VAT for contractors

Re: All kinds of Tax
Recently, the Building and Other Construction Workers Welfare Cess Act, 1996 and Cess Rules, 1998 have been implemented for all states and UTs of India. Labour Cess shall be levied @1% of the cost of construction for the welfare of BOC workers in accordance with the BOCW Act, 1996 and direction of the Supreme Court. All the government departments and local bodies should pay 1% labour cess on the total cost of the work taken up by them. Any construction work carried out through a private contractor, shall deduct 1% of the amount of the cost approved as per the tender notification, from bills at the time of making payment to contractors.
BOCW Act & Rules are available
VAT licence is mandatory for a contractor. Pls go through the provisions of VAT liability and registration under VAT as follows:
LIABILITY FOR PAYMENT OF VAT
A. AN EXISTING DEALER–
a. who is registered under the West Bengal Sales Tax Act, 1994 or Central Sales Tax Act, 1956; or
b. who is not registered but is liable to pay tax under the West Bengal Sales Tax Act, 1994 or Central Sales Tax Act, 1956; or
c. whose gross turnover of sales/purchases or contractual transfer price exceeds taxable quantum on the day immediately preceding the appointed day, will be liable to pay VAT from the appointed day, irrespective of quantum of sale, purchase or works contract under the aforesaid Acts.
Note: Appointed day means the day from which the West Bengal Value Added Tax Act, 2003, comes into force.
B. A NEW DEALER WHO–
a. being a manufacturer or reseller of goods in West Bengal exceeds turnover of sales of five lakh rupees in an accounting year will be liable to pay VAT with effect from the next day; or
b. is a works contractor and exceeds contractual transfer price of five lakh rupees any time during an accounting year will be liable to pay VAT with effect from the next day; or
c. is an occupier of jute mills or shipper of jute will be liable to pay tax under the VAT Act with effect from the date of first purchase in West Bengal; or
d. sells goods brought from outside West Bengal will be liable to pay VAT from the very first sale; or
e. is liable to pay tax under Central Sales Tax Act, 1956, will also be liable to pay VAT; or
f. is liable to pay tax as works contractor will be liable to pay VAT on all other sales; or
g. is a transferee of business of a registered dealer (for example acquisition of business by way of purchase or inheritance or gift), either in part or in full, will be liable to pay VAT from the date of such transfer; or
h. gets himself registered voluntarily will be liable to pay VAT from the date of registration.
Note: The definition of contractual transfer price under the VAT Act means the aggregate of amount received or receivable for the transfer of property in goods, (whether as goods or in any other form) involved in the execution of works contract.
REGISTRATION UNDER VAT
a. All the dealers registered under the West Bengal Sales Tax Act, 1994 on the day immediately preceding the day on which the West Bengal Value Added Tax Act, 2003 (hereinafter referred to as the VAT Act) comes into force, will be deemed to have been registered under the VAT Act from the very first day. These dealers, however, are required to furnish certain information in the prescribed form to facilitate issue of certificate of registration under the VAT Act.
b. Dealers not falling under category (a) and incurring liability to pay tax under the VAT Act will have to apply in the prescribed form within 30 days from the date of incurring liability. The application will be disposed of within 21 days of filing of the application. Such dealers, if apply for registration within 30 days from the date of incurring liability, will be entitled to issue tax invoice from the very first day of incurring liability.
c. A dealer who is not liable to pay tax under the VAT Act is also eligible for getting himself registered voluntarily provided he sets up a business of selling or purchasing goods in West Bengal.
Source:
In compliance with the Section 40 of the WB VAT Act,2003 deduction of tax should be made at source while making payment to a dealer in connection with execution of works contract. The Builder’s Association of India (BAI) had challenged the validity of the provision of section 40 of the Act before the Taxation Tribunal. The Hon’ble Tribunal in its order dated 25/02/2010 had held “We have interpreted that section-40 has intended and imposed obligation for deduction of specified amount from Contractual Transfer Price paid by the owner (contractee) to the contractor. But such interpretation does not save the Section from unconstitutionality in absence of any provision or mechanism for ascertaining Contractual Transfer Price and for excluding sales or deemed sales in course of inter-state trade or commerce or export or import or other non-taxable components, if any. For the reasons hereinabove explained and following the decisions of the Supreme Court and several High Courts referred to and discussed hereinabove, we declare Section-40 of the West Bengal Value Added Tax Act, 2003 as unworkable, arbitrary, unreasonable, incompetent and unconstitutional. We direct the concerned Respondents to adjust the amount already deducted at source from work contractors against tax on Contractual Transfer Price payable under the VAT Act, 2003 and to refund excess amount, if any, to the concerned work contractor within 4 months from the date of communication of this judgment and order by the concerned works contractors.”

Re: All kinds of Tax
It is obligatory on the part of the contractor to be registered under VAT Act if his annual turnover is more than Rs. 5 lacs. Otherwise registration is optional. If he has no VAT registration or Sales Tax registration he cannot get the contract with annual turnover more than 5 lacs. The plan cannot be approved by the Local Authority in favour of him. So, he is not required to have VAT registration if his turn over is shown less than 5 lacs and, there is no question of deduction of tax from billed amount. If in such a case a deductor cuts the amount then the question will arise – where to deposit that deducted amount and under which head if no VAT number is allotted!

dear mr. banerjee, the date column (c) of the VAT calculator is showing “#######” instead of date. please unlock the sheet so that the width can be adjusted by the users. thanks.