payment of vat under works contract service

[Asked by Guest]

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.

AI Summary

Works contract service eligibility depends on VAT payment and documentary proof, affecting reverse charge adjustment and refund rights.
Eligibility for Works Contract Service requires service with material and establishment of VAT on materials; VAT payment or VAT department acceptance may serve as evidence but purchase invoices are required for claiming the service portion benefit. Absent purchase bills, departmental discretion may allow acceptance of VAT returns, yet the burden of proof lies with the assessee. Where the builder has paid tax under reverse charge, that tax can be adjusted or refunded if reverse charge was not applicable, but denial of works contract benefits to the contractor is likely without documentary evidence; litigation based on facts and physical verification may be necessary.