Valuation of
Works Contracts
Typically every
works contract involves an element of sale of goods and provision of service.
Every works contract can be segregated in to a contract of sale of goods &
contract of provision of service, Hence every works contract has to face two
different laws i.e. One that governs taxation of sale of goods (in present
study we will be discussing D-VAT) and other that govern taxation of taxable
services.
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Taxation of
service portion of works contract
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Taxation of
sale of goods in works contract (DVAT)
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Service
tax (determination of value) Rules, 2006
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Delhi Value added tax rules, 2005
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RULE-2A (i)
Actual Value
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Rule 3 (1)
Actual Value
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Value
of service portion in execution of
Works
contract shall be
Gross amount Charged for
The
works contract
Less:
The
value of transfer of
Property
in goods in the execution.
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In
case turnover arising from execution of the works contract
The
amount representing taxable turnover
Shall Exclude:
·
Charges
towards Labour, services and other like charges
·
The charges towards cost of Land in civil works
contract
Subject
to
Dealer
maintains proper bifurcated records.
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Gross
amount
Includes:
· Labour charges
· Amount paid to
subcontractor for labour & service
· Planning,
Designing, & Architect fee
· Hire charges
of machines & tools for the execution of works contract
· Cost of
consumables as water, electricity, fuel,
· Cost of
establishment of the contractor relatable to supply labour & service
· Other similar
expenses relatable to supply of labour & service
· Profit earned
by service provider to supply labour & services
Excludes:
·
Value of transfer of property in goods involved in
execution (including VAT or sales tax)
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Charges
towards Labour, services and other like charges
Includes:
·
Labour charges for execution of WC
·
Planning & architects Fee
·
Hire charges for machinery and tools used for
execution of WC
·
Cost of consumables such as water, electricity,
fuel tec. Used in execution of WC the property in which is not transferred in
course of execution of WC
·
Other similar expenses for labour & services
·
Profits earned by contractor to the extent it is
relatable to supply of labour & services subject to furnishing P&L of
work sites
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RULE-2A (ii)
Composite
Value
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Rule 3 (2)
Proviso
Composite
Value
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Where
the value has
NOT
BEEN DETERMINED
under
rule-(i)
It
shall be determined in following manner:
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Where
amount of charges toward
labour, services and other like charges
are
NOT ascertainable
from
books of the dealer than
Amount
of such charges shall be as follows
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Works contract
For
|
Value of
service portion
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Contract Type
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% amount of
total value of contract
|
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Execution
of original Work
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40%
of total amount charged for WC
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Fabrication
& installation of Plant & Machinery
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25%
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Fabrication
& erection of structural works of iron & steel
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15%
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Maintenance,
Repairs, Reconditioning, Restoration, Servicing of any goods
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70%
of total amount charged including such gross amount
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Fabrication
& installation of cranes & hoist
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15%
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Fabrication
& Installation of elevators
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15%
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Fabrication
& installation of rolling shutters
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15%
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Civil
Works
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25%
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Installation
of doors, windows
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20%
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Supply
& fixing of tiles, slabs
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20%
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Other
than above two including Maintenance, Repairs, Completion, finishing services
such as glazing, plastering, floor & wall tiling, installation of
electrical fitting
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60%
of total amount charged for WC
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Supply
& installation of AC
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15%
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Supply
& installation of AC, cold storage plants
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15%
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Supply
& fitting of electrical goods, equipments
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15%
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Supply
& fixing of furniture & fixtures
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20%
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Construction
of railway coaches
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20%
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Construction
of bodies of motor vehicle
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20%
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Sanitary
fitting
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25%
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Laying
underground surface pipeline
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30%
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Dyeing
& printing of textiles
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30%
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Supply
& erection of weighing machines
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15%
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Painting
& white washing
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30%
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All
other Contracts
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20%
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Original Works
means:
·
All new Constructions
·
All additions and alteration to abandoned or
damaged structures on land that are required to make them workable.
·
Erection, commissioning or installation of plant,
machinery or equipment or structures, whether pre-fabricated or otherwise.
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Valuation
under composition scheme
N
F.3(78)/fin.(T&E)/2005-06/1508kha
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Every
registered dealer
Engaged
Exclusively in
Works
contract of CIVIL CONSTRUCTION
Will
pay 3% of entire turnover
Provided:
·
He shall not import or procure goods from outside
country
·
He shall not make inter-state purchases of
material against form C,D,E1,EII for utilising in execution of works contract
·
He shall not purchase goods in delhi from an
unregistered person except in case of goods specified in first schedule.
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Total Amount
Means:
Sum
total of
gross
amount charged for WC
AND
Fair
market value of goods & services
Supplied
in or in relation to
Execution
of such WC
WHETHER
or NOT
Supplied
under the same contract or
Any
other contract
After
Deducting
·
Amount charged for such goods or services
(provided by the receiver)
·
VAT or sales tax levied to the extent they form
part of the gross amount or the total amount.
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Since both
legislation are separate & independent it is very well possible that value
overlaps in composite valuation and assessee will be liable to pay tax for more
than 100% value of turnover.
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