work contract tax

[veera swamy]

In a work contract labour and materials seperately shown.VAT for material and service tax for labour claimed.Whether work contract tax for labour shall be deducted on payment.

[YAGAY andSUN]

Dear Veera,

Showing the labour component and material component separately won't absolve you from the liability under the provisions of WCT. If you are not maintaining the separate records then either you can avail the abatement or you can go for composition scheme under the works contract. The contractee is also under statutory obligation to deduct the TDS on WCT and to issue a certificate in this regard to the contractor on the Gross Value of the Contract. At the time of your assessment you would have to produce such certificate to the assessing authority.

Regards,

YAGAY and SUN

(Management, Business and Indirect Tax Consultants)

[Ganeshan Kalyani]

Works contract Tax which is also called as VAT-TDS is required to be deducted by the receiver of service from the payment to be made to the provider of works contract service. The deductor is required to deposit the amount so collected to the exchequer. the deductor shall issue a certificate to the service provider who inturn can claim the benefit by showing as tax already paid in the Vat return. The provision of VAT-TDS or WCT varies from state to state. In some state it is applicable and in some not. VAT is a state subject.

[Guest]

Dear Sir

I want to escalate this problem. can we deduct TDS/WCT on inter state transaction.

[Ganeshan Kalyani]

As I said VAT is a state subject it differs from state to state and therfore if you can write down which state you are referring to we can comment with reply.

[Guest]

Dear Ganeshan Sir

My company is situated in Daman & Diu & most of contractor belong to gujrat & maharasthra.

[YAGAY andSUN]

Dear Deepak,

There is no provision under CST Act, 1956 regarding deduction of TDS on interstate works contract.

Regards,

YAGAY and SUN

(Management, Business and Indirect Tax Consultants)

AI Summary

Works contract tax deduction applies on gross contract value despite separate labour and material breakdown. Segregating labour and material components does not by itself eliminate liability for works contract tax; the contractee must deduct VAT-TDS/WCT on the gross contract value, deposit it with the exchequer and issue a certificate to the contractor, who may claim credit in VAT returns. Applicability and procedure vary by state, and the CST Act contains no provision for TDS on interstate works contracts.