Answer / gravi

THIS ANSWER WAS TAKEN FROM TAX 4 INDIA.COM

ANSWER:
A works contract is an agreement, which is entered into for
the following purposes:

For carrying out construction, fitting out, improvement or
repair of any building, road, bridge or other immovable or
movable property.
For cash, or for deferred payment, or for other valuable
consideration.
In other words, whenever there is a contract, by which one
person promises to make something which, when made, will
not be his absolute property, and by which, the other
person promises to pay for the work done, will be
considered to be a contract for work. This will be the case
even if the payment maybe called a price for the thing and
if the materials, of which the thing is made, may be
supplied by the maker.
Though the Central Sales Tax Act still has no definition
for a contract or works contract, the definition of sale
includes a transfer of property in goods, involved in the
execution of a works contract.

In order to prevent evasion of tax by the transfer of
property through a works contract, the Indian Constitution
was amended to make such transactions taxable. Works
contracts are taxable under most State sales tax laws (but
not under the Central Sales Tax Act). However, it is only
taxable to the extent of the value of the goods that have
been transferred. This means that the full value of the
Works Contract is not taken into account while calculating
tax that is payable under the state sales tax laws

Answer / vijaykant

Example A-Company requires a building in their company,
then A will give Works Contract to Contractor-B

Contractor-B then build Building in A-company
by providing material, labour & Expenses, this is works
Contract.In his Invoice Contractor-B will charge Works
Contract Value, 5% VAT & 4.12% or 10.36% Service Tax on
Contract Value(Note:- 4.12% Service tax is Under
composition scheme and 10.36% Service will be on 36% of
contract value)

Mainly works are done at the purchasers site

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