Effective Rate of Tax on Certain Works Contract Activities Reduced under the Delhi VAT Act

with effect from 20.09.2013

[vide Notification No.F.3(16)/Fin.(Rev‐I)/2013‐14/dsVI/785 dated the 20.09.2013]

Computation of taxable turnover in works contracts: Where amount of labour, services and other like charges is not ascertainable from the books of accounts of the dealer (being works contractor) or where he fails to produce documentary evidence in support of such charges, the amount of such charges shall be calculated on the basis of percentages specified in the Table given in Rule 3(2) of the Delhi VAT Rules.

The Government has amended the said Table with effect from 20.09.2013 and standard percentage of certain activities has been increased (and thus effective rate of VAT has been decreased , if claiming labour & services on percentage basis), as under:

Sl. No. of Table	Nature of Activities	Percentage ofLabour & Services		Effective Rate of DVAT
		Up to 19.9.2013	From 20.9.2013	Up to 20.9.2013	From 20.9.2013
(A)	(B)	(C)	(D)	(E)	(F)
20	Book‐binding	20%	50%	10%	6.25%
21	Textile processing such as dying, fabrication, tailoring, embroidery and other similar activities where textile is supplied by the contractee	20%	50%	10%	6.25%
22	Electro plating, electro galvanizing, anodizing, powder coating and other similar activities	20%	50%	10%	6.25%
23	Re‐treading of old tyres	20%	40%	10%	7.5%
Note: Effective DVAT rate has been calculated as:‐ 12.5 * [100 (–) C or D] % . Applicable rate of works contract (other than printing works contract) in Delhi VAT is 12.5%.

 (Rakesh Garg)

Effective VAT rate reduction for specified works contracts follows revised labour and services percentage allocation, lowering tax liability. Amendment to Rule 3(2) increases prescribed labour, services and similar percentages for certain works contract activities where such charges are not ascertainable or supported, so that applying the higher percentages reduces the taxable works contract turnover and thereby lowers the effective VAT burden when the percentage basis is relied on; specified activities affected include book-binding, textile processing (materials supplied by contractee), electroplating and tyre re-treading, and the notice supplies the formula linking the prescribed works contract rate to the effective DVAT rate under the percentage method.