Works Contract Tax in The state of Punjab under composition/Lumpsum, VAT + CST

[SM JHA]

Dear Sir,

In our outset, we would like to introduce about the background of activities of our Company, is engaged in two types of work is being explained hereunder:

 1.    Design, fabrication, & supply of SS Products or Structures as per specific design desired by customers (i.e. Individual, Pvt. Sector, Public Sector and Government Sector, Contractor & Builder etc.) &

2.    Design, fabrication, supply & Installation of Stainless Steel Railing, Cladding, Bus Shelter & Other structural works as per customer specific designed based work contract for Individual, Pvt. Sector, Public Sector and Government Sector i.e. Airport Authority of India, Railway, Indian Post Office, Indian Defense, Army etc.

Our manufacturing unit is situated at Gurgaon in the state of Haryana and trading branches are situated in different states having TIN. Only our factory in Haryana is excisable Unit where approximate 65% manufacturing & fabrication process is being compeleted towards execution of Works Contract for trunkey project i.e. Stainless Steel Structures according to design provided by customer and being sent to different site of project situated in different state on stock transfer basis against Form "F" and remaning 35% work i.e. welding, cutting, polishing etc & installation work is being done at respective site in different states by the team of our site engineers & supervisors.

 In contention to get legal opinion, we would like to brief about Works Order for which we are shortly going to bid with Bharti Reality Ltd. Ludhiana (Punjab) for tender price Approx. Rs.50,00,000/- (inclusive of all duties & taxes) for Fabrication, Supply & Installation of Stainless Steel Modular Railings in Mall constructing at Ludhiana as per specification provided with tender documents. To execute this work order, 85% material would be procured from our Haryana factory on stock transfer basis (i.e. against Form- “F”) and remaining 15% material would be procured either by locally or by interstate Purchase.

 Our Queries:-

a)    To the above scenario, is it possible to go for execution of above work contract under composition scheme?

b)    Since all duties & taxes are inclusive in Contract value, can we ascertain tax liability by reverse calculation method under composition scheme?

c)    Is stock transfer against Form “F” allowed for execution of work contract under composition scheme since stock transfer in not a interstate purchase?

d)    What method is beneficial for us to execute the above works contract towards minimization of tax liability since all duties & taxes are inclusive in order value?

 Please advise us legal, favorable & hassles opinion to ascertain to pay minimum tax liability so that we can participate in bidding with our reliable tax structure in Punjab.

 Thanks & Regards

 S. M. Jha

Mob.No. 09868715026

 

Posts / Replies

[AMIT BAJAJ ADVOCATE]

There is no composition scheme available in Punjab. Only two options are available either to go for lump sum scheme, wherein tax @ 12.5% is leviable on the total consideration after making prescribed deductions. In lump sum scheme no benefit of ITC on local purchases will be available. Other is to maintain proper books of accounts and pay tax accordingly, which is more beneficial for contractors.

 Stock transfer against F forms in works contracts may not be permissible as the contract is pre-determined ussualy. F forms may be rejected in such case as the movement of goods is being occassioned by pre-determined contract of sales.

 The best way for you is to draft the contract stipulating therein that the goods will be moved from outside State of Punjab towards inside the state of Punjab in pursuance of the contract, thereby it will be easy for you to get exemption u/s 3 of CST Act of the inter-state deemed sales. Whatever goods you move in the State of Punjab should be billed in the favour of contractee and charge CST @ 2% against C forms rather than against F forms.

The contract should be drafted under the guidence of a tax professional who is expert works contracts so as to avoid unnecessary litigation.

 Kind Regards

Amit Bajaj Advocate, Jalandhar(Punjab)

www.amitbajajadvocate.com

Email: amitbajajadvocate@hotmail.com

M +919815243335

[Pradeep Khatri]

On interstate movement of goods in execution of works contract, works contract tax is not applicable. 

[vivekanand kumar]

Dear Sir,

Please help me for how to calclute wct payable  of punjab in construction work

 

thanks & regards

 

vivekanand

9971572812