Works
Contract is an agreement between contractor and contractee to transfer the
moveable goods as per section 2(1) (zt). This includes the activities of
assembling, construction, building, altering, manufacturing, processing,
fabrication, installation, fitting out, improvement, repair or commissioning of
any moveable or immoveable property.
Contractee
as per section 2(1) (j) is the person for whom or for whose benefit a works
contract is executed and contractor as per section 2(1) (k) is the person who
executes either himself or through a sub-contractor a works contract. A sub
contractor does not come under the definition of Contractor. Sub contractor is
mere agent of contractor since goods transferred directly to Contractee.
Registration
of Contractor/Contractee Contractor
is to get himself registered under the VAT Act either as a registered dealer
under section 11 or lump sum dealer under section 9. A lump sum dealer is also
to submit the details of each contract to the Assessing Authority within 30
days of the award of the contract as per Rule 49. A Registered dealer is
eligible for the input tax credit as per section 8 whereas the lump sum dealer
is not since as per section 2(1)(w) input tax means the amount of tax paid to
the State in respect of goods sold to a VAT dealer. A lump sum is not a VAT
dealer though he is registered under the Act. A register dealer is to pay the
tax on the goods transferred in the contract as per the rate of tax on the
goods transferred as per section 7 of the Act whereas the lump sum dealer is to
pay the tax @ 4% on the value of the contract as per Rule 49(1).
Filing of
Returns A registered contractor is to file quarterly return on Form R-1
like other dealers as per Rule 16. A lump sum dealer is to file the return on
Form R-6 as per Rule 49(4). A contractee is to file his return on Form R4A
whether he is registered or not registered under the Act as per Rule 16(1). The
return is to be filed by the next of the month after each quarter i.e. 31 July,
31 October, 31 January, and 30 April as per Rule 16(1). An annual return on
Form R-2 is to be filed by every registered contractor by 30 November as per
Rule 16(2) but in the case of lump sum contractor need not to file the Annual
Return since R-2 is to be filed by the registered dealer who file the R-1 as
mentioned in Rule 16(1).
Payment
of Tax A
registered contractor whose tax liability does not exceed 1 lakh rupees in a
year is to
deposit the tax along with return otherwise he is to deposit the tax monthly by
15th of each month for the previous month as per section 14(3). A lump sum
contractor is to pay the tax within 30 days of the close of the quarter. A
contractee is to deduct the tax @ 4% before making the payment to contractor as
per Rule 33(1) and the same will be deposited by 15 of the next month for the
previous month as per Rule 33(5) into the appropriate Government Treasury in
challan in Form VAT C-1 separately for each payee.
TDS A contractee is to deduct the TDS @ 4% from the bill amount of
contractor as per Rule 33. TDS will not be deducted on the Tax amount included
in the Bill. A contractor is also to deduct the tax from the payment made to
subcontractor as per the clarification given by Haryana Government in the case
of DLF Universal Ltd. DLF has taken up the case with the Haryana Tax Tribunal
against this clarification and the decision is awaited. A provision to deduct
the TDS from the payment made to subcontractor is ultra virus as per decision
of Allahabad High Court reported in 97STC355. Collection of Taxes from both
contractor and sub contractor would be vocative of article 14 as per AP High
court decision in the case of M/s Larsen Toubro Limited and another V State of
AP(148 STC 616AP).
Assessment Assessment of registered dealer is to be completed within three
years of the close of the year as per section 15(3). A notice is to be given
for scrutiny assessment within one year of the last return filed. It means the
notice for scrutiny assessment in the case of registered dealer is to be given
by 30 November 2008 and in the case of lump sum dealer by 30 April 2013 for the year 2011-12.
Use of
declaration Forms A lump
sum dealer/registered dealer is to use the declaration forms like VAT D-1, VAT
D-3 and Central form C as per Rule 49(6). VAT D-3 from must be used for the
movement of goods value exceeding 25000/- from any
place in the State to any other place in or outside the State. In case of loss
of any form, an indemnity bond in Form VAT-B3 will be given to the Assessing
Authority for the sum as the authority determine.
Tax
invoice A
registered dealer can issue the sale invoice/tax invoice but the lump sum
dealer cannot issue the tax invoice as per Rule 46(5). Tax should not be
charged on the invoice. Tax invoice is used between the two registered dealers
under the VAT Act.
Refund Contractor can also claim the refund if applicable. Tax collected
from the sub contractor will also be the case of refund but this amount cannot
be refunded till the assessment of sub contractor is finalized. These
provisions under the Act make joint or severally liable to contractor and the
sub-contractor. Burden to prove the turnover of sub-contractor cannot be
shifted to contractor as per judgment of AP High Court reported in 105STC227 (AP)
and 47STC204 (AP)
Judicial
Guidelines
The Apex Court in drunkenly
had brought a wide impact till the 46th Constitutional amendment sales tax on indivisible works contracts
could not be levied. The Supreme Court has upheld the validity of the 46th Amendment and the works contract which was indivisible one is by a
legal fiction altered into a contract which is divisible one for sale of goods
and the other for supply of labour and services. The cost of consumables used
in works contract property in which is not transferred in the course of
execution of the works contract, is to be excluded from the taxable turnover as
nothing is being transferred from contractor to contractee to be taxed as held
in the case of Gannon Drunkenly and Co. Vs St. of Rajasthan(88STC 204SC).
This
Article is written by CMA Samir Biswal.
He can be reached at cmasamirbiswal@gmail.com
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