WCT out side the state

[sachin kuchekar]

Hi,

Situation:one business entity  situated in Maharashtra who deals in Supply,Installation and commissioning.Which includes Service and Supply of goods both.company also able to identify the amount of service and amount of goods supplied.

However it is registered in maharastra only and they wants to do business with other state i.e Punjab. Currently company execute the transaction as service tax on service provided and WCT on goods supplied as applicable.

 

Now the issue is pujab commercial tax telling that company have to register to execute WCT in punjab.As per my knowledge in CST Act there are not mandatory to get registration.and scenario is that party in punjab agreed to allow maharastra party to charge WCT provided punjab party will not Input credit.

So,Kindly advice on how to avoid registration in PUNJAB!!!!(As it costs much to maharastra party)

 

 

Dear Mr Sachin,

The WCT provisions are under VAT and is a State matter. Normally the Maharastra party is not required to charge WCT from the Punjab party but in some States, the dealers are required to pay VAT on the purchases made from the unregistered dealers. Since Maharastra party is not registered under Punjab VAT hence the Punjab party shall be laible to pay the tax that is why they are allowing the Maharstra party to charge the WCT in the bill being an additional cost to the Maharstra party. Even you may include this cost into the price. Now the Punjab party shall deduct the WCT from the bills and shall deposit with the Punjab Govt.

However the main issue is the practicle point that how the Maharastra party shall bring the goods into Punjab  from outside Punjab being an unregistred dealer? In case the entire purchases to be made by the Maharastra party are from within Punjan then it has to pay the local VAT but being unregistered dealer can not avail the input vat credit and this amount shall un-necessarily becomes a cost to everyone.

In case you would like to avoid the registration in Punjab then the practicle way out may be:-

1. Negotiate the full project cost.

2. Get the purchases invoiced on the Punjab party directly for the purchases made within Punjab and the Punjab party may avail the VAT credit.

3. Get the inter state purchases directly invoiced on the Punjab party from suppliers other than you on 2% tax which would have been factored into the cost any way.

4. Invoive your supplies directly on the Punjab party from Maharastra on 2% tax.

5. The balance amount is your profit and labour part (1-2-3-4) and invoice it from maharastra and charge the applicable service tax. (check the party status/constitution  and the reverse charge mechanism). There shall be no WCT but only Income tax TDS.

Thanks

S.R. Bansal

AI Summary

Interstate VAT registration affects works contract tax; structuring invoicing can avoid foreign-state registration while preserving input credit.
State VAT/WCT is territorially governed and an unregistered out-of-state supplier may lead the purchaser to bear or deduct tax and lose input credit. Practical measures to avoid registration in the purchasing State include negotiating a lump-sum project price; having in-state purchases invoiced directly to the purchaser so they can claim VAT credit; arranging interstate supplier invoices directed to the purchaser under the interstate tax mechanism; invoicing supplies from the supplier state under the interstate tax rate; and invoicing the profit/labour portion from the supplier state as a service subject to service tax, leaving only income tax TDS.