W o r k C o n t r a c t T a x

SECTION 36A

Introduction

In order to constitute a works contract, two basic cumulative conditions need to be satisfied,

i. there must be transfer of property goods involved in the execution of specified works contract.

ii. such transfer is leviable to tax as sale of goods under relevant Sales tax/ VAT laws.

Who is liable to deduct WCT?

• Contractee :Every person other than individual & HUF responsible for making payment to contractor in relation to work contract.

• Contractor : Every contractor whether individual or HUF or any other person,responsible for making payment to sub contractor in pursuance of work contract.

When to deduct WCT?

Contractee : Earlier of credit in books or at the time of payment.

Contractor : At the time of payment to sub-contractor for transfer of property in goods.

Rates of WCT

Nature of Deductee Rate of WCT

If the contractor or Sub-Contractor as the case may be, to whom payment is made is registered under DVAT

4%

If the contractor or Sub-Contractor as the case may be, to whom payment is made is not registered under DVAT 6%

TAN(Tax Deduction Account Number)

TAN(Tax Deduction Account Number)

• Person responsible for making deduction u/s 36A shall apply for TAN in form DVAT 44 within 7 days from date on which tax was deducted.

• TAN shall be issued in Form DVAT 45

Basic Exemption

• Contracts for a value upto Rs 20,000 or such amount as may be notified by commisioner are exempt from deduction of WCT.

WCT on Advance Payment

• WCT cannot be deducted by the contractee or contractor as the case may be, on the advance payment to contractor/sub-contractor.( as provisions of WCT doesnot apply to all payments but apply to those payments which are for discharge of any liability)

Deposit of WCTDeposit of WCT

• WCT shall be deposited before the expiry of 15 days following the month in which deduction is made, in challan in form DVAT 20.

• It shall be deposited in electronic form by all registered dealers & contractees.

WCT CertificateWCT Certificate

• It shall be issued by deductor u/s 36A(5) & 36A(5A) of DVAT Act read with rule 59(2).

• Certificate shall be issued in Form DVAT 43.

• Copy of challan for payment of tax by contractee shall also be attached with WCT certificate.

• Certificate shall be issued in quadruplicate.

• First & Second copy shall be furnished to contractor.

• Third copy shall be attached by deductor along with WCT return with proof of payment in challan form DVAT 20.

• Fourth shall be retained by deductor for his records.

Time limit to furnish certificateTime limit to furnish certificate

• Certificate shall be furnished in duplicate to contractor within 7 days from date of deposit of WCT.[Rule 59(2)]

• In case of default in issue of certificate within the prescribed time, defaulter shall be liable to a penalty of Rs 100 per day of default.

WCT ReturnWCT Return

WCt return shall be filed by deductor in form DVAT 48Within 28 days from end of quarter in

which tax has been deducted.

Default : In case of default in filing of return in prescribed time, defaulter shall be liable to a penalty of Rs. 200 per day of default but doesn't exceeds Rs. 20,000.

Penalty for non-deduction or non-payment of WCT [Sec 36A(8)]

• If any person fails to deduct or after making deduction fails to deposit with account of Govt. shall be liable for imposition of penalty.

Amount of Penalty

A sum not exceeding twice the amount deductible besides the tax deductible but not so deducted or if deducted,not so deposited. But this penalty will not discharge the deductor from liability for deduction of WCT and even after payment of penalty,he is still required to discharge the obligation for deduction and payment of WCT.

Interest for non-deduction or non-payment of WCT [Sec 36A(9)]

• If any person fails to deduct or after making deduction fails to deposit with account of Govt. shall be liable for interest without prejudice to provisions u/s 36A(8).

Rate of Interest Defaulter is liable for simple interest at the rate of 15%

p.a on the amount deductible but not so deducted, and if deducted,not so deposited. It shall be calculated from the date on which tax was deductible to the date on which such amount is actually deposited.