MVAT - WORKS CONTRACT - SALE PRICE

Sl. No.	Type of Works Contract	*Amount to be deducted from the contract price (%)
(1)	(2)	(3)
1.	Installation of plant and machinery	Fifteen per cent
2.	Installation of air-conditioners and air-coolers	Ten per cent
3.	Installation of elevators (lifts) and escalators	Fifteen per cent
4.	Fixing of marble slabs, polished granite stones and tiles (other than mosaic tiles)	Twenty five per cent
5.	Civil works like construction of buildings, bridges, roads, etc.	Thirty per cent
6.	Construction of railway coaches or under carriages supplied by Railways	Thirty per cent
7.	Ship and boat building including construction of barges, ferries, tugs, trawlers and dragger	Twenty per cent
8.	Fixing of sanitary fittings for plumbing, drainage and the like	Fifteen per cent
9.	Painting and polishing	Twenty per cent
10.	Construction of bodies of motor vehicles and construction of trucks	Twenty per cent
11.	Laying of pipes	Twenty per cent
12.	Tyre retreading	Forty per cent
13.	Dyeing and printing of textiles	Forty per cent
14.	Annual Maintenance Contract	Forty per cent
15.	Any other works contract	Twenty five per cent(w.e.f. 1-4-2006)

• The percentage given in the Table should be applied on total contract price after deducting the price on which tax is paid by sub-contractor. It is also provided that if any tax is separately charged by the contractor as per terms of contract then the deduction should be after excluding such separate tax.
• The value of goods so arrived at under Rule 58 (1) shall, for the purposes of levy of tax, be the sale price or, as the case may be, the purchase price relating to the transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract.
• The dealer, opting to pay tax as per the above scheme, is entitled to take full input tax credit; i.e., full set-off of MVAT paid on purchases eligible for set-off.
• Service Tax, collected separately, shall not form part of the value of contract. Thus no VAT on service tax collected separately. [Ref: Trade Circular 6T of 2015 dated 14th May, 2015].

Deduction from sale price for cost of land & other deductions in case of Construction Contracts related to sale of under construction units by builders/developers:

[Rule 58(1A)]

1. In case of a construction contract, where along with the immovable property, the land or, as the case may be, interest in the land, underlying the immovable property is to be conveyed, and the property in the goods (whether as goods or in some other form) involved in the execution of the construction contract is also transferred to the purchaser, the value of the said goods at the time of the transfer shall be calculated after deducting cost of the land from the total agreement value.
2. The cost of the land shall be determined in accordance with the guidelines appended to the Annual Statement of Rates prepared under the provisions of the Bombay Stamp (Determination of True Market Value of Property) Rules, 1995, as applicable on the 1st January of the year in which the agreement to sell the property is registered Provided that, after payment of tax on the value of goods, determined as per this rule, it shall be open to the dealer to provide before the Department of Town Planning and Valuation that the actual cost of the land is higher than that determined in accordance with the Annual Statement of Rates (including guidelines) prepared under the provisions of the Bombay Stamp (Determination of True Market Value of Property) Rules, 1995. On such actual cost being proved to be higher than the Annual Statement of Rates, the actual cost of the land will be deducted and excess tax paid, if any, shall be refunded. [Rule 58(1A)].
3. The deduction u/r. 58(1) shall be made after deducting cost of land as per rule (1A).
4. No deduction for cost of land is applicable in cases of payment of tax under the composition scheme for builders & developers.

[Rule 58(1B)]

a. Where the dealer undertakes the construction of flats, dwellings, buildings or premises and transfers them in pursuance of an agreement along with the land or interest underlying the land then, after deductions under sub-rules (1) and (1A) from the total contract price, the value of the goods involved in the works contract shall be determined after applying the percentage provided in column (3) of the following TABLE depending upon the stage at which the purchaser entered into contract.

Sr. No.	Stage during which the developer enters into a contract with the purchaser	Amount to be determined as value of goods involved in works contract
(1)	(2)	(3)
(a)	Before issue of the Commencement Certificate.	100%
(b)	From the Commencement Certificate to the completion of plinth level.	95%
(c)	After the completion of plinth level to the completion of 100% of RCC framework.	85%
(d)	After the completion of 100% RCC framework to the Occupancy Certificate.	55%
(e)	After the Occupancy Certificate.	Nil%

 

b. For determining the value of goods as per the Table clause (a), it shall be necessary for the dealer to furnish a certificate from the Local or Planning Authority certifying the date of completion of the stages referred above and where such authority does not have a procedure for providing such certificate then such certificate from a registered RCC consultant.

[Rule 58(1C)]

If the dealer fails to establish the stage during which the agreement with the purchaser is entered, then the entire value of goods as determined after deductions under sub-rules (1) and (1A) from the value of the entire contract, shall be taxable.

2) The value of goods so arrived at under sub-rules (1) & (1A) or, as the case may be, under sub-rule (1B)] shall, for the purposes of levy of tax, be the sale price or, as the case may be, the purchase price relating to the transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract.