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CA Amit Mundhra

Rajasthan government has changed the rates of exemption fees relating to works contracts of various nature w.e.f. 01st April, 2012. This will have high implication on applications for exemption fees for works contracts made after 1st April, 2012. Following is an analysis of the same.

Relevant Original Notification : F.12(63)FD/Tax/2005-80 dated 11.08.2006

Amendment made by Notification : F.12(15)FD/Tax/2012-14 dated 26-03-2012

Old Rates Effective upto 31st MARCH, 2012

S.N.

Description of Works Contract

Rate of exemption fees as a % of total value of the contract

1. Works contract where the cost of materials does not exceed 5% of the total contract amount.

0.25%

2. Works contract relating to buildings, roads, bridges, dams, canals, sewerage system.

1.50%

3. Works contract relating to installation of plants and machinery including pspo, water treatment plant, laying of pipe line with material.

2.25%

4. Any other kind of works contract not covered by item 1, 2  and 3.

3.00%

 

New Rates Effective from 1st APRIL, 2012

 

S.N.

Description of Works Contract

Rate of exemption fees as a % of total value of the contract

1. Works contract where the cost of materials does not exceed 5% of the total contract amount.

0.25%

2. Works contract relating to EPC turnkey power projects awarded by Rajasthan Rajya Vidyut Utpadan Nigam Limited.Works contract relating to construction of roads, runways, bridges, dams, drains, tunnels, channels, barrages, diversion, railway tracks, causeway, sub-ways, spillways, boundary walls and water harvesting structures.

1.00%

3. Any other kind of works contract not covered by item no. 1 and 2

3.00%

 

Implications:

  • Whole category of 2.25% exemption fees is deleted. Now on these contracts will be taxable @ 3% exemption fees.
  • Earlier, works contract relating to buildings are covered under 1.50% category but now these works contract are not covered under 1% category. Thus from 1st April, 2012, these works contracts will be taxable @ 3% exemption fees.

Issues :

  • However, there is still a question whether these new rates will be applicable for work orders awarded on or after 1st April, 2012 or even to old contracts on which EC has already been taken.
  • Whether these new rates will be applicable on EC applied for after 1st April, 2012.

These issues needs further clarification from the department’s side.

CA Amit Mundhra

Author is a member of ICAI and he can be reached at amit.mundhra@gmail.com

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11 Comments

  1. B.K.Jain says:

    Sir,
    we are developers for Affordable Housing under PPP Scheme of Rajasthan Government.

    Are we liable to pay W.C.T on our running bills ?
    Is W.C.T applicable on Affordable Housing Scheme ?

    Please guide.

  2. ASHOK GUPTA says:

    I am a contractor of Boards installed on roads & Highways. A Contract has been awarded by the Rajasthan govt. My Queries are as under :
    1. In Exception fee Scheme can I Import Goods from out side State. What form will I use to import goods ?
    2. After payment of 3% Tax are my tax liabilities over.
    3. What will be the status of VAT on WCT deducted by the Govt Department of Rajasthan. Can I Claim its Refund or the amount will adjust with the exception fee Tax ?

    Thanks

    1. DARGA RAM JI says:

      I TAKE CONTRACT FROM L&T TO WORK THARMA PLAST PAINT ON ROAD FOR ROAD SAFETY PURPOSE AND PAID EC FEE 3% BUT MATERIAL ARRIVED FROM MY OWN CONCERN IN GUJRAT ON STOCK TRANSFER OUR ASSESSING AUTHORITY DEMAND LOCAL TAX ON GOODS RECEIVED FROM OTHER STATE

  3. bhunesh sharma says:

    when whole contract is constraction in this contract belding and boundry wale total amount 15 lacs 10lack is belding and 5 lack is boundry wale that rate applied on them

  4. CA Amit Mundhra says:

    I think, once exemption certificate is issued, the tax rate as per that exemption certificate will apply. In my view, the new rates will be applicable on the contracts awarded after 1st April, 2012. For contracts awarded before 1st April, 2012 the old EC rates should prevail.

  5. S.M.REHMAN says:

    The issues you have raised are our openion also.what should be the answer if the change in exemption fee is applied for works awarded even before 31st March,2012.Can we apply for the reimbursement for the extra amount deducted from our bills certified after March 2012 as per new policy?.Are we eligible?

  6. Abhishek says:

    What is the status if there is any clarification as these rates will apply to old Contracts for Whom EC Already Taken???

  7. jay says:

    does this also affect TDS WCT, as the same rates are reffered in the earlier notification
    dt. 11.08.2006 for deduction of WCT by GOVT agencies.

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