compilation of works contract provisions p - combined - 13-3-13 … · isbn : 978-81-8441-614-5 the...
TRANSCRIPT
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www.icai.org
ISBN : 978-81-8441-614-5
The Institute of Chartered Accountants of India(Set up by an Act of Parliament)
New DelhiMarch/2013/1,000 (New)
Compilation
of
Works Contract Provisions under
VAT Laws of Different States
Compilation of Works Contract Provisions under VAT Laws of Different States
-
Compilation of Works Contract
Provisions under VAT Laws of Different States
The Institute of Chartered Accountants of India (Set up by an Act of Parliament)
New Delhi
-
Compilation of Work Contract Provisions
© The Institute of Chartered Accountants of India All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form, or by any means, electronic mechanical, photocopying, recording, or otherwise, without prior permission, in writing, from the publisher. Edition : February, 2013 Committee/Department : Indirect Taxes Committee Email : [email protected] Website : www.icai.org Price : ` 450 /- (Including CD) ISBN : 978-81-8441-614-5 Published by : The Publication Department on behalf of the
Institute of Chartered Accountants of India, ICAI Bhawan, Post Box No. 7100, Indraprastha Marg, New Delhi - 110 002.
Printed by : Sahitya Bhawan Publications, Hospital Road,
Agra 282 003 March/2013/1,000 Copies
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Foreword
Laws and rules relating to indirect taxes have been evolving on account of development in business models, economic growth of the country, global developments, and technological advances and also with reforms in the field of taxation especially, in the area of service tax. The introduction of value added tax in the year 2005 marked a significant step forward in the reform of domestic trade taxes in India. Introduction of VAT in the States has been a more challenging exercise in a federal country like India, where each State, in terms of Constitutional provision, is sovereign in levying and collecting State taxes. However, now all the States and Union Territories have implemented State-Level VAT. Though the broad design of the State-level VAT is uniform across the country but every State has its own VAT legislation and procedures differ on many counts from one State to another. It is often found that information in respect of VAT laws of various States is not available readily at one place. I, therefore, congratulate the Indirect Taxes Committee and in particular, CA. Madhukar N Hiregange, Chairman, Indirect Taxes Committee for bringing out a “Compilation of Works Contract Provisions under VAT Laws of Different States”. Compilation of ‘works contract’ assumes significance as taxation of works contract has always been a challenging area for the professionals. I am sure that members will find this compilation very useful in their day to day practice in respect of State-Level VAT. Date: 29th January, 2013 Place: New Delhi
CA. Jaydeep Narendra Shah President
-
Preface
Works contract taxation is considered to involve a lot of complexities and controversies which in the short term may not get resolved. Since the time when the concept of deemed sale was introduced under sales tax, transactions that would be liable to tax under the guise of works contract have always been a matter of debate and dispute.
Earlier the Courts took a view that in the case of composite contracts involving sale of goods and execution of works, no sales tax could be levied at all - the landmark decision on the issue being the Supreme Court’s ruling in the case of State of Madras vs. Gannon Dunkerley & Co. (Mad) Ltd. [1958] 9 STC 353 (SC). However, in order to enable the States to collect the sales tax, the 46th amendment to the Constitution provided for the taxation of transfer of materials used in the execution of a works contract as deemed sale. Clause 29A was added to Article 366 of the Constitution of India to cover ‘transfer of property in goods involved in execution of works contract’.
‘Works contract’ is defined in the Central Sales Tax, 1956 as a contract for carrying out any work which includes assembling, construction, building, altering, manufacturing, processing, fabricating, erection, installation fitting out, improvement, repair or commissioning of any movable or immovable property. Majority of the States have adopted this definition for works contract in their VAT legislations. Though the basic framework of the works contract provisions is broadly the same across the country, the administrative and procedural provisions do vary from State to State depending upon the size and developmental status, the experiences in implementation and monitoring of compliances, the extent of computerization of each State and so on.
Considering the positive feedback of the Committee’s publication, “Compilation of Registration Provisions under VAT Laws of Different States”, the Indirect Taxes Committee of the ICAI decided to prepare a similar compilation of the provisions of works contract under the VAT laws of different States to assist the members of ICAI who practice in different States and are called upon by the businesses operating in multi States. This would, in effect, facilitate the members to practice across geographies thereby
-
vi
enabling even a small town practitioner to render services in any State with the aid of technology.
This “Compilation of Provisions of Works Contracts under the VAT Laws of Different States” will also be of assistance to those experts/ officers working on Goods and Services Tax to understand the process being followed in different States, adopt best practices and achieve uniformity in provisions across all States to facilitate businesses operating in different states.
Information in respect of provisions of Works Contract of twenty-six States has been collated in this compilation. For quick reference and easy understanding, the provisions have been tabulated against a set of common questions for all the States.
I am thankful to CA. Jaydeep Narender Shah, President, ICAI and CA. Subodh Kumar Agrawal, Vice-President, ICAI who have been supporting the initiatives and the members of Committee in particulars by CA. Sanjay M. Dhariwal, CA. Rajiv J. Luthia and CA. Pulak Saha who provided valuable inputs for this publication. Also, I acknowledge with thanks, contribution made by CA. Gaurav Gupta and CA. Brijesh Verma. I must compliment and appreciate the substantial assistance provided by the Indirect Taxes Committee Secretariat in bringing out this publication.
I look forward to feedback for further improvements in this Compilation at [email protected] and queries on www.pdicai.org.
Date: 29th January, 2013 Place : New Delhi.
CA. Madhukar N. Hiregange Chairman
Indirect Taxes Committee
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Introduction
vii
CONTENTS
Introduction 1-6 States
(i) Andhra Pradesh 7-17 (ii) Arunachal Pradesh 18-53 (iii) Assam 54-78 (iv) Bihar 79-108 (v) Chhattisgarh 109-134 (vi) Delhi 135-154 (vii) Goa 155-179 (viii) Gujarat 180-195 (ix) Haryana 196-212 (x) Himachal Pradesh 213-227 (xi) Jharkhand 228-249 (xii) Karnataka 250-276 (xiii) Kerala 277-294 (xiv) Madhya Pradesh 295-318 (xv) Maharashtra 319-355 (xvi) Manipur 356-387 (xvii) Nagaland 388-413 (xviii) Orissa 414-434 (xix) Punjab 435-453 (xx) Puducherry 454-482 (xxi) Rajasthan 483-512 (xxii) Tamil Nadu 513-528 (xxiii) Tripura 529-547 (xxiv) Uttarakhan 548-562 (xxv) Uttar Pradesh 563-576 (xxvi) West Bengal 577-606
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viii
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INTRODUCTION
The Indian Constitution is considered to be the “Mother of all Law”, where the powers have been given to enact laws in the matters enumerated in Seventh Schedule between Central and States. It acts as machinery by which laws are made. One of the important characteristic of the Constitution is ‘Division of Power’ between the Union and the State Governments. Article 246 of the Constitution deals with ‘Distribution of Legislative Powers’. The legislative power under the Indian Constitution is subject to the limitation of the rule that a State Legislature cannot legislate extra-territorially, though Parliament does not suffer from this limitation.
According to Article 246, Union has been given exclusive power to make laws in respect of the matters listed in List I [called Union List] of the Seventh Schedule. Simultaneously, States have been given power to make laws in respect of the matters listed in the List II [called State List] of the Seventh Schedule. Further, this article also gives power to Union and States to make laws in respect of matters not included in either Union List or State List but listed in List III [called Concurrent List]. The power given to the States in respect of matters listed in Concurrent List is subject to limitation of Article 254. It means that in the event of any inconsistency between the laws made by Parliament and laws made by the State Legislature, the former will prevail. Overall it is important to note that there is no implied restriction on the States while exercising powers under legislative heads unless expressly provided in the Constitution itself. The works contract i.e., levy of tax on transfer of property in goods is enumerated in Entry 54 of List II under State Legislature. It is well settled that these laws are not free from disputes. This book is intended to highlight the basic provisions pertaining to works contract in 26 States.
