Determination of turnover of sale of goods involved in the execution of a works contract

(1) Subject to other provisions of these rules, the tax on turnover of sale of goods where such sale is affected by way of transfer of property in goods (whether as goods or in some other form) involved in the execution of a work contract shall be computed on the taxable turnover of sale of taxable goods. For the purposes of determining the taxable turnover of sale of such goods, the amounts specified below shall be deducted if included in the gross amount received or receivable in respect of the works contract:-

(a) all amounts representing the value of goods consumed in execution of the works contract; in which property in goods is not transferred in the execution of the works contract;

(b) all amounts representing the value of exempt goods and amount of profit thereon;

(c) all amounts representing the rent paid or payable in respect of machinery and other equipments taken on hire for use in the execution of such works contract;

(d) all amounts representing the value of service and labour and profit thereon;

(e) all amounts representing the value of goods in which property has been transferred in the execution of the works contract as a result of sale in the course of interstate trade or commerce;

(f) all amounts representing the value of goods in which property has been transferred in the execution of the works contract as a result of sale in the course of export of goods out of the territory of India or sale in the course of import of goods into the territory of India;

(g) all amounts representing the value of goods in which property has been transferred as a result of a sale outside the State;

(h) all amounts representing the value of non-vat goods purchased from within the State in the circumstances in which the dealer executing the works contact himself is liable to pay tax on turnover of purchase of such goods;

(i) all amounts representing value of non vat goods where such goods are purchased by the dealer from a registered dealer;

(j) the amount representing the cost of establishment and other similar expenses of the contractor to the extent it is relatable to supply of labour and services, and profit thereon;

(k) amount paid to sub-contractor for the execution of works contract on furnishing certificate obtained from the assessing authority of sub-contractor certifying that,-

(i) the sub contractor is registered dealer under the Act;

(ii) the sub-contractor has disclosed turnover in the relevant return of tax period and has paid tax according to the provisions of the Act;

(l) proportionate amount of actual cost of land required to be used in the construction of building, by the builder contractor where cost of such land is included in the amount received or receivable from the purchaser ;

Explanation:

(i) For the purposes of clauses (a) and (e) to (h), the value of goods referred to in such clauses includes amount of profit thereon.

(ii)Actual cost of land required to be used in construction of building by the builder contractor means the value of land computed at rate notified by the Collector of the relevant district in accordance with the procedure laid down for determination of the value of land for the purpose of payment of stamp duty under the Indian Stamp Act, 1899.

(2) Where any amount has been deducted by the contractee from the amount of the contract on account of breach of any condition of the contract, such amount shall be deemed part of amount payable to the contractor in respect of such contract

(3) Where accounts maintained by the contractor do not show separately the value of labour and services and amount of profit accrued on such labour and services, or accounts maintained by the dealer are not worthy of credence or if the dealer has not maintained accounts, for the purpose of determining turnover of goods in which transfer of property in goods has taken place, in cases other than those mentioned in the table below, an amount, representing twenty percent of gross amount received or receivable, shall be deducted towards labour and services and amount of profit accrued thereon and in the cases described or mentioned in column 2 of the table given below, amount of deduction towards such labour and services and amount of profit accrued thereon shall be computed at the rate percentages, given in column 3 against the entry in column 2 of the table, of the amount received or receivable.

Table

Explanation: For the purposes of this rule,

(a) where period of execution of a works contract is spread over several tax periods or several assessment years; or

(b) where a part of a works contract awarded to subcontractor relates to different category of works contract; or

(c) where whole or part of a works contract is awarded to sub-contractors,the amount towards labour and services and the amount of profit accrued thereon claimed by contractor or subcontractor together, shall not exceed the percentage of the gross amount received or receivable in respect of execution of each category of such works contract.

(4) For removal of doubts it is hereby made clear that, for the purposes of this rule, in arriving at the turnover of sale of goods involved in the execution of a work contract, amounts of following nature shall not be deducted from the gross amount receivable.

(a) any amount proposed to be deducted in the name of any tax or fee or any other levy;

(b) any amount which has been deducted by the contractee from the contractor as demurrage or penalty or a fine or in any other name for breach of any conditions of the contract or otherwise;

(c) any amount which has been deducted by the contractee from the contractor as compensation;