Work contract tax

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Querist : Anonymous

Querist : Anonymous (Querist)

26 July 2013 Explain in detail what is work contract tax?
Please

CA Vijeta Verma

CA Vijeta Verma (Expert)
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26 July 2013 See a work contract is liable to VAT as well Service tax.
What is works contract?
It is a contract wherein property in the goods is mandatorily involved in the execution of the contract.If it is a pure labour contract it won't be considered as works contract.
Works contract are generally for construction,installations,repairs,renovation,maintenance,alteration of any movable /immovable property or any work attached to it.
Now the goods involved in these contracts will be liable to VAT (EX-value of material) and the service portion shall be liable to Service tax (Ex-Amount paid for labour supplies in work contract).
Basically there are 2 ways in which tax can be paid
1)composite scheme-generally used wherein serive portion is not easily ascertainable,so in law flat rates are prescribed based upon which tax can be paid.they are:-
a)orginal contract-value of service portion shall be 40% of gross amount charged & pay tax accordingly
B) if its repair and maintenance of movable property -then 70%
C) else( like- completion and finishing services,glazing,plastering etc) 60%

2)if service portion can be easily ascertained then apply service tax on it & VAT on goods

Querist : Anonymous

Querist : Anonymous (Querist)

26 July 2013 Thanks.
Is there any TDS liability on WCT?

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Ganeshbabu K

Ganeshbabu K (Expert)
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16 August 2013 Yes,TDS 194C is applicable

tds is deducable 2% or 1% which ever is applicable on

(i) on the invoice value excluding the value of material, if such value is mentioned separately in the invoice; or
(ii) on the whole of the invoice value, if the value of material is not mentioned separately in the invoice.

tds applicable if amount credited to payee exceeds 75000 in a F.Y or 30000 in a single payment

1% for individuals and HUF

FOR OTHER 2% WILL BE APPLICABLE