CA Amit Mundhra

Following are the summary of rules and procedure to be followed by a awarder of works contract in Rajasthan State.

What is a Works Contract

As per Section 2(44) of the RVAT Act 2003, works contract means

“contract for carrying out any work which includes assembling, construction, building, altering, manufacturing, processing, fabricating, erection, installation, fitting out, improvement, repair or commissioning or any movable or immovable property”

As per section 2(ja) of Central Sales Tax Act, 1956 Works contract means

“contract for carrying out any work which includes assembling, construction, building, altering, manufacturing, processing, fabricating, erection, installation, fitting out, improvement, repair or commissioning or any movable or immovable property”

Thus both in RVAT Act and CST Act same definitions are used for defining works contract.

Clause 29-A (b) of Article 366 of the Constitution

The genesis of the works contract tax can be derived from Clause 29-A(b) of Article 366 of the constitution of India, which includes execution of works contract in the definition of Sale.

Article 366 of the constitution of India defines that

29A(a) : …………

29A (b) : a tax on transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract.

Rules Applicable for Awarder of Works contract in Rajasthan VAT Act

Rule 40 of Rajasthan VAT Rules governs the Works Contract Tax liability of the awarder which can be summarized as below.

1. Submit Information to VAT Department

Awarder Shall submit information to his jurisdictional Asstt Comm or ACTO upon entering into a works contract exceeding Rs. 5 Lacs.

Time limit for submitting of this information is within 1 month from the date of contract.

Form VAT-40 is the form prescribed for submission of this information.

2.       Deduct Tax at Source [WCT] from Contractor

If awarder is Government Department, a corporation, a public undertaking, a co-operative society, a local body, a statutory body, an autonomous body, a trust or a private or public limited company, then

the awarder shall at the time of credit of any sum to the account of the contractor or at the time of making payment of the same, deduct an amount as notified by the State Government in lieu of tax.

The awarder shall issue certificate of deduction of tax at source in form VAT-41.

3. Rate of TDS notified by State Government

The state government vide notification no. F.12(63)/Tax/2005-81 dated 11-08-2006 has notified a rate of 3% to be deducted from contractor in case of works contract. However,

If contractor submits the exemption certificate under notification no. F.12(63)/FD/Tax/2005-80 dated 11-08-2006, then the rate of TDS will be equal to the rate of exemption fees mentioned in said certificate.

4. Deposit of TDS with VAT Department.

The amount of TDS so deducted by the awarder should be deposited by him in VAT Challan form VAT-37 within 15 days of the end of the month.

A monthly statement in Form VAT-42 mentioning the details of tax deducted and deposits along with the duplicate copies of issued Form VAT-41 is to be furnished to the relevant assessing authority within one month from the date of such deposits.

5.      Requisition of Form VAT-41 from the Department

Blank form VAT-41 shall be obtained by the awarder from the jurisdictional commercial taxes officer of the area in which the office of the awarder is situated on payment of Rs. 50/- per book containing 25 forms.

6.      Penalty for Non Deduction of TDS

Where the awarder fails to deduct the tax, or after having deducted does not deposit the same with the government, then penalty (i) for each violation is upto Rs. 1000/- in case of non deduction and (ii) penalty @ 2% per month on amount deducted but not deposited. (Section 63)

Where the awarder fails to submit monthly statements of tax deducted the penalty not exceeding Rs. 2000/- for each violation and for continuous violation Rs. 25/- per day is payable.

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

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2 responses to “Works Contract Tax under Rajasthan VAT – Rules Applicable for Awarder of a Works Contract”

  1. Ashwini Sharma says:

    Whether TDS under RVAT deductible on the Bill Amount or on the Released amount for the Bill.

  2. Ashwini Sharma says:

    Contract Awarded by Railways to a Joint Venture, who obtained EC from Department and in his turn given the work to subcontractor and again subcontractor awarded the work to other subcontractors, what is the liabilities for Main contractor for deduction of TDS from subcontractor and by subcontractor to subcontractor when full EC fees payable by Main Contractor.

  3. Priyanka says:

    Is there any limit of Bill up to which w.c.t is not deductible as in case of t.d.s up to Rsmm 30,000 for single payment and Rsmm 75000 for a year .

  4. Priyanka says:

    Is there any limit of Bill up to which w.c.t is not deductible as in case of t.d.s up to Rsmm 30,000 for single payment and Rsmm 75000 for a year

  5. B.M.Suneja says:

    I have taken any service (which comes under WCT & as per PO terms is tax extra (as actual))If party has charge the WCT Amount on Invoice than who will be responsible to deposit the WCT and what document required from Contractor(party) at the time of payment to party

  6. rk goyal says:

    Sir,

    Under WCT order if client deducts 3% tax is there any further liability of contractor ( is it similar to Haryana) under composition scheme.

    Can we get C form for importing material from outside Rajastan .

    Is it possible to be NON RESIDENT DEALER ( can we register in Rajastan with office adresss at DELHI and without any Permanent office in RAJASTAN).

    with regards

    rk goyal

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