The Constitution (Forty Sixth Amendment) Act, 1982, granted powers to State Governments to enact laws for providing the levy of tax on the transfer of property involved in the execution of works contract, which to hither was not possible in lieu of Honorable Supreme Court’s decision in the case of State of Madras Vs. Gannon Dunkerley & Co (Mad) Ltd. [1958] 9 STC 353 (SC). Even after the said amendment in the Constitution of India on the subject under context, there still persist disputes between the trade and the tax authorities.
A works contract is a contract which involves labour as well as materials and where the materials are partially transferred. The quantum of materials could vary from contract to contract. The State law has the capability of only charging the
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Compilation of Works Contract Provisions under VAT Laws of Different States
2
tax on the goods and is not in a position to tax the service element of the transaction.
As a result of the 46th Amendment to the constitution, the contract which was single and indivisible was altered by a legal fiction into a contract which could be divisible into contract for sale of goods and contract for supply of labour and services. If the legal fiction introduced by Article 366(29A)(b) is carried to its logical end, it follows that even in a single and indivisible works contract there is a deemed sale of the goods which are involved in the execution of a works contract. After the 46th amendment, it has become possible for the States to levy sales tax on the value of goods involved in a works contract in the same way in which the sales tax was leviable on the price of goods and materials.
The difference between a sale and a works contract is that a sale involves transfer of property in the goods whereas in a works contract, there is only a contract to render work on the customer’s property whether movable or immovable. Works Contract includes any agreement for carrying out for cash, deferred payment or other valuable consideration, the assembling, construction, building, altering, manufacturing, processing, fabrication, installation, fitting out, improvement, repair or commissioning of any moveable or immovable property. Transfer of goods involved in the execution of works contract is a deemed sale and therefore, works contract can be split into contract for labour and contract for sale. The transfer of property in goods involved in execution of works contract is chargeable to VAT. In arriving at the taxable turnover, various deductions from the contract receipts are allowed. The various deductions are in respect of labour charges, purchases of material from local registered dealers and payments to sub-contractors.
In the case of Gannon Dunkerley and Co Vs. State of Rajasthan (SC) 88 STC 204, the Hon’ble Supreme Court held that the measure of levy of the tax contemplated by Article 366(29-A)(b) is the value of goods involved in the execution of works contract. The value of goods for levying tax can be assessed only on the basis of cost of acquisition of the goods by the contractor and not on the basis of the value at the time of incorporation of such goods in the works contract as incorporation of the goods in the works forms part of the contract relating to work and labour which is distinct from the contract for transfer of property in goods. Therefore, the cost of incorporation of goods in the works cannot be made a part of the measure for levy of tax contemplated by Article 366(29A)(b).
-
Introduction
3
Sale price in relation to transfer of property in goods whether as goods or in some other form is arrived at by deducting from the amount of valuable consideration paid or payable to a person for the execution of the works contract, the amount representing labour charges for such execution. In Gannon Drunkenly and company and others vs. State of Rajasthan and others (1993) 88 STC 204 (SC), it was stated that the value of the goods involved in the execution of works contract will have to be determined by taking into account the entire value of the contract and deducting there from the charges towards labour and other services. In other words labour, service and other charges not relatable to transfer of property has to be deducted from the total consideration of works contract. Where such labour and other service charges are not quantifiable, the sale price shall be the cost of acquisition of the goods and the margin of profit on them prevalent in the trade plus the cost of transferring the property in the goods and all other expenses in relation thereto till the property in them, whether as such or in any other form, passes to the Contractee and where the property passes in a different form shall include the cost of conversion. The value of the goods involved in the execution of a works contract will, therefore, have to be determined by taking into account the value of the entire works contract and deducting there from the charges towards labour and services which would cover :
(i) labour charges for execution of works
(ii) amount paid to sub-contractor for labour and service
(iii) charges for obtaining on hire or otherwise machinery and tool used for execution of the works contract
(iv) charges for planning, designing and architect’s fees
(v) cost of consumables used in the execution of the works contract
(vi) cost of establishment of the contractor to the extent it is relatable to supply of labour and services
(vii) other similar expenses relatable to supply of labour and services and
(viii) profit earned by the contractor to the extent it is relatable to supply of labour and services.
The transfer of property in goods (whether as goods or in some other form) involved in the execution of works contract is sale of the goods. Under the VAT System, tax is to be charged on each sale of taxable goods and tax invoice
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Compilation of Works Contract Provisions under VAT Laws of Different States
4
showing the tax element separately is to be issued in respect of every sale of taxable goods in the State by a registered dealer.
If a contractor-registered dealer is engaged in the execution of works contract of moveable property of a Contractee in the State and is not availing the composition scheme of paying a lump-sum amount in lieu of tax, then he will charge tax on the value of goods transferred in the works contract and will issue tax invoice to the Contractee. In case the Contractee is a registered dealer under the Act, he would claim input tax credit in respect of such goods received in the works contract from the contractor. The contractor-registered dealer will also be entitled to claim input tax credit in respect of the goods purchased from within the State, which were transferred in the execution of the works contract.
If a contractor-registered dealer is engaged in the execution of works contract of immovable property of a Contractee in the State and is not availing the composition scheme of paying a lump-sum amount in lieu of tax, then he will charge tax on the value of goods transferred in the works contract and will issue tax invoice to the Contractee. The Contractee would not be entitled to claim input tax credit in respect of the goods received in the works contract. However, the contractor registered dealer will be entitled to claim input tax credit in respect of the goods purchased in the State, which were transferred in the execution of the works contract.
If a contractor-registered dealer is availing composition scheme as applicable under the relevant State VAT Act and is engaged in the execution of works contract of immovable property of a Contractee in the State, then he is not entitled to charge tax in respect of the goods transferred in the works contract. The contractor registered dealer is also not entitled to claim input tax credit in respect of purchase of any goods from within the State, which were transferred in the execution of works contract of the immovable property to the Contractee. The Contractee registered dealer will also be not entitled to claim input tax credit in respect of the goods received by way of transfer in the works contract of immovable property from the contractor -registered dealer.
If a contractor-registered dealer is availing composition scheme as applicable under the relevant State VAT Act and is engaged in the execution of works contract of moveable property of a Contractee in the State, then he is not entitled to charge tax in respect of the goods transferred in the works contract and will not issue tax invoice to the Contractee. The contractor- registered dealer is also not entitled to claim input tax credit in respect of purchase of any goods from within the State, which were transferred in the execution of the works contract. The
-
Introduction
5
Contractee- registered dealer will also be not entitled to claim input tax credit in respect of the goods received by way of transfer in the works contract of moveable property, from the contractor registered dealer.
The rates of tax applicable to various kinds of works contract are specified in respective schedules. The transaction can be considered to be works contract generally only if there is any accession or accretion to the property of the customer. Purely labour contracts not involving supply of any goods by the contractor to his customer will not attract any VAT or works contract tax.
As a basic feature, tax is chargeable on the transfer of property in goods involved in the execution of works contract at the rates prescribed for the concerned goods in the schedules of the concerned State VAT legislation. Where value of each item of material transferred in the course of execution of works contract is identifiable, tax can be charged on the value of individual items of materials as provided under the schedules to the concerned State VAT Legislation. On inputs, the contractor is entitled to avail Input Tax Credit(ITC).
Most of the State VAT laws provide input tax credit on inputs used for executing Works Contract. Some States however, are not considering consumables at par with inputs. In case of composition schemes some States do not allow any input tax credit while in some States allow partial tax credit.
The following are certain important principles with respect to works contracts:
• There should be transfer of property in goods.
• Pure labour contracts or service contracts are outside the purview of the works contract under the State law. In case if any of the goods are consumed during the execution of works contract and their identity is lost and accordingly there is no transfer of property in goods then in such instance such consumables are not leviable to VAT under the State VAT law.
• There must exist an individual and composite works contract. The divisible contracts are outside the scope of the works contract.
• Transfer of property in goods must pass as goods or in some other form. Form of goods has no relevance.
• In works contract transaction vesting of property must occur not by contract but on the theory of accretion and accession.
-
Compilation of Works Contract Provisions under VAT Laws of Different States
6
• There must be dominant intention to affect the transfer of property in goods in execution of works contract, passing of the property in goods must not be only incidental to the contract.
