MVAT - WORKS CONTRACTS

There is no separate Act governing works contract transactions, all such transactions are now taxable as deemed sales under the MVAT Act. The rate of tax, on such deemed sales of goods, used in the execution of works contract, shall remain same as prescribed in the aforesaid schedules to the respective goods. However the sale price of such goods has to be determined in accordance with the provisions contained in Rule 58 of the Maharashtra Value Added Tax Rules, 2005.

Accordingly the value of the goods, at the time of the transfer of property in the goods (whether as goods or in some other form) involved in the execution of works contract, has to be determined by effecting the following deductions from the value of entire contract in so far as the amounts relating to the deduction pertain to the said works contract:

• Labour and service charges for the execution of the works contract.
• Amounts paid by way of price for sub-contract, if any, to sub-contractors.
• Charges for planning, designing and architects fees.
• Charges for obtaining on hire or otherwise, machinery and tools for the execution of the works contract.
• Cost of consumables such as water, electricity, fuel used in the execution of works contract, the property in which is not transferred in the course of execution of the works contract.
• Cost of establishment of the contractor to the extent to which it is relatable to supply of the said labour and services.
• Other similar expenses relatable to the said supply of labour and services, where the labour and services are subsequent to the said transfer of property.
• Profit earned by the contractor to the extent it is relatable to the supply of said labour and services.

Provided that where the contractor has not maintained accounts which enable a proper evaluation of the different deductions as above or where the Commissioner finds that the accounts maintained by the contractor are not sufficiently clear or intelligible, the contractor at his option or, as the case may be, the Commissioner may in lieu of the deductions as above provide a lump sum deduction as provided in the Table below and determine accordingly the sale price of the goods at the time of the said transfer of property.