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Works Contract

gokul palde (student) (40 Points)

07 January 2008

Please can anybody tell me which books to refer for works contract , is there any thumb rule for it.

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CA. Amit Daga (Finance Controller CA. CS. CFA. CIFRS. M.COM. ) (9017 Points)
Replied 07 January 2008

Type of Business "Rule of Thumb" valuation Accounting Firms 100% - 125% of annual revenues Auto Dealers 2-3 years net income + tangible assets Book Stores 15% of annual sales + inventory Coffee Shops 40% - 45% of annual sales + inventory Dental Practices 60% - 70% of annual revenues Dry Cleaners 70% - 100% of annual sales Engineering practices 40% of annual revenues Florists 34% of annual sales + inventory Food/Gourmet Shops 20% of annual sales + inventory Furniture & Appliance Stores 15% - 25% of annual sales + inventory Gas Stations 15% - 25% of annual sales + equip/inventory Gift & Card Shops 32% - 40% of annual sales + inventory Grocery Stores 11% - 18% of annual sales + inventory

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(Guest)

I WOULD LIKE TO INFORM YOU THAT AS PER NOTIFIACTION NO VAT-1505/CR-123/TAXATION-1 Employers are liable to deduct the Work Contract Tax on any payment made by the Employer to contractor . Rate of tax will be 2 % if contractor is registered in Vat and 4% in any other case

(Guest)

WE WOULD LIKE TO INFORM YOU THAT AS PER NOTIFIACTION NO VAT-1505/CR-123/TAXATION-1 Employers are liable to deduct the Work Contract Tax on any payment made by the Employer to contractor . Rate of tax will be 2 % if contractor is registered in Vat and 4% in any other case

(Guest)

The Issue is very Simple. You have to understand the Concept. Works Contract is of two types one Purely Labour. In this case no Indirect taxes involved. The principal employer will employer will treat the payment as contract payment and deduct Income Tax2% with Cess. On the other hand If it include material also you have to split the total value into three categories. (1) Material Component (2) Labour Component (3) Indirect tax say (VAT). The first two categories will have cost element also. For material again it will have two sections viz. Locally Procured and Purchased outside the state. Your vat liability is only the relevant state act % on the addition you bill your Awaqrder on the Locally procured materials and for Interstate purchase Total cost including tax and Addition made with respective % of the respective vat act. Inorder to claim exemption at actuals your books of account must be complete in all aspect elst at a fixed % as allowed by the local vat act. Derive % of profit add with the cost of material and work out VAT at the respective rates to determine your vat liability for that contract.