Work Contract Tax

[p.k.s nair]

Sir,                                            

I have entered into an agreement with a Civil Contractor ( a Privite Limited Company) to Construct a house in our village. The estimated value is Rs. 39,33,692.22. The  contractor levies Rs. 1,19,191.00 (3.03%) as Tax on the estimated value of the house. Sales Tax are levied while purchasing by the dealers and included in the cost of goods/materials viz. a viz.- Cement, Iron and  Steel, wooden compontents like doors and windows, Tiles, glasses, electrical and plumbing accessories for use in the construction of house. So again Tax is payable by me or not and if so how much?. And whether the contract tax in payable on labour charges for construction of house and Transportation charges which includes loading and unloading charges levied by the loaders.

Please help me and clarify.

Regards,

P.K.Surendranathan Nair.

5-9-2012.

[YAGAY andSUN]

If it is a single unit then no service tax will be applicable at all.

[p.k.s nair]

i meant work contract tax . Not serviice tax .

[YAGAY andSUN]

Works contract under VAT is not payable on the labour charges, construction charges included loading and unloading charges.  It is paid on the goods involved in the execution of works contract.  If the contractor issues an invoice or bill upon you then surely he will charge works contract tax as applicable and will deposit it with the concerned department.  At the time of assessment he may take the benefit of tax paid on the goods/material.   Please talk with him in this regard.

AI Summary

Works contract tax applies to goods in construction, not to labour or transport, and contractor may collect and claim input credit. Works contract tax under VAT applies to goods incorporated in the execution of the contract and does not extend to pure labour charges or to transportation, loading and unloading charges; a contractor who issues an invoice may collect and remit works contract tax and may claim credit for tax paid on materials used, so purchasers should clarify allocations and tax credits with the contractor.