HOW TO DISCHARGE WORKS CONTRACT TAX IN TNVAT

There are three methods of tax payments available for Works Contracts Tax in TNVAT. They are as follows :-

1)      Goods Identification method (Section 5)

2)      Percentage Deduction method – Rule 8(5)

3)      Composition Scheme – Section 6

GOODS IDENTIFICATION METHOD

In this method, tax is on the deemed sale value of goods at rates specified in the Schedule to the Act. Deemed Sale value is arrived on the landed cost of the goods at the site and reasonable profit on the same. Conversion charges can also be added, if the goods are used in some other form than the one purchased. The output tax can be collected from the buyer (Contractee)

PERCENTAGE DEDUCTION METHOD

When the labour and other like charges are not available separately and the same is not ascertainable from the books of accounts and records maintained by the dealer,  it has to be calculated at the following rates on contract price, vide rule 8(5) :-

 

Type of Contract                                                                     % of Contract Price

Electrical contracts                                                                15%

All structural contracts                                                        15%

Sanitary contracts                                                                 25%

Watch and clock repair contracts                                      50%

Dyeing contracts                                                                     50%

All other contracts                                                                  30%

By deducting the above from the contract price, the deemed sale value of the goods involved is arrived at and tax is payable @ 14.5% when the goods involved are taxable at various rates , @ 5% only when all the goods involved are taxable @ 5%.

COMPOSITION SCHEME – Section 6

Under this scheme, tax is payable @ 2% in case of Civil Works contract receipts or @ 5% in case of non civil works contract receipts.

This option should be exercised in writing to pay tax under this method.

ITC cannot be claimed under this method.

The contractor shall not collect any tax on his works contract receipts.

No ITC to Contractee also.

Dealers opting to pay tax under composition scheme SHOULD NOT MAKE ANY INTERSTATE PURCHASES OR IMPORT FROM FOREIGN COUNTRIES.

 

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Eligible & Ineligible Purchases for VAT Input Tax Credit

VAT Input Credit is not available for all types of purchases, there are certain purchases which are in eligible for Input Tax credit Claim. The Eligible and Ineligible Purchases for the purpose of Input Tax Credit are given below :-

Eligible Purchases:

Purchases made:

è For sale/resale within the state

è For interstate sale (Sale outside the state)

è For being used in the execution of WORKS contract

è For making other zero rated sales

è To be used as capital goods required for manufacture or resale of taxable goods

è To be used as packing materials, raw materials or as consumable stores of the goods intended to be sold within/outside the state or in the course of export of the goods.

Ineligible Purchases:

Purchases:

è Made From unregistered dealers

è Made From other states (interstate purchases)

è Made From registered dealers opted for composition scheme

è Of non-creditable goods

è Made from outside the territory of India

è Of goods used in the manufacture of exempted goods

è Made from the dealer, where his invoice doesn’t show the tax amount charged separately

è Of goods meant for personal use

è Where there is no evidence or absence of invoice

è Of capital goods where credit is available in parts.

è Of goods to be used as fuel in generation of power

è Of goods meant for branch transfer.

TNVAT on unbranded food & Mineral water reduced to 2%

The Government of Tamilnadu vide its notification dtd 09th March 2012, has reduced the rate of tax on sale of ready to eat unbranded foods and mineral water served in or catered indoors or outdoors by hotels , restaurants, sweet-stalls, clubs , caterers and any other eating houses , to 2% of the taxable turnover. This will come into force w.e.f 10th March 2012.

The relevant notification is reproduced below :-

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TNVAT Monthly Return Filing

Every dealer who is liable to pay tax under this Act shall file return on or before 20 th of the succeeding month to Assessing authority in  whose jurisdiction the principal place of business is located along with statement of purchases and sales effected by him during the month in the Form specified in Rules.
Every dealer whose taxable turnover in the preceding year is Two hundred crores of rupees and above shall file return on or before 12 th of succeeding month along with statement of purchases and sales effected by him during the month.
The returns shall be filed either electronically or by ICR forms.  The returns so filed shall be accompanied with proof of payment. The category of dealers to file returns either electronically or by ICR forms may be notified by the Commissioner as per VAT rules.

Every dealer who is liable to pay tax under this Act shall file return on or before 20th of the succeeding month to Assessing authority in  whose jurisdiction the principal place of business is located along with statement of purchases and sales effected by him during the month in the Form specified in Rules. Every dealer whose taxable turnover in the preceding year is Two hundred crores of rupees and above shall file return on or before 12th of succeeding month along with statement of purchases and sales effected by him during the month.  The returns shall be filed either electronically or by ICR forms.  The returns so filed shall be accompanied with proof of payment.  The category of dealers to file returns either electronically or by ICR forms may be notified by the Commissioner as per VAT rules.

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