• Such transfer of property in goods may be in the form of goods itself or in some other form.
• Such goods, which are being transferred, should be involved in the execution of works contract.
If any of the above said propositions are not fulfilled, then the activity is not covered under the scope of levy under VAT. However, there are numerous decisions in this context under various sales tax laws considering different types of activities independently. Therefore, though the above is only a broad principle, each transaction would be required to be examined in the light of the circumstances and the decided case laws as may be applicable to the goods dealt in with by them. Considering the above factors, it becomes essential to identify whether the activity is covered under the scope of levy in the course of execution of works contract or not. If it is so covered, then the next question would be the quantification of such levy. The quantification of tax levy will be based on the tax rate, which has to be applied on the value to be determined.
-
1. A
NDHR
A PR
ADES
H (A
.P.)
Sl.
No.
Parti
cular
s Pa
rticu
lars
Relev
ant S
ectio
n /
Rule
Rem
arks
1. Is
works
con
tract
dealt
sep
arate
ly un
der t
he V
AT A
ct?
Is the
re a
dee
ming
pro
vision
dea
ling
with
works
contr
act?
Yes
Deem
ed a
s sa
le un
der t
he d
efinit
ion
of ‘sa
le’
Secti
on
4
(7)
is the
ch
argin
g se
ction
of
the
Andh
ra
Prad
esh
Value
Ad
ded
Tax A
ct, 2
005
(the
VAT
Act)
2. Is
there
any
spe
cific
form
to ap
ply fo
r re
gistra
tion
as
a wo
rks
contr
actor
(W
C) un
der V
AT la
w?
No se
para
te re
gistra
tion.
Secti
on
17 o
f the
VAT
Ac
t
3. W
hethe
r Non
- res
ident
(dea
ler ou
tside
the
state
) can
app
ly for
regis
tratio
n as
wo
rks co
ntrac
tor?
Ther
e is
no s
pecif
ic re
gistra
tion
for
works
co
ntrac
tor.
It is
only
regis
tratio
n as a
VAT
deale
r.
4 El
igible
Tur
nove
r for
regis
tratio
n `
7.5 la
khs
Secti
on 1
7 (5
) (g)
of t
he
VAT
Act
5. W
hat
are
the d
educ
tions
tha
t ar
e all
owab
le fro
m tur
nove
r?
Dedu
ction
s tow
ards
lab
our
comp
onen
t Ru
le 17
(1)
(e)
of
the
Andh
ra
Prad
esh
Value
-
Com
pilat
ion
of W
orks
Con
tract
Pro
visio
ns un
der V
AT L
aws o
f Diff
eren
t Sta
tes
8
Sl.
No.
Parti
cular
s Pa
rticu
lars
Relev
ant S
ectio
n /
Rule
Rem
arks
Adde
d Ta
x Ru
les,
2005
(th
e VA
T Ru
les)
6. W
hethe
r the
WC
has
the o
ption
to
claim
the
labou
r cha
rges
and
like
on
actu
al ba
sis or
adho
c bas
is?
Till t
he p
rojec
t is
comp
leted
he
can
claim
on
adho
c ba
sis a
nd o
nce
it is
comp
leted
, the
sa
me
shou
ld be
cla
imed
on ac
tual b
asis.
Seco
nd
Prov
iso
unde
r Ru
le 17
(1) (
e) o
f the
VAT
Ru
les
7. Ho
w ar
e the
labo
ur c
harg
es a
nd li
ke
defin
ed un
der t
he V
AT la
w?
No
defin
ition
is pr
ovide
d in
the
Statu
te
8. W
hethe
r dep
recia
tion
can
be c
laime
d as
labo
ur ch
arge
s and
like?
If
yes,
then
wheth
er in
put t
ax c
redit
on
capit
al go
ods w
ill be
allow
able?
Statu
te do
es
not
prov
ide
for
dedu
ction
of
depr
eciat
ion b
ut it
is be
ing al
lowed
as pe
r cas
e law
. Th
ere
is no
dis
tincti
on
betw
een
capit
al go
ods
and
other
goo
ds i
n An
dhra
Pra
desh
.
9. Ca
n de
ducti
on b
e cla
imed
for
lan
d va
lue by
the c
ompo
sition
deale
r?
In the
cas
e of
build
er, w
ho o
pted
for
comp
ositio
n, tax
has
to b
e pa
id ev
en
on th
e va
lue o
f the
land
, whil
e se
lling
flat o
r villa
.
-
Andh
ra P
rade
sh
9
Sl.
No.
Parti
cular
s Pa
rticu
lars
Relev
ant S
ectio
n /
Rule
Rem
arks
10.
How
is the
esti
mated
gro
ss p
rofit
comp
uted i
n cas
e of w
ork c
ontra
ct?
Also
, wha
t is th
e ra
tio to
app
ortio
n the
gr
oss
profi
t be
twee
n ma
terial
and
lab
our?
Gene
rally
boo
k pr
ofit i
s ad
opted
for
the pu
rpos
e.
11.
Whe
ther g
ross
pro
fits a
re to
be
adde
d to
actua
l lab
our
char
ges
and
like
or
adho
c lab
our c
harg
es an
d like
?
Profi
t re
latab
le to
labou
r is
dedu
ctable
.
12.
Whe
ther
water
, ele
ctrici
ty de
posit
s, sta
mp d
uty,
regis
tratio
n fee
, se
rvice
tax
, etc
form
part
of the
wor
ks co
ntrac
t tur
nove
r?
If the
se a
re c
ollec
ted a
s pa
rt of
sale
cons
idera
tion,
then
tax is
pay
able
on
the sa
me.
Ge
nera
lly,
these
ar
e se
para
tely
and
direc
tly
paid
by th
e buy
ers.
13.
Is co
ntrac
tor l
iable
to tax
for
fre
e su
pply
of go
ods b
y con
tracte
e?
The
contr
actor
is n
ot lia
ble t
o pa
y an
y tax
on
the
va
lue
of go
ods
wher
ein
the
contr
actee
su
pplie
s go
ods o
n fre
e bas
is.
-
Com
pilat
ion
of W
orks
Con
tract
Pro
visio
ns un
der V
AT L
aws o
f Diff
eren
t Sta
tes
10
Sl.
No.
Parti
cular
s Pa
rticu
lars
Relev
ant S
ectio
n /
Rule
Rem
arks
14.
Wha
t is
the t
ime
of sa
le for
wor
ks
contr
actor
and
at w
hat p
oint o
f tim
e the
tax
sho
uld b
e off
ered
to
the
depa
rtmen
t?
Tax
shou
ld be
paid
on
trans
fer o
f pr
oper
ty in
good
s i.e
., on
inc
orpo
ratio
n of
good
s int
o the
wo
rks.
15.
Whic
h Se
ction
/ Sc
hedu
le pr
escri
bes
the ra
te of
tax fo
r wor
ks co
ntrac
t? Ta
x ha
s to
be
paid
on
the
incor
pora
tion
value
of t
he g
oods
at
the
rates
me
ntion
ed
in the
Sc
hedu
les to
the
Act i
n re
spec
t of
the go
ods e
nume
rated
ther
ein.
Secti
on 4
(7) (
a) (r
egula
r Sc
hem
e)
and
Secti
on .
4 (7
) (b
) &
(d)
(Com
posit
ion S
chem
e) o
f the
VAT
Act
Effec
tive
from
15.9.
2011
, the
ra
te of
tax
unde
r co
mpos
ition s
chem
e is 5
%
16.
Whe
ther
WC
will
be l
iable
to pa
y un
regis
tered
pur
chas
e tax
in a
dditio
n to
works
contr
act ta
x?
Ther
e is n
o suc
h pro
vision
.
Wor
ks c
ontra
ctor
is lia
ble
to pa
y ou
tput
tax,
no
purch
ase
tax n
eed
to be
pa
id.
17.
Wha
t is
the r
ate o
f tax
for
decla
red
good
s use
d in t
he co
urse
of co
ntrac
t? It i
s 5%
.
18.
Is sta
ndar
d de
ducti
on
metho
d av
ailab
le for
paym
ent?
