Works-contract VAT applies to the full contract value, including subcontracted work and retained amounts, with only statutory deductions allowed.

Under the Maharashtra Value Added Tax Act, 2002, works-contract receipts are taxable in the hands of the principal contractor on the full contract value, including amounts executed through sub-contractors and sums retained by the principal contractor, subject only to deductions expressly permitted by the statute and rules. The ruling treats the contractor and sub-contractor within the statutory principal-agent framework and confirms that the subcontracted portion does not fall outside the tax net merely because performance is delegated. Prospective effect was refused because no ambiguity in the statutory scheme or other sufficient basis was shown to protect past liability.

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Issues: (i) Whether the applicant was liable to pay VAT on the entire value of the works contract, including the portion executed through sub-contractors, and on the amount retained by the principal contractor; (ii) whether prospective effect should be granted to the ruling.

Issue (i): Whether the applicant was liable to pay VAT on the entire value of the works contract, including the portion executed through sub-contractors, and on the amount retained by the principal contractor.

Analysis: The ruling applied the scheme of the Maharashtra Value Added Tax Act, 2002 governing works contracts, particularly the treatment of the contractor and sub-contractor as principal and agent and the statutory method for determining taxable value. Relying on the settled interpretation of the provisions, it was held that the contract value is taxable as a whole, with appropriate deductions available under the rules, and that the amount retained by the principal contractor remains part of the same transaction and is not outside the tax net.

Conclusion: The applicant was held liable to pay tax on the entire contract value, subject to the sub-contractor's discharged liability to the extent of the amount forming part of the contract value, and the amount retained by the principal contractor was also held taxable subject to lawful deductions.

Issue (ii): Whether prospective effect should be granted to the ruling.

Analysis: The ruling considered the discretionary power to grant prospective effect and found no ambiguity in the statutory scheme or compelling circumstances warranting relief. It was held that the applicant had not established any sufficient basis to justify protection against past liability.

Conclusion: Prospective effect was refused.

Final Conclusion: The ruling confirms tax liability on the full works-contract value under the statutory scheme, while declining to shield prior transactions from the effect of the determination.

Ratio Decidendi: In a works-contract regime that treats the contractor and sub-contractor as principal and agent, the contract receipts attributable to the works are taxable in the hands of the principal contractor, subject only to deductions expressly permitted by the statute and rules.

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