Work Contract Tax

[Guest]

(a) What is Work Contract Tax and what are the works and services covered under Work Contract Tax in Jammu.

(b) Recently my company invited the tender for SITC of batteries in Jammu. In the tender document, it was clearly written that the work is for Supply, Installation, Testing and Commissioning of Batteries which includes replacement of old batteries. After completion of the work, the party submitted their bill and was contesting that no WCT is to be deducted as they have supplied the batteries and they have not charged any amount for their services.

My question is whether WCT is to be deducted on such supply where the tender condition clearly says that the work is SITC and party after going through the tender document has submitted their offer.

Party's contention also seems to be right because they have supplied the batteries as the end product.

Please reply at the earliest because I have to clear the payment.

[DR.MARIAPPAN GOVINDARAJAN]

Supply of materials attracts VAT. In the tender document the installation, testing and commissioning work are to be done which amounts to service. Whether the parties supplied only batteries and does not do any work as per the tender agreement?

[Ganeshan Kalyani]

Service tax is not applicable in the State of Jammu & Kashmir.

[KASTURI SETHI]

Works Contract Tax is a tax on transfer of goods. Here the word 'Supply' implies 'sale' as pointed out by Sh.Mariappan , Sir.

Installation, testing and commissioning attract ST but Services being consumed in J & K are out of service tax network as ST is not leviable in the jurisdiction of J & K. NO ST to be paid.

Regarding WCT (equal to VAT), it is not my field. Whether WCT is applicable in J & K or not, other experts in this forum are well conversant. They may throw light.

[Guest]

Thanks for the replies. But my queries still stand.

As per the tender document, the party had to replace the old batteries on buy back offer. The party had supplied the batteries, replaced the old batteries with the new one and tested the installed batteries and thereby commissioning of the installed batteries.

The parties contention is that though the work is SITC but they have quoted for the price of batteries on buy back offer and they have not charged any extra amount for their services.

Whereas as per the tender document, the party had to quote the one rate for SITC of each type of battery and after going through the tender document, the party had offered their rates which is for SITC hence their service charges are included in the rates quoted by them. So the supply has become the work due to SITC and hence WCT is to be deducted or not. This is my question. Please reply.

[KASTURI SETHI]

In my view WCT is to be deducted.

[KASTURI SETHI]

WCT is deductible like TDS but WCT is not TDS.

AI Summary

Work Contract Tax applicability when supply includes installation and commissioning - WCT may be deductible despite supplier claiming only goods Where a tender expressly required Supply, Installation, Testing and Commissioning (SITC) and the contractor quoted an inclusive rate for SITC, the contractually required service elements are treated as part of the supply; supply attracts VAT, service tax was not leviable in Jammu & Kashmir, and Work Contract Tax-being a tax on transfer of goods-should be deducted. WCT is collected by deduction at source similar to TDS but is not TDS.