Yes,
they a
re av
ailab
le
Rule
17 (1
) (g)
of th
e VAT
Ru
les
-
Andh
ra P
rade
sh
11
Sl.
No.
Parti
cular
s Pa
rticu
lars
Relev
ant S
ectio
n /
Rule
Rem
arks
If ye
s, wh
at ar
e the
var
ious
rates
pr
escri
bed
for d
iffere
nt typ
es o
f wor
ks
contr
act?
They
are v
ary f
rom
15 %
to 40
%.
19.
Whe
ther c
ontra
ctee/
princ
ipal is
liable
to
dedu
ct Ta
x De
ducte
d at
Sour
ce
(TDS
) fro
m the
amo
unt
paya
ble t
o co
ntrac
tor?
Yes.
Contr
actee
is li
able
to de
duct
Tax D
educ
ted a
t Sou
rce (T
DS)/
Tax
Co
llecte
d at
Sour
ce (
TCS)
as
the
case
may
be.
Secti
on 22
(3)
(TDS
) and
Se
ction
22(
3A) (
TCS)
of
the V
AT A
ct
TCS
is ma
de
by
State
Go
vern
ment
depa
rtmen
ts an
d Loc
al au
thoriti
es.
20.
Wha
t is
the
rate
of TD
S to
be
dedu
cted i
n cas
e of w
orks
contr
act?
W
hethe
r inte
rstate
sup
plies
or i
mpor
t tra
nsac
tions
ar
e co
nside
red
for
dedu
cting
TDS
?
(a)
In re
spec
t of
road
wor
ks a
nd
cana
l lin
ing w
orks
the
rate
of
TDS
is 1.4
%
and
(b)
for ot
hers
it is 2
.8%.
A de
aler c
an re
ques
t the
ass
essin
g au
thority
to
redu
ce
the
TDS
perce
ntage
if th
ere
are
trans
actio
ns
fallin
g un
der C
entra
l Sale
s Ta
x Ac
t (C
ST) A
ct, 19
56.
Rule
18 of
the V
AT R
ules
-
Com
pilat
ion
of W
orks
Con
tract
Pro
visio
ns un
der V
AT L
aws o
f Diff
eren
t Sta
tes
12
Sl.
No.
Parti
cular
s Pa
rticu
lars
Relev
ant S
ectio
n /
Rule
Rem
arks
21.
Is the
con
tracto
r also
liable
to d
educ
t TD
S fro
m the
amo
unt p
ayab
le to
the
Sub-
Contr
actor
?
Contr
actor
can
not
make
TDS
fro
m ou
t of t
he a
moun
ts pa
id to
the s
ub
contr
actor
.
22.
Whe
ther t
he W
C ca
n cla
im in
put t
ax
credit
on co
nsum
ables
?
Ther
e is
no p
rohib
ition
on c
laimi
ng
Input
Tax
Cred
it (IT
C)
on
cons
umab
les,
if the
y ar
e us
ed f
or
busin
ess.
23.
Whe
ther d
educ
tion
for s
ub c
ontra
ctor
turno
ver is
perm
itted f
rom
the tu
rnov
er
of W
C?
Does
WC
have
the
opti
on t
o cla
im
input
tax
credit
(IT
C)
in lie
u of
dedu
ction
from
total
turn
over
?
If the
sub
con
tracto
r is
a re
gister
ed
VAT
deale
r, the
main
con
tracto
r can
cla
im
dedu
ction
on
the
co
ntrac
t re
ceipt
s.
Main
contr
actor
is
not
eligib
le to
claim
any I
TC in
such
situa
tion.
24.
Whe
ther i
nput
tax c
redit
is a
llowa
ble
fully
in ca
se of
wor
ks co
ntrac
t? If
the co
ntrac
tor is
und
er co
mpos
ition
sche
me, IT
C is
not a
llowe
d.
-
Andh
ra P
rade
sh
13
Sl.
No.
Parti
cular
s Pa
rticu
lars
Relev
ant S
ectio
n /
Rule
Rem
arks
25.
Is the
re a
ny s
pecif
ic for
mat o
f inv
oice
or b
ill for
reg
ular
and
comp
ositio
n W
C?
No sp
ecific
form
at.
26.
Can
runn
ing
bill
be
treate
d as
inv
oice?
W
hethe
r adv
ance
s re
ceive
d inc
luding
mo
biliza
tion
adva
nce
will
be li
able
to tax
?
Runn
ing A
ccou
nt (R
A) b
ill is
the
base
. Ad
vanc
es
are
not
liable
to
tax
beca
use
there
is
no
trans
fer
of pr
oper
ty in
good
s bu
t whe
n ad
vanc
e is
adjus
ted ta
x is p
ayab
le.
27.
Is it c
ompu
lsory
for th
e sub
- con
tracto
r to
be a
reg
ister
ed d
ealer
and
file
re
turns
de
clarin
g the
tur
nove
r pe
rtaini
ng to
main
contr
actor
?
Yes.
Such
cond
ition i
s the
re
Secti
on 4
(7)
(h)
of
the
VAT
Act
28.
Can
sub
contr
actor
claim
exe
mptio
n if
main
contr
actor
pays
tax?
If
the
main
contr
actor
op
ts for
co
mpos
ition,
then
only
sub-
co
ntrac
tor is
not li
able
to tax
.
-
Com
pilat
ion
of W
orks
Con
tract
Pro
visio
ns un
der V
AT L
aws o
f Diff
eren
t Sta
tes
14
Sl.
No.
Parti
cular
s Pa
rticu
lars
Relev
ant S
ectio
n /
Rule
Rem
arks
29.
Whe
ther c
ontra
ctor o
r sub
-contr
actor
ar
e ex
empte
d in
case
any
one
of
the
two
unde
rtake
s to
disch
arge
VA
T lia
bility
on
the
en
tire
cons
idera
tion?
No s
uch
prov
ision
. Stat
ute d
oes
not
pres
cribe
any s
uch u
nder
taking
.
30.
Does
the
WC
have
an
optio
n to
pay
tax un
der c
ompo
sition
categ
ory?
Ye
s, If
WC
wants
, he
can
opt t
o pa
y un
der c
ompo
sition
sche
me.
Secti
on 4
(7) (
a) (R
egul
ar
Sche
me)
and
Secti
on 4
(7)
(b)
& (
c) (C
ompo
sitio
n Sc
hem
e)
of the
VAT
Act
By d
efault
, tax
has
to b
e pa
id un
der r
egula
r sch
eme
in ca
se
optio
n for
co
mpos
ition i
s not
avail
ed.
31.
Is co
mpos
ition
WC
allow
ed to
mak
e int
ersta
te / im
port
purch
ases
? W
C ca
n ma
ke
impo
rt/
inter
state
purch
ase.
32.
Is co
mpos
ition
WC
eligib
le to
take
sub
contr
actor
dedu
ction
s?
If the
sub
con
tracto
r is
payin
g tax
, be
ing a
reg
ister
ed V
AT d
ealer
, the
qu
estio
n of
main
contr
actor
opti
ng
for c
ompo
sition
doe
s no
t ar
ise,
as
there
is no
liabil
ity on
him.
Ho
weve
r, if
the
main
contr
actor
op
ts for
co
mpos
ition,
then
the s
ub
contr
actor
to th
at ex
tent i
s no
t liab
le to
tax.
-
Andh
ra P
rade
sh
15
Sl.
No.
Parti
cular
s Pa
rticu
lars
Relev
ant S
ectio
n /
Rule
Rem
arks
33.
Whe
ther
WC
can
opt
for
regu
lar
sche
me
for
one
proje
ct an
d co
mpos
ition
sche
me
for
other
pr
oject?
Comp
ositio
n ca
n be
pro
ject-w
ise a
nd
it is p
ermi
tted.
34.
Is the
re a
ny p
roce
dure
to c
hang
e the
sc
heme
from
reg
ular
to co
mpos
ition
works
contr
actor
?
A co
ntrac
tor c
an o
pt for
com
posit
ion
only
befor
e he
co
mmen
ces
the
exec
ution
of a
partic
ular p
rojec
t.
