TDS on Work Contract (WCT TDS) – MVAT

Navin Agicha

Meaning of work Contract: A works contract is an agreement which is a mixture of service or labour and transfer of goods. Under a works contract the contractor agrees to do certain job in execution whereof, certain goods are transferred to the contractee. Thus, an agreement of building construction, manufacture, processing, fabrication, erection, installation, repair or commissioning of any movable or immovable property, is a works contract. In relation to a works contract only that part of consideration which represents transfer of property in the goods involved in execution of the works contract, shall be taxable.

CONCEPT OF WCT TDS

The concept of WCT TDS is same of TDS, Like in TDS we deduct and Deductee can claim setoff in income tax, in same way dealer can claim setoff of WCT TDS in VAT Payment.

Definition of Works Contract:

Works Contract is defined under the MVAT Act, 2002

Section 2(24) :- the transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract including, an agreement for carrying out for cash, deferred payment or other valuable consideration, the building, construction, manufacture, processing, fabrication, erection, installation, fitting out, improvement, modification, repair or commissioning of any movable or immovable property.

Works Contract is defined under the CST Act, 1956

Section 2(ja) :- works contract means 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.

Applicability of WCT-TDS:

1) TDS is applicable for Works Contract Transactions.

2) Employer employing Contractor for Work Contract is required to comply with requirement of TDS.

What is covered under work Contract::

1. Construction Contract includes contraction of buildings, roads, water purification plant, Bridge, etc.
2. Other Contracts, which includes installation of Plant and machinery, air conditions, painting & polishing, laying pipes, etc.

Rate of deduction of TDS:

• 2% in case of Registered Dealer
• 5% in Unregistered Dealer

When to deduct WCT TDS

WCT TDS is required to be deducted on payment basis.

Not Required to deduct WCT TDS

• no deduction as provided under this clause shall be made in respect of any sale or purchase to which section 8 applies.
• no deduction shall be made from any payment made to any sub-contractor by a principal contractor where the principal contractor has assigned the execution of any works contract, in whole or in part, to the said sub-contractor

PROCEDURE FOR WCT TDS

• Remittance of tax to Government Treasure in MTR – 6 within 21 days from the expiry of the month.
• Furnish the Certificate to the Contractor in Form No 402 immediately after deduction of TDS
• Employer shall maintain the record of amount of tax deduction, furnishing of TDS certificate and payment of deduction to Government treasure in Form No 404.
• Employer is required to file annual TDS return in Form No 424 with Joint Commissioner of Sales Tax within 3 months of the end of the year to which it relates.

WCT RETURN

 Form 424 Is Required To File Within 3 Months Of End Of Year In Which It Relates (i.e. 30^th June)

LATE PAYMENT INTEREST

Interest on late payment is same like MVAT  i.e. 1.25% p.m.

WCT PAYMENT CHALLAN

Challan MTR 6 Is Required To Be Paid Within 21 Days From The Expiry of The Month.

ISSUE OF FORM 402

Form 402 Is Required To Be Issued By Deductor To Deductee Immediately After Deducting WCT TDS.