You can either account for VAT on the goods involved in the contract by identifying the value of the goods transferred in the course of execution of a works contract and paying tax at the appropriate VAT rate, or you can opt to pay tax by way of composition. In both cases, you can claim a set- off of the VAT paid on the purchase of the goods.

No. You can decide on an individual contract basis whether to opt for accounting for VAT by way of composition. You must retain in your VAT accounts and records full details of how you have accounted for VAT.

You are liable to pay tax at the rate specified for the goods in the Maharashtra VAT Act, 2002 on the goods transferred in the execution of the works contract. You can calculate the sale price of the goods by deducting the following items from the total value of the contracts. · labour charges for the execution of works · amount paid by way of price for sub- contract, work (if it is subjected to VAT separately) · charges for planning, designing and architects fees · hire charges for machinery and tools · costs of consumables such as water, electricity, fuel used in the execution of the works contract · cost of the establishment of the contractor to the extent to which it is relatable to the supply of labour and services. · other similar expenses relatable to the supply of labour and services · profit earned by the contractor to the extent it is relatable to the supply of labour and services The net figure arrived at by deducting the above amounts from the total value of the contract is the notional sale price of the goods included in the contract on which you have to account for VAT at the rate specified for the goods in the Maharashtra VAT Act, 2002.

In such a case, the Sales Tax Department may impose a lumpsum deduction based on a percentage of the contract price. This percentage will be applied after first deducting from the total contract price any amounts paid for sub-contractors, if such sub contractors pay VAT separately on their sub contract value. The amount so arrived at will be the sale price for the goods on which VAT has to be calculated and paid.

Yes, You can claim full set-off of the VAT paid on the purchase of all goods, including capital assets as are otherwise admissible.

Yes, in the following circumstances you do not have to account for VAT on goods transferred in the execution of works contracts: · Contracts executed outside the state of Maharashtra

You cannot claim set off in the case of works contracts executed outside the State of Maharashtra.

Either you or the sub-contractor can account for VAT and claim set-off. The person not accounting for VAT must possess an exemption certificate issued by the person accounting for VAT.

VAT has to be accounted for at the rate of 8% of the total value of the contract. You can claim set-off calculated at the rate of 16/25 of the VAT you have been charged on the purchase of all goods including capital goods purchased for use in the execution of the works contract.

It simplifies the record keeping required and the calculation of the value on which VAT has to be charged. You should assess each works contract to judge whether paying VAT by way of composition would be to your advantage.

Persons issuing works contracts will be notified by the Sales Tax Department if they are required to deduct tax at source. The rate of tax to be deducted would be as notified. The person deducting the tax is required to deposit the tax with the Sales Tax Department within a specified time limit. You will be given a Tax Deduction Certificate by the Contractee for the amount of tax deducted. You can deduct this amount from the VAT you are liable to pay on the works contract at the time you complete your VAT returns. A works contractor can apply to the Sales Tax Department for a certificate limiting the amount of tax to be deducted at source in cases where the dealer can demonstrate that the tax to be deducted will exceed the tax due.

Yes. However, you are not required to pay more tax after 1 April, 2005 than would have been payable under the Maharashtra Sales Tax on the Transfer of Property in Goods involved in the Execution of Works Contract (re-enacted) Act, 1989.

Contact your local Sales Tax Office.

If you wish to join the scheme with effect from 1 April 2005, you must apply before 30 April 2005. You can apply to join the scheme at any time after 30 April 2005 but your application will then only become effective from the beginning of the next financial year, that is the following 1st April. Until that time, you must continue to account for VAT under the normal rules.