35.
Is the
re a
ny p
roce
dure
to c
hang
e the
sc
heme
from
com
posit
ion to
reg
ular
works
contr
actor
?
Not p
ermi
tted.
36.
Wha
t ar
e the
com
posit
ion r
ates
for
differ
ent ty
pes o
f con
tracts
? (a
) Fo
r all c
ontra
cts it
is on
ly 5%
. (b
) In
the c
ase
of bu
ilder
s, it
is 1.2
5%
(i.e 5
% o
n 25
% o
f the
gr
oss r
eceip
ts)
37.
Whe
ther
WC
optin
g for
com
posit
ion
metho
d is
requ
ired
to tak
e pr
ior
perm
ission
/ pro
vide
intim
ation
to th
e de
partm
ent?
Only
intim
ation
in fo
rm V
AT 2
50 h
as
to be
file
d an
d ac
know
ledgm
ent
need
s to b
e obta
ined.
Rule
17 (2
) (3)
and
(4) o
f the
VAT
Rule
s Fo
rm V
AT 25
0
-
Com
pilat
ion
of W
orks
Con
tract
Pro
visio
ns un
der V
AT L
aws o
f Diff
eren
t Sta
tes
16
Sl.
No.
Parti
cular
s Pa
rticu
lars
Relev
ant S
ectio
n /
Rule
Rem
arks
38.
Whe
ther
comp
ositio
n de
aler
can
apply
for in
tersta
te wo
rks co
ntrac
t? Th
ere
is no
co
nnec
tion
betw
een
comp
ositio
n un
der V
AT A
ct an
d int
er
State
wor
ks co
ntrac
t. Int
er-S
tate
works
co
ntrac
ts ar
e tax
able
unde
r CST
Act.
and
ther
e is
no c
ompo
sition
sch
eme
unde
r CST
Ac
t.
39.
Whe
ther s
uch
WC
is re
quire
d to
file
month
ly/ qu
arter
ly re
turn?
W
hat
is the
due
date
of
filing
the
re
turn?
Month
ly re
turn
It ha
s to
be f
iled
by t
he 2
0th o
f su
ccee
ding m
onth.
Secti
on 22
of th
e VAT
Act
40.
Whe
ther A
nnua
l Retu
rn is
filed
by
the
works
contr
actor
? Th
ere i
s no s
uch a
nnua
l retur
n.
41.
Wha
t is
the ti
me lim
it for
Ass
essm
ent
in ca
se of
wor
ks co
ntrac
tor?
Sche
me is
self a
sses
smen
t bas
is.
Ho
weve
r, the
dep
artm
ent
has
time
for fo
ur y
ears
to ma
ke as
sess
ment.
-
Andh
ra P
rade
sh
17
Sl.
No.
Parti
cular
s Pa
rticu
lars
Relev
ant S
ectio
n /
Rule
Rem
arks
42.
Whe
ther
VAT
Audit
pr
ovisi
ons,
if ap
plica
ble u
nder
the
State
VAT
law,
ap
ply to
WC
as w
ell?
If
yes,
what
is the
turn
over
limi
t for
su
ch au
dit?
Ther
e is
no m
anda
tory
audit
by
eithe
r Sale
s Ta
x Pr
actio
ner (
STP)
or
Char
tered
Ac
coun
tant
(CA)
in
Andh
ra P
rade
sh.
On th
eir o
wn o
fficer
s co
nduc
t aud
it pe
riodic
ally.
43.
Whe
ther V
AT is
app
licab
le on
sale
of
flats
by th
e dev
elope
r per
tainin
g to t
he
shar
e of
deve
loped
are
a in
case
of
cons
tructi
on co
ntrac
ts?
On th
e gr
oss
cons
idera
tion
rece
ived
or re
ceiva
ble fo
r the
sale
of fla
t/ vil
la/
comp
lex i
nclud
ing l
and
value
, the
bu
ilder
is lia
ble to
pay t
ax @
1.25
%
Secti
on 4
(7)
(d)
of
the
VAT
Act
It is c
ompo
sition
sche
me.
44.
Is the
re a
requ
ireme
nt to
file th
e co
py
of co
ntrac
t /
agre
emen
ts wi
th the
de
partm
ent?
As a
nd w
hen
dema
nded
, it m
ust b
e file
d.
-
2.
ARU
NACH
AL P
RADE
SH
Sl.
No.
Parti
cular
s Pa
rticu
lars
Relev
ant S
ectio
n /
Rule
Rem
arks
1. Is
works
con
tract
dealt
sep
arate
ly un
der t
he V
AT A
ct?
Is the
re a
dee
ming
pro
vision
dea
ling
with
works
contr
act?
Wor
ks c
ontra
ct ha
s be
en d
ealt
with
sepa
ratel
y un
der
the
Arun
acha
l Pr
ades
h Go
ods
Tax
Act,
2005
(the
VA
T Ac
t) un
der S
ectio
n 5(
2) o
f the
VA
T Ac
t. As
per S
ectio
n 2(
zq) o
f the s
aid A
ct,
“Wor
ks
Cont
ract
” inc
ludes
an
y ag
reem
ent f
or c
arryi
ng o
ut for
cas
h or
for
de
ferre
d pa
ymen
t or
for
va
luable
con
sider
ation
, the
buil
ding
cons
tructi
on,
manu
factur
e, pr
oces
sing,
fabric
ation
, er
ectio
n, ins
tallat
ion, f
itting
out,
impr
ovem
ent,
repa
ir or
co
mmiss
ioning
of
any
mova
ble
or
immo
vable
pr
oper
ty.
Secti
on
2(zq
) an
d 2(
zf)(v)
of th
e VAT
Act.
-
Arun
acha
l Pra
desh
19
Sl.
No.
Parti
cular
s Pa
rticu
lars
Relev
ant S
ectio
n /
Rule
Rem
arks
Also
the
re i
s a
menti
on o
f sa
le inc
luding
the
trans
fer o
f pro
perty
in
good
s (wh
ether
as go
ods o
r in s
ome
other
form
) inv
olved
in th
e ex
ecuti
on
of a
works
co
ntrac
t un
der
Secti
on 2(
zf)(v)
of th
e VAT
Act.
2.
Is the
re a
ny s
pecif
ic for
m to
apply
for
regis
tratio
n as
a
works
co
ntrac
tor
(WC)
unde
r VAT
law?
Ther
e is
no
spec
ific
form
of ap
plica
tion
for re
gistra
tion
as w
orks
co
ntrac
tor. T
he w
orks
contr
actor
has
to ap
ply i
n the
gen
eral
form
of re
gistra
tion
i.e.,
Form
RF
-01,
RF-0
2, RF
-03,
RU-0
1, RN
-02
as
appli
cable
in di
ffere
nt ca
ses.
On
ly for
ro
ad
trans
porte
r an
d wa
reho
use
appr
oval
sepa
rate
forms
ar
e the
re vi
z, Fo
rm T
R-01
and
For
m W
A-01
resp
ectiv
ely.
Secti
on 2
0, 21
, 22
of the
VA
T Ac
t re
ad
with
Rule
15, 1
6, 17
, 18,
21,
22
of the
Ar
unac
hal
Prad
esh
Good
s Ta
x Ru
les,
2005
. (th
e VA
T Ru
les)
-
Com
pilat
ion
of W
orks
Con
tract
Pro
visio
ns un
der V
AT L
aws o
f Diff
eren
t Sta
tes
20
Sl.
No.
Parti
cular
s Pa
rticu
lars
Relev
ant S
ectio
n /
Rule
Rem
arks
3. W
hethe
r No
n-
resid
ent
(dea
ler
outsi
de
the
state)
ca
n ap
ply
for
regis
tratio
n as w
orks
contr
actor
?
Yes.
4. El
igible
Tur
nove
r for
regis
tratio
n. `
5 lac
s is
the T
axab
le Qu
antum
as
per V
AT A
ct.
Secti
on 1
9(2)
of t
he V
AT
Act
5. W
hat
are
the d
educ
tions
tha
t ar
e all
owab
le fro
m tur
nove
r?
