Works Contract aggrement with unregistered Vendor

[Ashish Bansal]

Dear Experts,

What if any contract is entered into with a supplier of material for Supply and fixing of material and Vendor is not registered with Service Tax and charging CST/VAT on whole bill.

In other words vendor is charging bill for supply only and it will be inclusive of labour charges.

Will that type of contract amount to works contract thereof attracting 60% abetement and 50% reverse charge, or it is fine to book whole as supply only thus ignoring labour charges.

regards

Ashish

AI Summary

Works contract treatment may trigger reverse charge liability even if the vendor is unregistered; contractee must ensure tax compliance.
Where a vendor supplies materials and performs fixing, the transaction should be treated as a works contract, making the contractee liable under the reverse charge mechanism for the service element while state VAT/CST abatement provisions govern VAT treatment; vendor registration status does not alter the contractee's obligation to discharge reverse-charge tax.