Works Contract Tax

[Srivatsan Krishnamachari]

Dear Experts,

Please let me know the WCT% in case works contract in various situations. In this Labor cess also need to be considered?.

Regards

Srinivas

[DR.MARIAPPAN GOVINDARAJAN]

For which State it is required?

[Ganeshan Kalyani]

SERVICE TAX : If you are a service provider under works contract service, and you are an individual, firm , HUF and the recipient is a body corporate then you have to charge half of service tax @15% on 40% of Value of service in case of original works and on 70% of value of service in case of other than original works.

VAT : Regarding material portion involved in the works contract then applicable VAT shall be charged on invoice.

VAT- TDS (WCT): the works contract tax is a tax to be deducted by the recipient of service from the payment to be made to contractor . A certificate is then issued by the service recipient to the contractor after making payment of the tax so deducted , based in which the contractor shall tax credit against output VAT payable.

[Ganeshan Kalyani]

Labour Cess need to be paid by the contractors. If contractor does not pay it then the owner (Service receiver ) shall pay the tax.

[Srivatsan Krishnamachari]

Thanks for replies. This is supply from Telangana to AP.

Regards

Srinivas

[Ganeshan Kalyani]

In case of interstate works contract service being provided then in my view 'works contract tax ' is not applicable.

AI Summary

Works contract tax as a withholding obligation by the recipient, with VAT on materials and labour cess liabilities.
Works contract taxation requires suppliers to apply service tax treatment for works contract services while VAT is charged on material portions; WCT functions as a tax deducted by the recipient from contractor payments with a certificate enabling credit against output VAT, and labour cess is the contractor's liability but falls on the owner if unpaid; interstate supply may render state WCT inapplicable.