Works contract taxation is considered to involve a lot of complexities and controversies which in the short term may not get resolved. Since the time when the concept of deemed sale was introduced under sales tax, transactions that would be liable to tax under the guise of works contract have always been a matter of debate and dispute.
Earlier the Courts took a view that in the case of composite contracts involving sale of goods and execution of works, no sales tax could be levied at all - the landmark decision on the issue being the Supreme Court’s ruling in the case of State of Madras vs. Gannon Dunkerley & Co. (Mad) Ltd. [1958] 9 STC 353 (SC). However, in order to enable the States to collect the sales tax, the 46th amendment to the Constitution provided for the taxation of transfer of materials used in the execution of a works contract as deemed sale. Clause 29A was added to Article 366 of the Constitution of India to cover ‘transfer of property in goods involved in execution of works contract’.
‘Works contract’ is defined in the Central Sales Tax, 1956 as a contract for carrying out any work which includes assembling, construction, building, altering, manufacturing, processing, fabricating, erection, installation fitting out, improvement, repair or commissioning of any movable or immovable property. Majority of the States have adopted this definition for works contract in their VAT legislations. Though the basic framework of the works contract provisions is broadly the same across the country, the administrative and procedural provisions do vary from State to State depending upon the size and developmental status, the experiences in implementation and monitoring of compliances, the extent of computerization of each State and so on.
Considering the positive feedback of the Committee’s publication, “Compilation of Registration Provisions under VAT Laws of Different States”, the Indirect Taxes Committee of the ICAI decided to prepare a similar compilation of the provisions of works contract under the VAT laws of different States to assist the members of ICAI who practice in different States and are called upon by the businesses operating in multi States. This would, in effect, facilitate the members to practice across geographies thereby enabling even a small town practitioner to render services in any State with the aid of technology.
This “Compilation of Provisions of Works Contracts under the VAT Laws of Different States” will also be of assistance to those experts/ officers working on Goods and Services Tax to understand the process being followed in different States, adopt best practices and achieve uniformity in provisions across all States to facilitate businesses operating in different states.
Information in respect of provisions of Works Contract of twenty-six States has been collated in this compilation. For quick reference and easy understanding, the provisions have been tabulated against a set of common questions for all the States.
Earlier the Courts took a view that in the case of composite contracts involving sale of goods and execution of works, no sales tax could be levied at all - the landmark decision on the issue being the Supreme Court’s ruling in the case of State of Madras vs. Gannon Dunkerley & Co. (Mad) Ltd. [1958] 9 STC 353 (SC). However, in order to enable the States to collect the sales tax, the 46th amendment to the Constitution provided for the taxation of transfer of materials used in the execution of a works contract as deemed sale. Clause 29A was added to Article 366 of the Constitution of India to cover ‘transfer of property in goods involved in execution of works contract’.
‘Works contract’ is defined in the Central Sales Tax, 1956 as a contract for carrying out any work which includes assembling, construction, building, altering, manufacturing, processing, fabricating, erection, installation fitting out, improvement, repair or commissioning of any movable or immovable property. Majority of the States have adopted this definition for works contract in their VAT legislations. Though the basic framework of the works contract provisions is broadly the same across the country, the administrative and procedural provisions do vary from State to State depending upon the size and developmental status, the experiences in implementation and monitoring of compliances, the extent of computerization of each State and so on.
Considering the positive feedback of the Committee’s publication, “Compilation of Registration Provisions under VAT Laws of Different States”, the Indirect Taxes Committee of the ICAI decided to prepare a similar compilation of the provisions of works contract under the VAT laws of different States to assist the members of ICAI who practice in different States and are called upon by the businesses operating in multi States. This would, in effect, facilitate the members to practice across geographies thereby enabling even a small town practitioner to render services in any State with the aid of technology.
This “Compilation of Provisions of Works Contracts under the VAT Laws of Different States” will also be of assistance to those experts/ officers working on Goods and Services Tax to understand the process being followed in different States, adopt best practices and achieve uniformity in provisions across all States to facilitate businesses operating in different states.
Information in respect of provisions of Works Contract of twenty-six States has been collated in this compilation. For quick reference and easy understanding, the provisions have been tabulated against a set of common questions for all the States.
States
(i) Andhra Pradesh
(ii) Arunachal Pradesh
(iii) Assam
(iv) Bihar
(v) Chhattisgarh
(vi) Delhi
(vii) Goa
(viii) Gujarat
(ix) Haryana
(x) Himachal Pradesh
(xi) Jharkhand
(xii) Karnataka
(xiii) Kerala
(xiv) Madhya Pradesh
(xv) Maharashtra
(xvi) Manipur
(xvii) Nagaland
(xviii) Orissa
(xix) Punjab
(xx) Puducherry
(xxi) Rajasthan
(xxii) Tamil Nadu
(xxiii) Tripura
(xxiv) Uttarakhan
(xxv) Uttar Pradesh
(xxvi) West Bengal
