One of our client is engaged in Construction of Residential Appartments. Total work was given to different contractors. Our client is purchasing and giving the material to contractors to execute the work. In this situation they opt the 70% abatement Rule of KVAT.Some of those matrials are procured from outside the state.
1) With out opting 70% abatement Rule can we deduct the Entire contract amount given to contractors from the Taxable VAT tournover ?
2) What are amounts deductable from VAT tournover ?
3) In that situation can we avail the Excise duty credit against Servicetax payable ?
4) My client was given the contract price inclusive of all Taxes in this situation can we avail the VAT credit on materials purchased by Contractors ?
I understand you question is Your client (say A) is engaged in construction of residential apprartment. Who purchases materials both inside and outside state and given the material to contractors(say B and C) to execute the work. Subcontractors ( B and C) opts for 70% abatement. Subcontractors also procured material from outside state.
Here subcontractor has received material from A and also used there own material. Hence his work is not pure service and has to be assessed under VAT for WCT. Now the question I understand is relating to assessment of WCT liability of A.
1. Yes you can deduct amount give to subcontract from taxable turnover (you should take proof that your subcontractor is registered and discharging wct liability on his turnover).
2. Value of services, labour and establishment expenses and profit attributable is deductible (gannon dunkerly case still hold good).
3. Yes, you can avail ecsise duty credit against service tax payable.In that case cost of material will get reduced to the extent credit availed.
4. You can avail credit only when your subcontractor raises Tax invoice on you. your subcontractor can take input tax credit and should raise output tax invoice on you.
Regards
Balaji
balaji_857 @ rediffmail.com
CAclubindia
