Chargibility of Vat on Items Under the head supply of Plant & Machinery

[Asked by Guest]

Please guide me

We have awarded a turnkey contract from SAIL which consists of ( a ) Engineering ( b ) Supply of Plant & Machinery & ( c ) Erection of those supplied items.

Supply of Plant & Machinery consists of several items & different Vat rate chargeability.Please guide me the legal bindings of Vat rate chargeability of purchase of Input items. As it is Plant & Machinery to the SAIL like making a GCP (Gas Cleaning Plant)

In continuation of the above mail I mean to say that can we charge a single rate (Plant & Machinery) while raising Tax Invoice as rate of Input Materials are different (Item based).

[YAGAY and SUN]

Dear Partha,

The turnkey projects are well defined in the definition of Work Contract under DVAT Act as well as Service Tax Laws, therefore, the whole plant will come under the purview of WCT. On your invoice you may mention GAS CLEANING PLANT and charge taxes as per the provisions of WCT under DVAT Act as well as Service Tax Laws.

[Ganeshan Kalyani]

In my view the rate of tax of main item would apply. Say if it a machinery then the kind of machinery it is the tax of that machinery would apply if itemwise purchased.

Dear All

Thanks for your prompt reply.In continuation to my earlier mail I m clarifying further it is a divisible contract.Contract is divided like

( a) Supply of Plant & Machinery-Supply Invoice

( b) Service of design & engineering-Service Invoice

( c ) Erection of GCP Plant where Vat as well as service tax applicable.

For supply of Plant & Machinery say 10 items

Each item is separate in nature & vat rate is different but the equipment we make is GCP.

While raising supply invoice items wise(10 items as per billing schedule) which rate is to be applicable of vat as the main equipment is Plant & Machinery (GCP) to the SAIL

[YAGAY and SUN]

Please check SC Judgement of Kone elevator in this connection.

AI Summary

Work contract characterization may require treating turnkey plant supply as a single taxable service, affecting VAT on components.
The query asks whether VAT should be charged itemwise or as a single rate when supplying a turnkey plant composed of components with different VAT rates. Replies indicate two positions: classify the turnkey supply as a Work Contract and tax the assembled plant as a whole under work contract provisions, or apply the VAT rate of the principal machinery/item; a judicial precedent is suggested for further reference.