Works Contract Rates

Rate of Composition w.e.f. 1-5-1998 to date : The Rate of composition has been changed w.e.f. 1-5-1998 which are as under :
A) First Option :
i)
To pay flat at specified rate on contract value without any deduction. For rate of composition uptil date See the following Chart.
Composition Chart
Period
Rate
1)
Works contract commenced after 1-4-1992 but before 30-4-1998 in respect of work done after 1-5-1998.
1% Construction contract.
3% other than construction contract.
2)
Other ongoing contracts and ccontracts awarded during the period from 1-5-1998 to 31-3-2000.
2% Construction contract.
4% other than construction contract.
3)
Works contract awarded during the period from 1-4-2000 to 31-3-2001.
3% for all types of contract.
4)
Works contract awarded from 1-4-2001 onwards.
4% for all types of contract.
(C)
Last return
On cancellation of Registration certificate the return should be filed from the first day of the year/ quarter/month in which the certificate is cancelled to the date of cancellation.
III
ii)
By an explanation to 6A(1) w.e.f. 1-1-2000, the term "Construction Contract" shall mean such contract as may be notified. By G. N. Dated 8-3-2000 following contracts are notified as Construction Contracts:
a)
Contracts for construction of - (1) Building, (2) Roads, (3) Runways, (4) Bridges, Flyover bridges, Railway overbridges, (5) Dams, (6) Tunnels, (7) Canals, (8) Barrages, (9) Diversions, (10) Rail tracts, (11) Causeways, Subways, Spilways, (12) Water Supply schemes, (13) Sewerage Works, (14) Drainage works, (15) Swimming Pools, (16) Water purification plants.
b)
Any contract incidental or ancillary to the contracts mentioned in paragraph A above, if such contracts are awarded and executed before the completion of the said contracts mentioned in A above.
   
B) Second Option :
Contractor can pay composition @8% on total contract value after duducting the following turnover of purchases.
i)
Goods covered by schedule A of the B.S.T. Act, 1959.
ii)
Goods which are totally and unconditionally exempt under a notification u/s. 41 of the B.S.T. Act, 1959.
iii)
Goods purchased from the registered dealer under the B.S.T. Act or from an unregistered dealer and purchase tax thereon is paid under the said Act.
(in short, composition money is payable on the value of labour, margin of profit, turnover of purchases in the course of Interstate trade or import or despatches from outside the state.)
C)
No composition u/s 6A is available in respect of Contracts involving transfer of a ready mix Concrete w.e.f. 1-4-2001 vide Sec.-6A(8). Such contractors will have to pay tax on their turnover of Sales as per provisions of Sec. 6.
The composition money has to be paid before filing the regular returns under the Works Contract Act as prescribed in the rules proportionate to the total contract receipts as compared to the goods used in the contract during the period covered by the return. A dealer opting for the Composition Scheme cannot recover any amount in excess of lump-sum paid or payable by him. All the permisssions granted prior to 1-5-98 will stand cancelled with this new scheme. No permission is required to pay tax by way of composition from 1-5-1998.
The turnover of sales of a Registered Dealer to the State Government is exempt on or after the notified date i.e., 1-4-2000 (Sec. 4A)
Tax Not Leviable on Sales to 'Diplomatic Authorities' A new section 4B has been introduced in the 1989 Act by which the turnover of Sales by any registered dealer under the Act to the Diplomatic Authorities will be exempted from the tax on or after the date notified for this purpose in the official gazette. The Contracts awarded by the Diplomatic Authority will not be liable to tax after the date to be notified by the Government in this regard. The Diplomatic authorities eligible for exemption will be notified separately. Till date no such Dipomatic Authorities are notified.
TDS Under Works Contract Act (S.6B & Rule 8B)
i)
Government of Maharashtra by ordinance No. II of 1999 dated 06-02-1999 which was converted into Maharashtra Act, No. XVII of 1999 dated 30-03-1999 has introduced section 6B in Works Contract Act, to provide for TDS under Works Contract Act, By G. N. No. STA-1198 / CR-43 / Taxation - 1 dated 6-3-1999, this provision has been made effective from 01-04-1999.
ii)
Every employer including Government department, Company, Individual, dealer registered under Bombay Sales Tax Act, etc. shall deduct amount equal to 2% of contract value in case of construction contract and in other case 4% of contract value from the payments made to a contractor upto 31-12-1999. This rate of TDS has been changed to 2% uniform in all types of Contracts w.e.f. 1-1-2000.
iii)
From 1-1-2000, the liability to deduct the tax at source is restricted to the extent of notified Employer who are as under :
1) The Central Government and any State Govenment.
2) An Industrial, Commercial or Trading undertaking, Company or Corporation of the Central Government or of any State Government, whether set up under any law or not, and a Port Trust set up under the Major Ports Act, 1963.
3) A Company registered under the Companies Act, 1956.
4) A Loacal Authority, including Municipal Corporation, Municipal Council, Zilla Parishad, Cantonment Board.
5) A Co-operative Society registered under the Maharashtra Co-operative Societies Acts, 1960.
6) A registered dealer under the Bombay Sales Tax Act, 1959.
7) An Insurance of Financial Corporation or Company; and any Bank included in the Second Schedule to the Reserve Bank of India Act, 1934, and any Scheduled Bank recognised by the Reserve Bank of India.
iv)
In case of any advance payment is made by an employer, then tax is to be deducted at the time when such payment is adjusted against the amount payable towards the Works Contract.
v)
The amount of T.D.S. shall not exceed the amount of tax or composition payable towards the Works Contract.
vi)
Such deduction is to be made only in case where Works Contract involving transfer of property in goods is awarded. Pure labour contract which does not involve any transfer of property in goods is out side the scope of this provision.
vii)
Nos such deduction is required to be done if the total amount payable to such contractor does not exceed Rs. 50,000/- in a year, upto 31-12-1999. By Mah. Act No. 1 of 2000 w.e.f. 1-1-2000 this limit is raised to Rs. 2,00,000/-
viii)
The amount of TDS is to be deposited into Government treasury within 10 days from the date of deduction. However by Mah Act 1 of 2000, T.D.S. is required to be paid by the employer within 10 days from the expiry of the month during which tax is required to be deducted.
ix)
The employer has to issue certificate in form No. XXXX immediately after deduction is made, to the dealer and has to file statement in duplicate in form no XXXXI before the assessing authority having jurisdiction over the dealer within 20 days from the end of the month to which it relates. The employer has to maintain register in Form No XXXXII.
x)
T.D.S. is not applicable in respect of sales not liable to tax under the Works Contract act by virtue of Section 10. Hence on Sales effected outside the state, in the course of import/export and in the course of interstate trade or commerce TDS is not applicable.
xi)
The amount of tax payable by the contractor for any month or year shall be reduced by the amount of T.D.S. [Sec. 6B (5A)].
xii)
The contractor can make an application inform No. XXXXIII to his assessing authority for exemption or lower rate of deduction of tax at source in specified cases (Sec. 6B (8A), Rule 8C).
xiii)
As per proviso to sub sec. 1 of sec 6B, no tax is to be deducted from any payment made to any sub contractor by a principal contractor.
xiv)
T.D.S. is not applicable on the amount of tax, if charged separtely by the Contractor.
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