m vat- work contract

Querist : Anonymous (Querist) 01 November 2010 This query is : Resolved
we are manufacturer in readymade garment in maharashtra. we give only cloth purchased by us for stiching work outside to other persons.
person who does labour job they purchase misc items like thread, buttons, zip, less etc cost of this item is very low.
whther this typr of work is considered as job work? or it termed as work contract?

if it is work contract then we have to deduct tds? if yes at which rate and what is turnover limit for tds.
please reply

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R.Ramachandran (Expert) 01 November 2010
It is purely a labour contract and not a works contract. Therefore, the question of deducting any TDS towards VAT in respect of Works contract does not arise.
However, if you are paying more than Rs. 20000 in a year to the tailor, then you are supposed to deduct TDS (towards income tax) an remit the same to the income tax department and grant TDS certificate to the tailor.
You should be very clear that there are two TDSs - one towards Works Contract Tax (i.e. VAT) payable to the State Government and the other towards Income Tax - payable to the Central Government. You should not get confused.

s.subramanian (Expert) 01 November 2010
I agree.

B.R. BHALLA, ADVOCATE (Expert) 04 November 2010
Stitching of garments from the fabrics supplied by the Contractor amounts to job-work/works contract. Currently all VAT Acts/CST Act have similar definition of word "Sale" and it includes any transfer of material in the execution of works contract is deemed sale. The controversy has been set at rest by SC. It would not be considered as "Service contract". TDS under IT is deductible if the amount of job work exceeds a limit prescribed. Similarly under State VAT Act or Works Contract Act, there are provisions for TDS. Since they differ from State to State, the Querist is advised to refer to the respective State Act.

Khaleel Ahmed Mohammed (Expert) 07 November 2010
I agree with Mr.Ramachandran

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