As per Sec.2(zo), “Works Contract” includes any agreement for carrying out

• building construction, manufacture, processing, fabrication, erection, installation, fitting out, improvement, repair or commissioning of any moveable or immovable property.
• for cash or for deferred payment or valuable consideration.

Yes, as per sec.2 (zc),“Sale” with its grammatical variation and cognate expressions means :-

• any transfer of property in goods by one person to another.
• for cash or for deferred payment or for other valuable consideration (not including a grant/subvention payment made by one govt. agency or department, whether of the central govt. or of any state govt., to another).

And includes transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract.

As per Sec.2(zd)(vii), “Sale Price” in relation to works contract means the amount of valuable consideration paid or payable to a dealer for the execution of the works contract. Following sums shall be deducted:

• Any sum allowed as discount which goes to reduce the sale price according to the normal practice prevailing in the trade.
• Freight, delivery charges or the cost of installation where such expenses are separately charged.

As per Rule 3(1) read with Sec.5(2), Taxable Turnover in respect of a Works Contract means:

• The total consideration paid or payable to the dealer or the value involved in the execution of the works contract at the time of transfer of property in goods (whether as goods or in some other form).
• Any charges towards labour, services and other like charges, cost of land (in case of civil works contracts) shall be excluded from the taxable turnover provided the dealer is maintaining proper records such as invoice, voucher, challan or any other document evidencing payment of such charges.
• Where the above charges are not ascertainable from the books of accounts of the dealer, then the amount of such charges shall be calculated at the prescribed percentages.

As per Rule 3(1) read with Sec.5(2), charges towards labour, services and other like charges, cost of land (in case of civil works contracts) shall be excluded from the taxable turnover. These include the following charges:

• Labour charges for execution of works contract
• Charges for planning and architect fees
• Charges for obtaining on hire or otherwise machinery & tools used for the execution of the works contract.
• Cost of consumables such as water, electricity, fuel etc. used in the execution of the works contract the property in which is not transferred in the course of execution of a works contract.
• Cost of establishment of the contractor to the extent it is relatable to supply of labour and services.
• Other similar expense relatable to supply of labour and services.
• Profits earned by the contractor to the extent it is relatable to supply of labour and services subject to furnishing of a Profit & Loss A/c of the works sites.

Where the above charges are not ascertainable from the books of accounts of the dealer, then the amount of such charges shall be calculated at the following prescribed percentages.

In case of Civil Works Contracts like construction of buildings, complexes, bridges, flyovers etc. the above said deduction of 25% shall be of the total value of the contract excluding the cost of the land transferred, if any. When such cost of land is not ascertainable from the books of accounts of the dealer, the amount of such charges shall be:

• 50% of the total value of the contract in the case of construction of commercial buildings or complexes.
• 30% of the total value of the contract in other cases.
• Where only a part of the total constructed area is being transferred, cost of land shall be calculated on a pro-rata basis by the following formula :
  Proportionate super area X Indexed cost of acquisition of land Total plot area X Floor Area Ratio

Proportionate super area here means the covered area booked for transfer and the proportionate common constructed area attributable to it.

Similarly, deduction towards labour, services and other like charges shall be calculated on a pro-rata basis.

As per Sec.11A, no tax shall be levied on the amount representing the value of the goods supplied by the contractee to the contractor where the ownership of such goods remains with the contractee as per the terms of contract and the value of such goods does not form part of the contract & thereby is not deductible from the amount payable to the contractor for the execution of the contract.

As per Sec.36A, any person, other than an individual or a HUF, who enters into a works contract with a contractor for a value exceeding Rs. 20,000/- shall deduct tax at the rate of 2% from the consideration value at the time of credit of such amount or payment whichever is earlier. [However, in case of a sub-contract individual/HUF contractors are also covered.]

Yes, as per Rule 59 (3), every person responsible for making deduction of tax at source under DVAT Act shall apply for TAN Number in Form DVAT-44 within seven days from the date on which the tax was deducted/ deductible.

As per Sec.36A (4), TDS has to be deposited in Form DVAT-20 within 15 days from the end of the month in which tax was deducted.

For issuance of TDS Certificate by the contractee (i.e. deductor), the DVAT Act, 2004 & the DVAT Rules, 2005 contain dissimilar provisions :-

• Rule 59(2) stipulates that the contractee shall issue TDS Certificate within 15 days from the end of the month in which tax has been deducted.
• However, Sec 36A(5A) stipulates that the contractee fails to furnish TDS Certificate to the contractor within 7 days of making payment or discharge, then a penalty of Rs. 100/- per day shall be levied from the day of making payment to the contractor (upto maximum of Rs. 20,000/-).

Since no clarification has been issued regarding this matter, it is advisable to deposit the TDS as well as issue the TDS Certificate within 15 days from the end of the month in which the tax has been deducted.

TDS Certificate shall be issued in Form DVAT-43 in triplicate (Original for the contractor, Second copy to be attached with the TDS Return and Third copy for contractee’s record).

As per Rule 59(4), every person deducting tax shall be required to file a TDS annual return in Form DVAT-48 within the period of 28 days from the end of the year in which tax has been deducted (i.e. by 28th April of the following financial year).

The author is a member of the Institute. The views expressed herein are his personal views and do no necessarily represent the views of the Regional Council. He can be reached at manobhav_verma@yahoo.com