For
deter
mina
tion
of the
tax
able
turno
ver,
the f
ollow
ing d
educ
tions
ar
e all
owed
in re
spec
t of t
he a
moun
t of
the c
harg
es to
ward
s go
ods
when
go
ods
are
asce
rtaina
ble (i
n ca
se o
f wo
rks co
ntrac
t):
(a)
the tu
rnov
er of
sales
not
subje
ct to
tax u
nder
Sec
tion
7 o
f the
VA
T Ac
t; (b
) ch
arge
s tow
ards
labo
ur, s
ervic
e an
d oth
er
like
char
ges
Secti
on 5
, 6 a
nd 7
of t
he
VAT
Act
and
Rule
5 of
the V
AT R
ules.
-
Arun
acha
l Pra
desh
21
Sl.
No.
Parti
cular
s Pa
rticu
lars
Relev
ant S
ectio
n /
Rule
Rem
arks
pres
cribe
d in
Rule
5 of
the V
AT
Rules
; (c)
the
turn
over
of s
ales
of go
ods
decla
red
exem
pt un
der S
ectio
n 6 o
f the V
AT A
ct.
6. W
hethe
r the
WC
has
the o
ption
to
claim
the
labou
r cha
rges
and
like
on
actua
l bas
is or
adho
c bas
is?
Wor
ks
contr
actor
ca
n cla
im
the
dedu
ction
for
lab
our
and
like
char
ges
on
actua
l ba
sis
if the
am
ounts
of c
harg
es to
ward
s go
ods
are
asce
rtaina
ble;
Whe
n un
asce
rtaina
ble,
the
works
co
ntrac
tor s
hall
pay
tax o
n the
sale
pr
ice
after
de
ducti
ng
a ce
rtain
perce
ntage
as pe
r Rule
s.
Secti
on
5(2)
of t
he V
AT
Act
read
with
Rule
5 o
f the
VAT
Rule
s.
7. Ho
w ar
e the
labo
ur c
harg
es a
nd li
ke
defin
ed un
der t
he V
AT la
w?
The
char
ges
towar
ds
labou
r an
d se
rvice
s an
d oth
er li
ke c
harg
es s
hall
includ
e:
(a)
Labo
ur c
harg
es fo
r ex
ecuti
on o
f
Rule
5(2)
of
the
VAT
Rules
.
-
Com
pilat
ion
of W
orks
Con
tract
Pro
visio
ns un
der V
AT L
aws o
f Diff
eren
t Sta
tes
22
Sl.
No.
Parti
cular
s Pa
rticu
lars
Relev
ant S
ectio
n /
Rule
Rem
arks
works
; (b
) Ch
arge
s for
pla
nning
an
d ar
chite
cts fe
es;
(c) C
harg
es fo
r obta
ining
on
hire
or
other
wise
mac
hiner
y an
d too
ls us
ed f
or t
he e
xecu
tion
of the
wo
rks co
ntrac
t; (d
) Co
st of
cons
umab
les s
uch
as
water
, elec
tricity
, fuel,
etc.
used
in
the
exec
ution
of
the
works
co
ntrac
t the
pro
perty
in w
hich
is no
t tra
nsfer
red
in the
cou
rse o
f ex
ecuti
on of
a wo
rks co
ntrac
ts;
(e)
Cost
of es
tablis
hmen
t of
the
contr
actor
to
the
exten
t it
is re
latab
le to
supp
ly of
labou
r and
se
rvice
s;
(f)
Othe
r sim
ilar e
xpen
ses
relat
able
-
Arun
acha
l Pra
desh
23
Sl.
No.
Parti
cular
s Pa
rticu
lars
Relev
ant S
ectio
n /
Rule
Rem
arks
to su
pply
of lab
our a
nd se
rvice
s;
(g) P
rofits
earn
ed by
the c
ontra
ctor t
o the
exte
nt it i
s re
latab
le to
supp
ly of
labou
r and
ser
vices
sub
ject t
o fur
nishin
g of
a pr
ofit
and
loss
acco
unt o
f the w
orks s
ites.
Prov
ided
wher
e am
ount
of ch
arge
s tow
ards
lab
our
and
servi
ce
are
not
asce
rtaina
ble
from
the a
ccou
nts o
f the
dea
ler,
the a
moun
t of s
uch
char
ges s
hall
be c
alcula
ted a
t the
per
centa
ges
as pe
r Rule
s. 8.
Whe
ther d
epre
ciatio
n ca
n be
clai
med
as la
bour
char
ges a
nd lik
e?
If ye
s, the
n wh
ether
inpu
t tax
cred
it on
Depr
eciat
ion
on m
achin
ery
and
tools
used
in th
e ex
ecuti
on o
f wor
ks
contr
act is
not
allow
ed a
s lab
our a
nd
like
char
ges
as t
here
is
no s
uch
inclus
ion in
Rule
5(2)
.
Rule
5(2)
of
the
VAT
Rules
; Se
ction
9(
1)
and
Secti
on 3
(im
posit
ion o
f tax
) of th
e VAT
Act.
No
sepa
rate
Secti
on
defin
ing t
he t
ax c
redit
in
case
of w
orks
contr
act.
-
Com
pilat
ion
of W
orks
Con
tract
Pro
visio
ns un
der V
AT L
aws o
f Diff
eren
t Sta
tes
24
Sl.
No.
Parti
cular
s Pa
rticu
lars
Relev
ant S
ectio
n /
Rule
Rem
arks
capit
al go
ods w
ill be
allow
able?
Ho
weve
r, un
der R
ule 5(
2) of
the V
AT
Rules
“cha
rges
for o
btaini
ng o
n hir
e or
oth
erwi
se m
achin
ery
and
tools
used
for
the
ex
ecuti
on
of the
wor
ks co
ntrac
t” ar
e allo
wed.
If
a co
ntrac
tor
uses
his
ow
n ma
chine
ry an
d too
ls in
the e
xecu
tion
of a w
orks
co
ntrac
t, wh
ich
he
other
wise
co
uld
have
hir
ed
from
outsi
de,
then
depr
eciat
ion j
ust
like
hire
char
ges
on s
uch m
achin
ery
and
tools
shou
ld be
allow
ed.
As p
er S
ectio
n 9
(1),
ever
y go
ods
impo
rted
or p
urch
ased
whic
h ar
e us
ed d
irectl
y or
ind
irectl
y by
the
de
aler
for t
he p
urpo
se o
f ma
king
Secti
on 1
5 of
the V
AT
Act.
-
Arun
acha
l Pra
desh
25
Sl.
No.
Parti
cular
s Pa
rticu
lars
Relev
ant S
ectio
n /
Rule
Rem
arks
sale
which
are
liab
le to
tax u
nder
se
ction
3 o
f the
Act;
and
whic
h ar
e no
t liab
le to
tax u
nder
sec
tion
7 ar
e en
titled
to
credit
. He
nce,
input
tax
credit
on
ca
pital
good
s is
also
allow
able.
How
ever
, Sec
tion
15(
1),
(2),
(3)
states
tha
t in
case
of
treatm
ent
of sto
ck b
roug
ht for
ward
du
ring
trans
ition,
no in
put t
ax c
redit
for
finish
ed g
oods
or c
apita
l goo
ds is
all
owed
. Ho
weve
r, un
der
simpli
fied
acco
untin
g me
thod
no
input
tax
credit
is av
ailab
le.
9. Ca
n de
ducti
on b
e cla
imed
for
lan
d va
lue by
the c
ompo
sition
deale
r?
Dedu
ction
for
the v
alue
of lan
d is
allow
able
in the
ha
nds
of a
simpli
fied a
ccou
nting
meth
od de
aler.
-
Com
pilat
ion
of W
orks
Con
tract
Pro
visio
ns un
der V
AT L
aws o
f Diff
eren
t Sta
tes
26
Sl.
No.
Parti
cular
s Pa
rticu
lars
Relev
ant S
ectio
n /
Rule
Rem
arks
Howe
ver,
it is n
ot wr
itten
spec
ificall
y in
eithe
r the
Act
or th
e Rule
s. 10
. Ho
w is
the e
stima
ted g
ross
pro
fit co
mpute
d in c
ase o
f wor
k con
tract?
