Wct in tn
AMIT KUMAR SHARMA
(Querist) 24 May 2013
This query is : Resolved
Dear Sir,
We have received a order for service in Tamilnadu for executing a work.
1. This is lump sum order for work. We are placing order to our Contractor to do this work. We are giving order in ratio e.g. Rs. 90/- for service and Rs. 10/- for Consumable items. Our contractor will charge VAT on consumable, can we also charge vat from our customer at the time issuing of Service Invoice.
2. Secondly, can customer deduct WCT from our payment if yes, how can we save from deduction of WCT.
3. Further, if we have place order to our contractor in ratio e.g. Rs. 90/- for service and Rs. 10/- for Consumable items, can we have to deduct WCT from contractor payment.
Please help.
Sankaranarayanan
(Expert) 24 May 2013
Sec 2(43) defines as “Works Contract” includes any agreement for carrying out for cash, deferred payment or other valuable consideration, building construction, manufacture, processing, fabrication, erection, installation, fitting out, improvement, modification, repair or commissioning of any movable or immovable property.
It need to be very careful while reading these lines that the act has not given the exact and exclusive definition but the definition specifically includes the activities/ nature of transactions covered under the Works Contract. In the absence of the exclusive definition for the words/ phrase “Works Contract” one need to refer the definition of works contract under the General Clauses Act and relevant judicial pronouncements from time to time.
The works contract is been governed by two different methods and the option is left to the choice of the dealer
This method is also known as Method of Composition or Composite method of tax payment. In this case the dealer is liable to pay tax on the total value of the works contract at the applicable rates. The applicable rates are 2% for civil works and civil maintenance works & 5% (4% till the amendment on 13/2/2012) for all other works. And the highlighting points under this method are (a). The dealer has to present his option of payment of tax under this method with the assessing authority before 20th of May of the financial year or along with the first month return after commencement of the works contract execution, as the case may be, (b) The dealer is not required to maintain books of accounts under this act., and it does not mean that he/ she need not maintain books of accounts under the other law(s) in the land, and (c) The dealer cannot take Input Tax Credit on the purchases or on the inputs, and more importantly (d) the tax has to be paid out of his margin earned or to be precise he has no rights to collect the tax portion from his customer(s). The reader may mark these facts/ points are covered under sec. 6 of the TNVAT Act
It is opposite to the first method and it is known as Non-composition in general and the properties are:
(a) The dealer is not liable to pay tax on the total value of the works contract/ total turnover at the applicable rates but on the taxable turnover only and again the percentage of tax payable on the said turnover is based on the form of the property and its applicable rate as listed in the different parts of the First Schedule of the Act.
(b) Unlike the other method the dealer need not place his/her option of payment of tax liability under Non-composition. Once the dealer fails to present the option, it is automatic that he is liable to pay tax under Non-composition method.
(c) The dealer is required to maintain books of accounts under this act and to produce the evidence(s) with the appropriate authorities, as and when required by them.
(d) The dealer is entitled for Input Tax Credit on the purchases or on the inputs.
(e) The dealer cannot take Input tax credit on the purchases under CST act.
