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Inter State Works Contract Queries

Ravi Mall (Proprietor) (25 Points)

12 July 2011

My Company has VAT and CST registration for Maharashtra, we executed an Interstate Works Contract project (in Tami Nadu) for a client based in Mumbai. The billing will be in Mumbai. My questions are

Since the works contract has been executed outside Maharashtra, is VAT applicable on the bill amount ? ie. Should I charge VAT to the client ?
The VAT that I am paying for materials bought in Tamil Nadu and consumed there for the project, can I offset that in any way ?
According to me, since I dont have VAT registration of Tamil Nadu, I am paying VAT in that state, which is additional cost to my company, is it true ?
Is there any way by which I can save on the VAT being charged or get concession on VAT on material purchase in Tamil Nadu ?

Please provide answers to the above questions.

Thanks

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2 Replies

chandra shaker (TAX PRACTITIONER) (59 Points)
Replied 13 July 2011

HERE in your case you are executing works contract outside the state and you are purchasing materials locally(i.e,tamilnadu your site place ) and sending the same to the site to execute the related works .

First of all, you should be a registered dealer under local act and CST acts to carry out any sales or deemed sales outside the state .If you are registered dealer then what ever purchases you are making from other state tamilnadu are treated as CST purchases and you donot get any input tax credit for the said purchases and forthe same you are liable to pay taxes at the rates applicable to the transfer of goods invoved in the said works if you maintain proper accounting i.e.books of accounts for the said contract other wise you are liable to pay tax at the higher rate on the total value of materials incorporated subjected to standard deduction of labour portion.

HOW TO SAVE TAX IN YOUR CASE:

From your registered place you effect local purchases from local registered dealers and direct the same dealers to deliver the said materials to the work site out side the state i.e,tamilnadu and you claim input tax credit and after completeing the said works when you bill to dealer in Maharastra you raise tax as per your option (taxes may vary if you opt for composition or non composition scheme) . you should also understand that when you incorporate any goods from other states in the said works then the relating turnover is not eligible for input tax credit and accordingly the said turnovers should be deducted from the total workcontracts turnover when opt for composition scheme ( composition scheme means payment of taxes at reduced rate on the gross turnovers involving materials and labour component) ,to the cst purchase turnovers you are required to pay taxes as per the rate of taxes applicable in your local state acts after adding the transport charges if any applicable and not any profit on supply of the said goods.

Further if any clarifications do write ...

G.S.CHANDRA SHAKER

SALES TAX PRACTITIONER

9395323341/9951038001.

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Ravi Mall (Proprietor) (25 Points)
Replied 11 September 2011

My Company has VAT and CST registration for Maharashtra (WCT under composition scheme), we plan to undertake an Interstate works contract in the state of Uttar Pradesh (UP). The client is based in UP and most of the materials that will be purchased to execute the contract will be procured locally. The contract term is 3 months. I don't have VAT registration of UP.

Under WCT, what is the tax percentage that I should charge ? Should VAT be charged or just Service Tax is enough ?

I am not sure about the taxation part of Interstate WCT, please guide.

Thanks