Al
so, w
hat is
the
ratio
to a
ppor
tion
the
gros
s pr
ofit
betw
een
mater
ial a
nd
labou
r?
Ther
e is
no
spec
ific
rule
for
estim
ation
of g
ross
pro
fit in
case
of
works
con
tract
or fo
r dete
rmina
tion
of the
rati
o of
appo
rtionm
ent
of gr
oss
profi
t be
twee
n ma
terial
and
lab
our.
Such
esti
matio
n ma
y be
ma
de o
n the
bas
is of
cost
incur
red
for v
ariou
s co
mpon
ents
and
the
value
of
the w
orks
con
tract
to be
ex
ecute
d.
11.
Whe
ther g
ross
pro
fits a
re to
be
adde
d to
actua
l lab
our
char
ges
and
like
or
adho
c lab
our c
harg
es an
d like
?
Profi
t ear
ned b
y the
contr
actor
to th
e ex
tent
it is
relat
able
to su
pply
of lab
our
and
servi
ces
will
be
dedu
ctible
from
the
turno
ver s
ubjec
t to
furnis
hing
of the
pro
fit an
d los
s
Rule
5(2)
(g)
of the
the
VA
T Ru
les.
-
Arun
acha
l Pra
desh
27
Sl.
No.
Parti
cular
s Pa
rticu
lars
Relev
ant S
ectio
n /
Rule
Rem
arks
acco
unt o
f the w
orks
sites
. 12
. W
hethe
r wa
ter,
electr
icity
depo
sits,
stamp
duty
, re
gistra
tion
fee,
servi
ce
tax, e
tc for
m pa
rt of
the w
orks
contr
act
turno
ver?
For d
eterm
inatio
n of
tax p
ayab
le by
the
dea
ler fo
llowi
ng d
educ
tions
from
tax
able
turno
ver a
re a
llowe
d un
der
Rule
5 (2)
of th
e VAT
Rule
s: (a
) lab
our c
harg
es fo
r exe
cutio
n of
works
contr
act;
(b) c
harg
es fo
r plan
ning,
desig
ning
and a
rchite
ct’s f
ees;
(c) c
harg
es fo
r obta
ining
on
hire
or
other
wise
mac
hiner
y an
d too
ls us
ed
for
the
exec
ution
of
the
works
co
ntrac
t; (d
) co
st of
cons
umab
les s
uch
as
water
, ele
ctrici
ty, f
uel e
tc. u
sed
in the
exe
cutio
n of
works
con
tract,
the
prop
erty
in wh
ich is
not
trans
ferre
d in
the c
ourse
of
exec
ution
of
the
Rule
5(2)
of
the
VAT
Rules
.
-
Com
pilat
ion
of W
orks
Con
tract
Pro
visio
ns un
der V
AT L
aws o
f Diff
eren
t Sta
tes
28
Sl.
No.
Parti
cular
s Pa
rticu
lars
Relev
ant S
ectio
n /
Rule
Rem
arks
works
contr
act;
(e)
cost
of es
tablis
hmen
t of
the
contr
actor
to th
e ex
tent it
is re
latab
le to
supp
ly of
labou
r an
d se
rvice
s; an
d (f)
Othe
r sim
ilar e
xpen
ses
relat
able
to su
pply
of lab
our a
nd se
rvice
s. (g
) pro
fits e
arne
d by
the
contr
actor
to
the e
xtent
it is
relat
able
to su
pply
of lab
our
and
servi
ces
subje
ct to
furnis
hing
of a
profi
t an
d los
s ac
coun
t of th
e wor
ks si
tes;
Dedu
ction
s in r
espe
ct of
stamp
duty
, re
gistra
tion
fee, a
nd s
ervic
e tax
are
no
t av
ailab
le fro
m the
tax
able
turno
ver
unde
r the
VAT
Act
and
rules
.
-
Arun
acha
l Pra
desh
29
Sl.
No.
Parti
cular
s Pa
rticu
lars
Relev
ant S
ectio
n /
Rule
Rem
arks
13.
Is co
ntrac
tor l
iable
to tax
for
fre
e su
pply
of go
ods b
y con
tracte
e?
In the
case
of f
ree
supp
ly, th
e wo
rks
contr
actor
is no
t liab
le to
tax.
Furth
er,
wher
e ma
terial
has
bee
n su
pplie
d by
prin
cipal
and
the co
st of
such
goo
ds h
as b
een
dedu
cted
by
the
princ
ipal
from
the
amou
nt pa
yable
to th
e co
ntrac
tor, d
educ
tion
is no
t allo
wed a
nd is
taxa
ble.
14.
Wha
t is
the t
ime
of sa
le for
wor
ks
contr
actor
and
at w
hat p
oint o
f tim
e the
tax
sho
uld b
e off
ered
to
the
depa
rtmen
t?
The
net t
ax o
f a d
ealer
shall
be
paid
withi
n 28
day
s of
the c
onclu
sion
of the
deale
r’s ta
x per
iod.
Expla
natio
n: T
he n
et tax
of a
dea
ler
shall
be
paid
at the
sam
e tim
e as
fur
nishin
g a re
turn,
but th
e obli
gatio
n to
pay
arise
s by
virtu
e of
the a
bove
pr
ovisi
on a
nd is
not
depe
nden
t on
furnis
hing
a re
turn,
nor o
n the
issu
e
Secti
on 3
(4)
of the
VAT
Ac
t.
-
Com
pilat
ion
of W
orks
Con
tract
Pro
visio
ns un
der V
AT L
aws o
f Diff
eren
t Sta
tes
30
Sl.
No.
Parti
cular
s Pa
rticu
lars
Relev
ant S
ectio
n /
Rule
Rem
arks
of a
notic
e of
asse
ssme
nt to
the
deale
r. 15
. W
hich
Secti
on
/ Sch
edule
pre
scrib
e the
rate
of tax
for w
orks
contr
act?
Secti
on 4
(1)
of the
VAT
Act
deals
wi
th the
rate
of
tax u
nder
wor
ks
contr
act.
Secti
on 5
(2) o
f the
VAT
Act
will
be
appli
cable
for
the
dete
rmina
tion
of tax
able
turno
ver
arisi
ng f
rom
the
exec
ution
of th
e Wor
ks C
ontra
ct.
Secti
on
17 o
f the
VAT
Act
and
Rule
12(1
0) a
nd (
11)
of the
VAT
Ru
les d
eals
with
the ra
te of
tax a
nd
lays
down
the
cond
itions
reg
ardin
g sim
plifie
d ac
coun
ting
metho
ds
appli
cable
to w
orks
contr
act.
Secti
on
4, 5
and
17 o
f the
VAT
Act;
Fo
r the
wor
ks c
ontra
ct me
thod,
Rule
12 o
f the
VA
T Ru
les to
be re
ferre
d.
16.
Whe
ther
WC
will
be l
iable
to pa
y un
regis
tered
pur
chas
e tax
in a
dditio
n to
works
contr
act ta
x?
Yes,
as
no
input
tax
credit
is
allow
able
for p
urch
ase
of go
ods
from
unre
gister
ed
deale
r as
Secti
on 9
(2) &
(7) o
f the
VA
T Ac
t.
-
Arun
acha
l Pra
desh
31
Sl.
No.
Parti
cular
s Pa
rticu
lars
Relev
ant S
ectio
n /
Rule
Rem
arks
menti
oned
in S
ectio
n 9
(2) &
(7) o
f the
VAT
Act.
Ho
weve
r, in
case
of
purch
ase
of se
cond
ha
nd
good
s fro
m un
regis
tered
dea
ler,
the c
redit
will
only
be a
llowe
d if
an i
nvoic
e or
re
ceipt
sig
ned
by
such
re
siden
t se
ller
(who
is
not
regis
tered
) is
prod
uced
. Th
e co
ntents
of
the
invoic
e are
: (a
) the
natur
e of th
e goo
ds;
(b)
the am
ount
paid
for th
e goo
ds;
(c)
the na
me of
the s
eller
; (d
) the
se
ller’s
ad
dres
s in
Arun
acha
l Pra
desh
; and
(e
) Th
e or
igina
l invo
ice s
epar
ately
indica
ting
the ta
x co
mpon
ent.
