Maharashtra Value Added Tax

WCT-TDS
Service Tax
Reverse charge mechanism
Income Tax
Income tax-TDS

Composition Scheme U/Sec. 42(3)

Actual Expense Method u/r 58
Standard Deduction Method u/r 58
Composition Scheme u/s 42(3A)

(wef. 01/04/2010)

5% tax on Agreement Value

No Deduction of Land Value from Agreement

Value
Input Tax Credit is available subject to
Retention of 4%
100% Tax Credit on Capital Goods
Option to Contractors - Contract Wise
Computations:
Taxable amount

Tax liability

Contract value

xxx

Output vat @ 5%

xxx

(-) sub-contract value

xxx

(-) Input tax credit @

96%

xxx

Taxable value

xxx

Tax Liability

xxx

Applicable when Land or Interest in land is

also conveyed to the buyer along with transfer

of property in goods
Deduction of Labour & Service Charges is
available on actual basis
Land deduction is also available but maximum
up to 70% of the contract value
Set off is available on all inputs

Particulars

Amounts

Total Works Contract Value

(Agreement value or Stamp Duty value, which ever is higher)

XXX

(-) Allowable Deduction u/r 58(1A) for land cost

XXX

(-) Allowable Deduction u/r 58(1) for labour/services:

XXX

SubContract price paid

XXX

Labour/service Charges for execution of WC

XXX

Planning, Designing & Architects fees

XXX

Hire Charges or otherwise, for obtaining Machinery & Tools

XXX

Cost of Consumables

XXX

Cost of Establishment

XXX

Similar other expenses relatable to supply of Labour & Services

XXX

Profit relatable to supply of Labour & Services

XXX

Taxable value (subject to stage deduction)

XXX

Output tax (on the value after stage deduction)

XXX

(-) Input tax

XXX

Tax liability

XXX

Applicable when contractor has not maintained

accounts which enable a proper evaluation of the

different deductions
Deduction of land cost will be allowed
30% Standard Deduction on Balance amount from
the Balance amount
Set off will be available on all the inputs
Computations:
Taxable amount

Tax liability

Contract value

XXX

Output vat

XXX

(-) sub-contract value and land

cost

XXX

(-) Input tax credit

XXX

Balance

XXX

Tax liability

XXX

Taxable value @70%

(subject to stage
deduction)

XXX

Sr.
No.

Stage of contract

Amount of
goods
involved in
contract

Before issue of the Commencement Certificate.

100%

From the Commencement Certificate to the

completion of plinth level.

95%

After the completion of plinth level to the

completion of 100% of RCC framework.

85%

After the completion of 100% RCC framework to

the Occupancy Certificate

55%

After the Occupancy Certificate

NIL

Tax payable will be 1% of Agreement Value

Agreement Value will be the value specified in

Agreement or value for the purpose of Stamp

Duty, whichever is higher
No deduction for Land Cost
No Input Tax Credit is available

Agreement must be registered

Dealer should include the agreement value in

turnover of sale in the period in which

agreement is registered
Payment of VAT should be made electronically
In relation to the contracts against which he is
paying tax under composition scheme, he
must not use goods purchased against C
Form
Dealer should not issue Tax Invoice

Applicability
Applicable for Works Contract Transaction
Employer employing Contractor for Work
Contract
Payments are exceeding Rs. 5 lacs in a financial
year.
Rate of WCT
2% in case of Registered Dealer
5% in case of unregistered dealer
Non Applicability
In case of Inter state trade
Payment made to Sub-Contractor

Employer to obtain registration / Tax deduction

number in Form No 401 within 3 months from the

day he become liable to deduct the tax.
Remittance of tax to Government Treasure in

within 21 days from the expiry of the month.

Employer shall maintain the record of amount of

tax deduction in form 404.

Employer is required to issue certificate to

contractor in form 402 and file annual TDS return

in form 424.

