Work contract tax

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Querist : Anonymous

Querist : Anonymous (Querist)

24 August 2012 Hello,
I need to know about the applicability of work contract tax in detail.
How does it apply with the help of a practical example.
If i being excise registered enter into a project which has supplies and service part in an outside state, then how should i show my order value to take WCT benefit. moreover, are there any other benefits? what should my billing break up be? i have heard abt NDC. wat is it in the context of WCT?
i am not registered in the other state under sales tax.
and , if i have a branch in the other state of delivery, how would WCT work?
can i DO 2% C form sale?

MJ Krishnamurthy

MJ Krishnamurthy (Expert)
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28 August 2012 Mr Author,
If you are registered under Central Excise Act and also undertaking installation of the plants/machinery manufactured by you,locally as well as interstate,you may follow this procedure :
1) While issuing the goods for sale directly or along with installation from your stores issue an excise invoice as per excise rules.
2) When you are selling a machine/plant and also doing its installation and commissioning it becomes a works contract,as it involves some labour charges also.
3) You can do interstate works contract also. If your customer can issue a 'C' form charge 2% cst only on the goods and its transportation and packing value.Show installation and comissoning charges seperately with ST if applicable.
4) If there are large number of transactions you may open branches at various places in other states for convenience. The branches can be registered under other state VAT laws and you can send your products on stock transfer against 'F' form without any CST levy.Isssue invoices for sale and installation from branches and main factory as mentioned above....MJK

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Querist : Anonymous

Querist : Anonymous (Querist)

07 September 2012 Thank u MJ Krishnamurthy Sir!!!
I would also add to the question.. how does taking an order under Work Contract Tax prove beneficial to me sales tax wise?
Can u highlight the points of difference of working under WCT and not working under WCT? what about the input credit part?

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MJ Krishnamurthy

MJ Krishnamurthy (Expert)
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08 September 2012 Mr Author,
If you take an order under WCT i.e.supply, installation commissioning and some service guarantee,Which many customers prefer,the charges can be high. When you split it into supply by a sale bill and installation by a labour bill the charges have to be competitive.Otherwise both are same. In Karnataka transfer of property in a works contract is charged at a common rate i.e. 14.5%.It means goods of tax rate @5.5% also suffer 14.5% VAT when billed under works contract. Input tax availability is same for sale and WCT..MJK

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Querist : Anonymous

Querist : Anonymous (Querist)

08 September 2012 if i get an order for supply and commissioning & installation, whereby supply values 5 crores and installation 3 crores, how should the invoicing be done under WCT?

MJ Krishnamurthy

MJ Krishnamurthy (Expert)
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09 September 2012 Mr Author,
While raising a bill,if you are collecting taxes,you have to show the price of the machine and other charges seperately. Note: this refers to the terms of the purchase order.If the above two items are shown seperately,tax collection can be shown at the applicable rates of VAT and ST.