30 January 2012
ABC Ltd has get a works contract job from Simplex Ltd in Orissa . ABC Ltd is a Sub - Contractor. Simplex Ltd is a Main Contractor. In month Nov 2011, ABC Ltd has cst purchased of Rs 3564000.00 . Total Works contract Bill Amount Rs 2587000.00 . Simplex Ltd has deducted VAt - TDS @ 4% on Rs 2587000.00 . ABC Ltd has get another labour job from Bhushan Steel Ltd in Orissa. Bhushan Steel has paid to ABC Ltd after Deducting of Vat - Tds @ 4% on Rs 546000.00 .
30 January 2012
u said cst purchased, r u bought the material by using c declaration, then it is invalid, bcz one person can enjoy one exception , means you pay 4% tax under WCT then u cant buy the material in low rate of tax. Need more details of ur part , what kind of tax u pay under VAT and r u enjoy the input tax
31 January 2012
Dear Mr. Ramen, If you have procured the goods in inter-state trade (by subjecting the same to CST) to be used in the works contract (the goods should have been consigned in the name of the contract work), then such CST subjected inter-state goods are not liable to TDS. Please see the decision of the Supreme Court in Sail vs. Napthpa Zakhari.
Further, while raising the invoice on L&T, you should very clear indicate that the goods used in the execution of the works contract have been procured in inter-State trade and already subjected to CST. If you do not specify this, naturally L&T will have no means of knowing whether they are goods procured for the works contract through inter-State trade or procured locally.
The same applies to your other works contract as well.
While you seem to be aware that deducting 4% VAT TDS is wrong, you only need clarify as to how to go about the transaction and the procedure to be adopted. Being a commercial concern, any wrong step at the initial stage will lead to many avoidable complications. Therefore, it will be advisable for you to contact a lawyer practising VAT in your area. It is worth it.