Q. 1) Many times mere advances are received and agreement is executed much
later. What will be the point of liability?
A - Tax will be levied from the date of the agreement. The amount of advance, as
and when it is adjusted towards the agreement amount, will be taxed.
Q. 2) The builders receive non-refundable deposits and other charges under the
agreement such as electricity deposit, water charges, etc. Whether such
receipts will also form part of sale price for VAT?
A - The amounts which are received as deposits will be a deduction to the extent
such amounts are actually paid to other authorities.
Q. 3) Can the VAT applicable in above cases be collected by raising a debit note or
the same should be mentioned in the agreement itself? Whether VAT should be
collected on each installment or at one go upon execution of the agreement?
A - Yes. It can be collected by raising a debit note. Specific mention in the
agreement is a choice of the contracting parties. It will be payable on the
installments received.
Q. 4) What will be the VAT implications where mere advances are received from
buyers and agreement for sell is not executed with the buyer?
A - There is no tax liability.

Q. 5)In the event where an agreement entered into is cancelled and

said flat is sold to someone else and the agreement is again
entered. What would be the VAT implication for the first sale and
the second one?
A - If the first sale of flat is cancelled then the subsequent sale of the
same flat by the developer is taxable. The tax paid on first sale can
be adjusted towards subsequent sale.
Q. 6) If builder constructs the flat on the land which is owned by land
owner and out of the constructed flats some flats are given to land
owner and other flats are sold by builder to prospective buyer. Land
owner sales the flat afterwards to buyers. In such instance what will
be the point of taxation? Whether land owner is liable to pay the
VAT on sales of flats which were handed over to him by builder?
A - Builder is liable to pay tax only in respect of sale of flats to
prospective buyers. The flats which are given to land owners will
not be taxable. The land owner when subsequently sales the flat
will not liable to pay any tax as he is not a dealer.

Service tax levy on the service portion provided

by the contractor to purchaser or dealer.

After the negative list regime the construction

of a complex, building, civil structure or a part

thereof, including a complex or building
intended for sale to a buyer, wholly or partly
has been declared to be a service liable to
service tax. However, if the entire consideration
from the prospective buyer is received after
issuance of completion certificate by competent
authority then it is outside the purview of
declared service.

4. Works Contract Service Shall include:labour charges for execution of the works;
amount paid to a sub-contractor for labour and services;
charges for planning, designing and architect's fees;
charges for obtaining on hire or otherwise, machinery
and tools used for the execution of the works contract;
cost of consumables such as water, electricity, etc;
cost of establishment of the contractor relatable to
supply of labour and services;
other similar expenses for Supply of Labour and Services
profit earned on Supply of Labour and Services

Applicable where the VAT is paid under

composition scheme:- Standard Deduction

Scheme

Sr.
No.

Situation

Value of Service in
execution of
works
contract

In case of original works contract

40% of the total

amount charged
for works contract

In case of works contract entered

into for maintenance or repairs

70% of the total

amount charged
for the works
contract

The term original works means:

i. All new constructions;

ii. All types of additions and alterations to
abandoned or damaged structures on
land that are required to make them
workable;
iii. Erection, commissioning or installation
of plant, machinery or equipment or
structures, whether prefabricated or
otherwise;

Description

Abatemen
Taxable
t

CENVAT
availability

75%

Credit allowed
only on :- Capital
Goods
- Input
Service

Construction of complex or
building1) For Residential Unit
a) having carpet area less
than
2000 Sq. Ft.
AND

25%

b) Amount charged is less

than Rs. 1 crore

2) For other than the (1)

above

70%

30%

Credit allowed
only on :- Capital
Goods
- Input
Service

Services by way of construction, erection, commissioning, or

installation of original works pertaining to:
an airport, port or railways (including monorail or metro)
single residential unit otherwise than as a part of a residential
complex;
low- cost houses up to a carpet area of 60 square meters
post- harvest storage infrastructure for agricultural produce
mechanized food grain handling system, machinery or equipment
for units processing agricultural produce

