Works Contract -

Sanjay Dwivedi,
Advocate

27/11/2010

SRD LEGAL, Advocates & Consultants

Topics to be covered
 What is Works Contract?
 Which contracts are taxable?
 Calculation of Tax Liability
 Composition Scheme
 Cenvat Credit

SRD LEGAL, Advocates & Consultants

Meaning of
Works Contract
 Contracts can be for
 Sale of goods
 Provision of Service
 Execution of Works
 Contracts for execution of work involve
service as well as goods. Property in the
goods passes to contractee.

SRD LEGAL, Advocates & Consultants

Taxable
Works Contracts - 1
 Works Contract is liable to Service Tax
only if it is liable to VAT.

 Definition: contract wherein transfer of

property in goods involved in the execution
of such contract is leviable to tax as sale
of goods, and ………

SRD LEGAL, Advocates & Consultants

Taxable
Works Contracts - 2
 Only following works contracts are taxable
 Erection, commissioning or installation work;
 New constructions for commercial purposes;
 New constructions for residential purposes;
 Completion/finishing/repairs of buildings or
civil structures; and
 Turnkey projects

SRD LEGAL, Advocates & Consultants

Exclusions
 ‘Works contracts’ in respect of roads,
airports, railways, transport terminals,
bridges, tunnels and dams are excluded.

 ‘Works Contracts’ other than the five

specified contracts are not covered.

SRD LEGAL, Advocates & Consultants

Valuation – Rule 2A
 Gross amount charged (-) Value of
transfer of property

 Value on which VAT is paid would be

‘value of transfer of property’

 Gross amount excludes VAT

SRD LEGAL, Advocates & Consultants

Composition Scheme
 Optional Scheme

 Option can be exercised for each contract (but

not for part of a contract)

 Tax @ 4.12% payable on Gross Value

 Gross Value includes value of material supplied

by customer

SRD LEGAL, Advocates & Consultants

Cenvat Credit
 Composition Scheme: Credit not available
against ‘Inputs’, but available on ‘capital
goods’ & ‘Input Services’

 Rule 2A valuation: Credits available on

‘inputs’ as well

SRD LEGAL, Advocates & Consultants

Cenvat Credit
Amendment 07/07/2009
 Following items have been excluded from
definition of ‘inputs’
 cement, angles, channels, Centrally Twisted
Deform bar(CTD) or Thermo Mechanically
Treated bar(TMT) and other items used for
construction of factory shed, building or laying
of foundation or making of structures for
support of capital goods

SRD LEGAL, Advocates & Consultants

 THANK YOU
For a Patient Hearing

SRD LEGAL, Advocates & Consultants

C. Excise, Service Tax, Customs & Foreign Trade
11, Block-3, Emerald Plaza, Hiranandani Meadows,
Off Pokhran Road No. 2, Thane (West), 400610.
 
Tel. & Fax: (022) 2173 0036
e-mail: srdlegal@gmail.com; indirecttaxes@gmail.com
  
Mr. Sanjay Dwivedi, Advocate - 9320 456 555
Mr. Rajeev Verma , Advocate - 9820 886 954/ 93202 86 954
Mrs. Savita Dwivedi , Advocate - 998 737 0673

SRD LEGAL, Advocates & Consultants