[Rule
10]
Rule
10
of the
VA
T Ru
les.
-
Com
pilat
ion
of W
orks
Con
tract
Pro
visio
ns un
der V
AT L
aws o
f Diff
eren
t Sta
tes
32
Sl.
No.
Parti
cular
s Pa
rticu
lars
Relev
ant S
ectio
n /
Rule
Rem
arks
17.
Wha
t is
the r
ate o
f tax
for
decla
red
good
s use
d in t
he co
urse
of co
ntrac
t? Ra
te of
tax fo
r dec
lared
goo
ds u
sed
in the
cour
se of
contr
act is
4%.
18.
Is sta
ndar
d de
ducti
on
metho
d av
ailab
le for
paym
ent?
If
yes,
what
are
the v
ariou
s ra
tes
pres
cribe
d for
diffe
rent
types
of w
orks
co
ntrac
t?
Stan
dard
ded
uctio
n is
avail
able
for
each
type
of w
orks
con
tract
wher
e the
dea
ler d
oes
not m
aintai
n bo
oks
of ac
coun
ts for
ide
ntific
ation
of
labou
r cha
rges
whic
h is
menti
oned
in
Anne
xure
8.
Rule
30(2
) of
the V
AT
Rules
19.
Whe
ther c
ontra
ctee
/ prin
cipal
is lia
ble
to de
duct
TDS
from
the
amou
nt pa
yable
to co
ntrac
tor?
It is
for g
ener
al inf
orma
tion
to all
co
ncer
ned
that
tax
dedu
ction
at
sour
ce (
TDS)
for
VAT
has
bee
n int
rodu
ced
w.e.f
. 11th
Apr
il 20
07 b
y ma
king
an
amen
dmen
t in
the
Arun
acha
l Pra
desh
Goo
ds T
ax A
ct,
2005
. An
y tax
ded
ucted
sha
ll be
paid
into
the G
over
nmen
t acc
ount
on b
ehalf
Circ
ular
No.-0
7 da
ted
22nd
Sep
tem
ber,
2009
-
Arun
acha
l Pra
desh
33
Sl.
No.
Parti
cular
s Pa
rticu
lars
Relev
ant S
ectio
n /
Rule
Rem
arks
of the
per
son
from
whos
e bil
ls an
d inv
oice
the
dedu
ction
ha
s be
en
made
and
sam
e sh
all b
e de
posit
ed
by C
halla
n No
FF-
08 u
nder
Hea
d of
Acco
unt “
0040
”. Th
e pe
rson
makin
g an
y de
ducti
on o
f tax
at s
ource
and
pa
ying
it int
o the
Go
vern
ment
acco
unt
shall
iss
ue t
o the
pay
ee
intim
ation
/ ce
rtifica
te of
tax
dedu
ction
at so
urce
and p
ayme
nt.
20.
Wha
t is
the
rate
of TD
S to
be
dedu
cted i
n cas
e of w
orks
contr
act?
W
hethe
r inte
rstate
sup
plies
or i
mpor
t tra
nsac
tions
ar
e co
nside
red
for
dedu
cting
TDS
?
Not
spec
ified
in the
Ar
unac
hal
Prad
esh
Good
s Ta
x Ac
t, 20
05 a
nd
Arun
acha
l Pr
ades
h Go
ods
Tax
Rules
, 200
5.
-
Com
pilat
ion
of W
orks
Con
tract
Pro
visio
ns un
der V
AT L
aws o
f Diff
eren
t Sta
tes
34
Sl.
No.
Parti
cular
s Pa
rticu
lars
Relev
ant S
ectio
n /
Rule
Rem
arks
21.
Is the
con
tracto
r also
liable
to d
educ
t TD
S fro
m the
amo
unt p
ayab
le to
the
Sub-
Contr
actor
?
Poin
t no.
31
22.
Whe
ther t
he W
C ca
n cla
im in
put t
ax
credit
on co
nsum
ables
?
Altho
ugh
no s
pecif
ic pr
ovisi
on f
or
allow
ing
input
tax
credit
on
co
nsum
ables
exis
ts un
der t
he la
w, it
is as
sume
d tha
t inp
ut tax
cre
dit is
all
owab
le for
cons
umab
les.
Secti
on 9
(1)
of the
VAT
Act
gives
im
porta
nce
to the
use
of g
oods
for
the p
urpo
se o
f mak
ing s
ale a
nd n
ot the
kind
s of g
oods
. Fu
rther
, Sec
tion
9(2)
of th
e VAT
Act
does
not
includ
e co
nsum
ables
as
disall
owed
.
Secti
on 9
(1) &
9(2
) of t
he
VAT
Act.
-
Arun
acha
l Pra
desh
35
Sl.
No.
Parti
cular
s Pa
rticu
lars
Relev
ant S
ectio
n /
Rule
Rem
arks
23.
Whe
ther d
educ
tion
for s
ub c
ontra
ctor
turno
ver is
perm
itted f
rom
the tu
rnov
er
of W
C?
Does
WC
have
the
opti
on t
o cla
im
input
tax c
redit
in li
eu o
f de
ducti
on
from
total
turno
ver?
The
works
con
tracto
r is
entitl
ed to
cla
im d
educ
tion
towar
ds a
moun
ts pa
id to
the
sub-
contr
actor
s for
ex
ecuti
on
of the
wo
rks
contr
act
subje
ct to
prod
uctio
n of
proo
f to
the
satis
factio
n of
the
Comm
ission
er
that:
(a)
the
sub-
contr
actor
is
a re
gister
ed d
ealer
liab
le to
pay
tax un
der t
he V
AT A
ct; an
d (b
) de
ducti
on ca
n be c
laime
d on
the
stren
gth o
f an
invoic
e ra
ised
by
the su
b con
tracto
r (c)
The
re is
no
furthe
r tra
nsfer
of
good
s in
any
form
by th
e su
b co
ntrac
tor
to the
wo
rks
contr
actor
exc
ept
as s
hown
in
the in
voice
of th
e sub
contr
actor
.
-
Com
pilat
ion
of W
orks
Con
tract
Pro
visio
ns un
der V
AT L
aws o
f Diff
eren
t Sta
tes
36
Sl.
No.
Parti
cular
s Pa
rticu
lars
Relev
ant S
ectio
n /
Rule
Rem
arks
No s
pecif
ic pr
ovisi
on a
s su
ch g
iven
in the
Act
or R
ules.
Ther
e is
no e
xpre
ss p
rovis
ion u
nder
the
VAT
Act
for a
llowi
ng in
put t
ax
credit
on
pa
ymen
ts to
sub
contr
actor
. 24
. W
hethe
r inp
ut tax
cre
dit is
allo
wable
ful
ly in
case
of w
orks
contr
act?
Input
tax c
redit
is a
llowa
ble in
full t
o the
exte
nt tax
has
bee
n pa
id or
pa
yable
on
pu
rchas
e of
taxab
le go
ods
from
a re
gister
ed
deale
r wh
en s
uch
good
s ar
e pu
rchas
ed fo
r us
e in
the
exec
ution
of
works
co
ntrac
t.
Secti
on
9(
1)
and
Secti
on
9(2)
(a)
of the
VA
T Ac
t.
25.
Is the
re a
ny s
pecif
ic for
mat o
f inv
oice
or b
ill for
reg
ular
and
comp
ositio
n W
C?
No
spec
ific
forma
t ha
s be
en
pres
cribe
d for
invo
ice or
bill.
Ho
weve
r, fol
lowing
info
rmati
on i
s co
mpuls
orily
inclu
dible
in the
invo
ice
Secti
on 5
1 of
the V
AT
Act.
-
Arun
acha
l Pra
desh
37
Sl.
No.
Parti
cular
s Pa
rticu
lars
Relev
ant S
ectio
n /
Rule
Rem
arks
or bi
ll: A)
The
tax
inv
oice
issue
d un
der
Secti
on
51(2
) sh
all c
ontai
n the
fol
lowing
par
ticula
rs on
the