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payment of vat under works contract service

jagannath prasad

Your valuable suggestion is solicited on the following points:-

1. From service tax angle,should Vat be actually paid on transfer of material in a composite contract for it to be considered as 'works contract' OR material should be simply leviable to VAT as per definition of Works Contract.

2. Is Deptt. right in not giving benefit of works contract to contractor of builder of residential complex because he has not paid vat and is neither in a position to produce purchase documents when on the other hand the builder has already paid S.T under Reverse Charge on audit's insistence and there is no dispute on the actual construction undertaken by the contractor. What should the contractor do now because he has not kept any purchase document as he was not aware of the service tax provision reg his liability.

3.Is there any case law in support of the contractor. If so, kindly give some to convince the department.

4. Can the contractor be considered as not eligible for Works Contract in the above circumstance when there is no dispute reg use of material in construction of building by the contractor specially in light of payment of tax under reverse charge already made by the builder on audit's insistence. In that case what will happen to the already deposted tax under reverse charge by the builder.

VAT Payment Crucial for Works Contract Eligibility; Department's Denial Without VAT Deemed Incorrect; Legal Action Suggested A discussion forum addresses the issue of VAT payment under works contract service. A participant queries whether VAT must be paid on material transfer in a composite contract for it to be considered a 'works contract' and if the department is justified in denying works contract benefits to a contractor lacking VAT payment and purchase documents. Kasturi Sethi responds that VAT payment is essential for works contract eligibility and suggests using VAT returns as evidence if purchase bills are unavailable. The department's refusal to grant benefits without VAT payment is deemed incorrect. Legal action may be necessary to resolve disputes. Other participants support Sethi's views, emphasizing the importance of understanding legal requirements. (AI Summary)
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