Nature Of
Service

Service
Provider

Service
Receiver

Percentage of
Service Tax which
is to be born by
Service
Provider

Service
Receiver

Works Contract
Service

Individual /
HUF/
Partnership
Firm

Body
Corporate

50%

50%

Works Contract
Service

Body
Corporate

Body
Corporate

100%

Nil

Taxability will arise on:

Date when invoice is issued for services

provided or to be provided; (invoice is required

to be issued within 30 days, otherwise, the
point of taxation will be the date of provision of
service)
Date when the payment is received for services

provided or to be provided;
whichever is earlier

If contract is covered under continuous Supply of

Service where the provision of the whole or part

of the service is determined periodically on the
completion of an event in terms of a contract,
which requires the receiver of service to make any
payment to service provider, then the date of
completion of each such event as specified in the
contract shall be deemed to be the date of
completion of provision of service.

Q. 1) We have received land from the land owner and we have agreed to
give him some flats in lieu of the land. Is service tax payable?
A - Service tax will indeed by payable. In fact, as soon as you get
possession of land from land owner, it is advance received and
service tax will become payable next month.
Q. 2) Service tax has been chargedto customer and depositedwith
department. Later, customer surrenders the booking and refund is
made to him. What are the implications in service tax?
A - If you refund the entire amount along with service tax to customer,
then you can adjust the service tax in your subsequent payments of
service tax.
Q. 3) Can we adopt different valuation methods for different contracts?
A - Each contract can be treated as separate contract and valued
differently.

From Financial Year 2013-14, section 43CA

levy the tax on transfer of immovable

property (land or building or both) held in
stock.
And the section 50C is applicable for
immovable property held in the nature of
capital asset under section 50C of the Act.

Therefore the provision of section 43CA shall be

applicable, for the real estate developers and

builders who are dealing in real estate properties.
Both section requires that in case land or building or
both, is transferred by a trader/ a real estate
developer for a value less than stamp duty value
notified by the stamp duty authority, stamp duty
value in such a case shall be deemed to be the full
value of the sale consideration to such person and he
shall be required to compute his taxable business
income (43CA)/capital gain (50C) by substituting the
actual sale consideration with the above mentioned
deemed sale consideration.

Provision of Section 43CA is applicable to

Assesses who deal in immovable property being
land or building or both.
held Land or Building or both as stock in trade.
transfer of ownership by any mode.
Stamp Duty valuation is to be taken on the

date of entering into Sale Agreement instead

of value on the date of transfer of Property.
If fair Value assessed by Valuation officer is
also less than Stamp Duty then such Fair
Value shall apply.

Transferee is required to deduct Tax on transfer

of Immovable Property
at the time of Payment or
at the time of Credit of such sum to his
account
whichever is earlier
Not applicable if

No tax to be deducted where the sale

consideration is less than 50 Lacs or Land is
rural agricultural land.
TDS to be deducted @ 1%
TDS to be deducted on any amount paid or
credited to payee being resident of India.

If deductee does not furnish PAN then deductor

will Deduct tax at source at higher of the

following rates:
The rate prescribed in the Act;
At the rate in force i.e. the rate mentioned in the
Finance Act;
At the rate of 20%
And the TDS deducted under Section 194IA shall

be paid to the credit of CG within 7 Days form

the end of the month in which deduction was
made.

Disclaimer:
The material in this presentation on every aspect

is not an exhaustive or comprehensively

considered, hence only for academic purpose.
It is advisable to consult professional before any
sort of application/decision.
Neither the author nor the publisher will be
responsible for the interpretation and/or use of
the information contained herein and/or for the
result of any action taken on the basis of this
work, whether directly or indirectly for any error,
omission or inaccuracy or otherwise, to any
person.

Any Query???

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Areas of studies & experiences: TAXATION, ACCOUNTS, AUDITING,
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