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Work contract

CA Lokesh Kumar Tiwari (Asst. Finance Manager) (195 Points)

23 July 2012

Is refilling of printer laser toner cartridges a work contract???

Plz suggest??

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5 Replies

Rohan (Consultant) (91 Points)
Replied 23 July 2012

It entirely depends what are you charging for? Is the Invoice only has the cost of refillable product? Are you charging VAT on your Invoice? What the service element? what's the service amount?

One has too look for the dominant nature of the activity and figure out the essential elements of the work done.

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CA Lokesh Kumar Tiwari (Asst. Finance Manager) (195 Points)
Replied 23 July 2012

Dear Rohan,

Actually i am doing internal audit of a service industry.... I found many bills of that kind in which amount charged is quite high and substantial. But amount charged in invoice is indivisble and cannot be bifurcated. Service Tax is charged on whole amount. now i am little bit confused that whether such type of transaction is covered under work contact or not...

Rohan (Consultant) (91 Points)
Replied 24 July 2012

Refilling shall not be covered under the definition of WORKS. "Works Contract" has been clearly defined under section 65B (54) as,

(54) "works contract" means a contract wherein transfer of property in goods involved in the execution of suchcontract is leviable to tax as sale of goods and such contract is for the purpose of carrying out construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, alteration of any movable or immovable property or for carrying out any other similar activity or a part thereof in relation to such property;

Rohan (Consultant) (91 Points)
Replied 24 July 2012

Also, it seems the dominant nature of activity is refilling job though the material is used while providing the service it is more likely to get it classified as a Full Service than a Work.

Look for the substantial portion of the job done, what comprises the majority of the Invoice amount. Is the material used while providing the service or their service charge.

Ajit kumar Dubey (Taxation Manager) (637 Points)
Replied 24 July 2012

In the erstwhile service tax mechanism if the dominant part is of a job is the service, then the entire contract value is chargeable to service tax. The case will vary from case to case as correctly pointed out earlier you need to ascertain what is the main job, depending which tax liability is to be determined.