The deductions which are allowable while opting to pay VAT on taxable turnover involved in works contracts in lump sum scheme under Punjab VAT Act 2005 have been prescribed by adding a sub rule 6 to rule 15 of PVAT Rules.
There was no lumpsum scheme for payment of VAT on taxable turnover involved in works contracts under PVAT Act 2005 untill sub section 2-A to section 8 was added by an ordinance dated 21-10-2010. Section 8(2-A) runs as under:
Thus where no books of accounts are maintained so as to determine the correct value of goods incorporated in works contract then tax @ 12.5% is payable on the whole value of consideration received or receivable subject to deductions which now have been prescribed under newly added Sub Rule 6 of Rule 15.
Under this lumpsum scheme no Input Tax credit of local purchases will be available, which may discourage the contractors to choose under this lumpsum scheme.
The deductions prescribed under newly added rule 15(6) will be applicable not only to the persons opting to pay tax under proviso to section 8(2-A) but also to other works contractors(who are maintaining books of accounts to determine the correct value of goods incorporated in works contracts) as well if the deductions claimed by them under Rule 15(4), are considered to be unreasonably high in view of the nature of contract.
It is further provided under Rule 15(6) that in such cases the contractor shall not be eligible to claim input tax credit and shall not be eligible to issue VAT Invoice. This Rule 15(6) has been added vide notification No No.G.S.R.6 /P.A.8/2005/S.70/Amd.(33)/2011 dated 17-02-2011 and is applicable w.e.f date of publication of the said notification in the official gazette.
Rule 15(6) and the deductions prescribed therein are produced here below for ready refernce of all concerneds:
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There was no lumpsum scheme for payment of VAT on taxable turnover involved in works contracts under PVAT Act 2005 untill sub section 2-A to section 8 was added by an ordinance dated 21-10-2010. Section 8(2-A) runs as under:
“(2-A) Every person executing works contracts shall pay tax on the value of goods at the time of incorporation of such goods in the works executed at the rates applicable to the goods under this Act:
Provided that where accounts are not maintained to determine the correct value of goods at the time of incorporation , such person shall pay tax at the rate of twelve and half per cent on the total consideration received or receivable, subject to such deductions , as may be prescribedThus where no books of accounts are maintained so as to determine the correct value of goods incorporated in works contract then tax @ 12.5% is payable on the whole value of consideration received or receivable subject to deductions which now have been prescribed under newly added Sub Rule 6 of Rule 15.
Under this lumpsum scheme no Input Tax credit of local purchases will be available, which may discourage the contractors to choose under this lumpsum scheme.
The deductions prescribed under newly added rule 15(6) will be applicable not only to the persons opting to pay tax under proviso to section 8(2-A) but also to other works contractors(who are maintaining books of accounts to determine the correct value of goods incorporated in works contracts) as well if the deductions claimed by them under Rule 15(4), are considered to be unreasonably high in view of the nature of contract.
It is further provided under Rule 15(6) that in such cases the contractor shall not be eligible to claim input tax credit and shall not be eligible to issue VAT Invoice. This Rule 15(6) has been added vide notification No No.G.S.R.6 /P.A.8/2005/S.70/Amd.(33)/2011 dated 17-02-2011 and is applicable w.e.f date of publication of the said notification in the official gazette.
Rule 15(6) and the deductions prescribed therein are produced here below for ready refernce of all concerneds:
“(6) Where the contractor has not maintained the accounts to determine the correct value of the goods at the time of incorporation or deductions being claimed under sub-rule 4 are considered to be unreasonably high in view of the nature of contract, he shall pay tax at the rate of twelve and a half percent on the total consideration received or receivable, subject to the deductions specified in the table below. In such cases the contractor shall not be eligible to claim input tax credit and shall not be eligible to issue VAT Invoice:-
TABLE
Serial. No. | Type of contract | Percentage of the total value eligible for deduction |
1 | (a) Electrical Contracts:- | |
(i) H.T Transmission lines; | Twenty percent | |
(ii) Sub-station equipment; | Fifteen percent | |
(iii) Power house equipment and extensions; | Fifteen percent | |
(iv) 11 and 22 KV and L.T distribution lines 12+5; and | Seventeen percent | |
(v) All other electrical contracts. | Twenty five percent | |
(b) All structural contracts | Thirty five percent | |
2 | Installation of plant and machinery. | Fifteen percent |
3 | Fixing of marble stabs, polished granite stones and tiles (other than mosaic tiles.) | Twenty five percent |
4 | Civil works like construction of buildings, bridges, roads etc. | Thirty percent |
5 | Fixing of sanitary fittings for plumbing, drainage and the like. | Fifteen percent |
6 | Fabrication and erection of structural works of iron and steel including fabrication, supply and erection of Iron trusses, purfins and the like. | Fifteen percent |
7 | Fabrication and installation of cranes and hoists. | Fifteen percent |
8 | Fabrication and installation of elevators (lifts) and escalators | Fifteen percent |
9 | Fabrication and installation of rolling shutters and collapsible gates | Fifteen percent |
10 | Installation of doors, door frames, window frames and grills. | Twenty percent |
11 | Supply and installation of air conditioners and air coolers | Fifteen percent |
12 | Supply and installation of air conditioning equipments including deep freezers, cold storage plants, humidification plants and dehumidres. | Fifteen percent |
13 | Supply and fixing of furniture and fixtures, partitions including contracts for interior decorators and false ceiling. | Twenty percent |
14 | Construction of Railway coaches and wagons on under carriages supplied by Railways. | Thirty percent |
15 | Construction of mounting of bodies of motor vehicles and construction of trailers. | Twenty percent |
16 | Supply and erection of weighing machines and weigh bridges. | Fifteen percent |
17 | Painting, Polishing and White Washing. | Twenty five percent |
18 | Laying of pipes. | Twenty percent |
19 | Tyre retreading | Forty percent |
20 | Dyeing and printing of textiles | Forty percent |
21 | Printing of reading material, cards, pamphlets, posters and office stationery. | Forty percent |
22 | All other contracts. | Thirty percent” |
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