VALUE ADDED TAX

&

WORKS CONTRACTS

A Power Point Presentation

Maharashtra Agricultural Competitiveness Project

F.Y. 2012-2013

CONTENT OF THE PRESENTATION

Introduction of the Act

VAT & WCT

Sales Vs. Works Contracts

Determination of Sale Price

Meaning of Construction

Exemption from TDS

Rate of TDS

Mode of Tax payment

CONTENT OF THE PRESENTATION

Due Date of Deposit

Interest for Late Payment

Return of Tax Deduction

Form 424

INTRODUCTION OF THE ACT

• Generally transfer of Movable Goods for a consideration

from a dealer to a customer would constitute a sale chargeable to sales tax under the provisions of value added tax act enforced in India.

• However there are certain activities performed which

includes both supply of goods as well as provision of services and it may not be possible to adjudge the sais activity either as only a sale or as only a service. ▫ .

• A transaction may be regarded as Work Contract if:- ▫ Property passes as and when the work is undertaken.

▫ Work is performed on the property belonging to

another.

▫ Contract is a type of work and the property passes in another form.

▫ In passing of the property is incidental, and the contract is for rendering services only, transaction may not be taxable.

INTRODUCTION OF THE ACT

INTRODUCTION OF THE ACT

• Types of Contract

Contracts can be divisible or indivisible. Where the value of materials can be identified separately, it is a divisible contract.

Eg. Sales & After sales contract

When contract awarded for a lump sum amount, it is an Indivisible contract.

There can be more than one contractors involved in the job. Even sub- contractors may be appointed.

VAT & WCT

• There is a basic difference between VAT & WCT

• The VAT is charged on the sale of the commodities from one party to another party.

• Whereas the WCT is charged when there is transfer of property in form of goods in

execution of contract.

Sales Vs. Works Contracts

Sale of Goods Works Contracts

1. Sale of Goods.

1. Transfer of property & ownership

2. Intension to buy

3. Goods are the essence of contract

4. Property passes under the contract

1. Transfer of property in goods involved in execution of works contracts.

2. No intension of purchase of goods.

3. Agreement for one kind of property but transfer of another

4. Property passes on theory of accretion or accession

Sales Vs. Works Contracts

Intension of the parties & object of the transaction play a major role in determining whether it is a

work contracts or sale.

DETREMINATION OF SALES PRICE

• Under the MVAT Act, the Contract Price or Contract Value is not to be considered as turnover of sales. It is defined to mean amount paid or payable to a dealer for transfer of property in goods involved in the execution of works contract. In other words now the cost of goods

expenses incurred thereon and profit earned will be treated as Sales Price. Since the State has got no power to levy tax on expenses, labour and services, involved in the execution of works contract rule 58 is provided, for

such determination of sales price.

MEANING OF CONSTRUCTION

• In exercise of the powers conferred by clause (i) of the Explanation to subsection (3) of section 42 of the Maharashtra Value Added Tax Act, 2002 [Mah. IX of 2005], the Government of Maharashtra hereby notifies the following works contracts to be the ‘Construction Contracts’ for the purposes of the said sub-section, namely (w.e.f.20-06-2006) :

MEANING OF CONSTRUCTION

• Contracts for construction of - Buildings, Roads, Runways, Bridges, Railway ,Over bridges, Dams, Tunnels, Canals, Barrages, Diversions, Rail tracks, Causeways, Subways, Spillways, Water supply schemes, Sewerage works, Drainage, Swimming pools, Water Purification plants

and Jetties.

Examples of works contacts

• Construction according to specification is works

contract .

• Repairs of vehicles is works contract.

• Printing & Photography is works contract.

• Fabrication & installation on steel is works contracts.

• Door & windows supply & fixing is works contract.

EXEMPTION FROM TDS

• If aggregate amount payable to a dealer is less than Rs. 5.00 Lacs in a financial year , no tax at source is to be deducted.

• If pure labour contract ; then no tax should be deducted.

EXEMPTION FROM TDS

• Joint Commissioner may issue a certificate in response to application of the dealer that the

contract is not a works contract ; then no TDS should be done.

RATES OF TDS

• If the Contractor is registered Dealer under MVAT Act – 02.00 %

• If the Contractor is not a registered dealer – 04.00 % [ Up to April 30, 2012 ]

RATES OF TDS

• If the Contractor is not a registered dealer – 05.00 % [ With effect from May 01, 2012 ]

MODE OF TAX PAYMENT

• The payment should be made online in favor of Sales tax Department as it is being made mandatory.

• However, if the online payment is not possible, the some of Banks do provide the facility of paying the tax online.

DUE DATE OF DEPOSIT

• It is prescribed in the MVAT Act, 2002 that the payment should be made within the 21 days

from the End of the month in which the Tax has been deducted.

INTEREST FOR LATE PAYMENT

• The interest is charged by the department of sales tax for late payment of tax.

• The interest charged by the department is 01.25% on Tax amount for month or the part of the month.

• Hence, Interest = 01.25* Tax amount * Delay period

in month

RETURN OF TAX DEDUCTION

• The new changes has been introduced by the department of sales tax regarding the filing the return of WCT to the sales tax department.

• The Form introduced by the unit is Form 424.

• Certificate in form no 402 are to issued to the contractor whose WC TDS is being made.

RETURN OF TAX DEDUCTION

• We all know that no unit has obtained the registration number i.e., TIN from the department of sales tax.

• Then the question has been raised that how the party will get credit of his deduction ????

RETURN OF TAX DEDUCTION

• Also, how the Department of sales tax will know that the payment received from MACP???

• Now, this return in Form 424 will help to overcome all these questions.

FORM 424

• Even if one does not have the Registration number under the act and still deducts the tax from the payment of contractor, he should file the return in Form 424.

• The due date for filing Form 424 for Financial Year is June 30, 2013 and hence we have prepared a video for how to file the return ??

FORM 424

• Lets see the video.

We have overviewed the summary of WCT provisions.

THANK YOU