FAQs on compliance with Haryana VAT Act 2003 by a work contractor
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FAQs on compliance with Haryana VAT Act 2003 by a work contractor
1. What is work contract?
As per section 2(zt) of HVAT Act, work contract includes any agreement for carrying out assembling, construction, building, altering, manufacturing, processing, fabrication, installation, fitting out, improvements, repair or commissioning of any movable or immovable property.
As per HVAT Act 2003, a contractor is liable to pay VAT on work contract if his gross turnover exceeds the taxable quantum i.e. 1 Lac in any year.
2. What are schemes of tax for a work contractor under HVAT?
There are two schemes of tax available to a contractor under HVAT Act, 2003. One is general scheme where contract has to pay tax on his taxable turnover. While calculating taxable turnover, charges towards labour and services are excluded provided sufficient information is available based on books of accounts maintained by contractor. If sufficient information is not available based on books of accounts, there is an option to deduct prescribed percentage towards labour and service charges. This method is less preferred.
An alternative scheme of tax which is more preferred and available to contractor is ‘Lumpsum’ or Composition Scheme whereby contractor is required to pay 4% of his total consideration as lump sum in lieu of tax payable under the Act.
3. What are the other requirements/restrictions in case of Lumpsum scheme?
a. To avail the ‘Lumpsum’ scheme, contractor has to make an application to assessing authority within 30 days of the award of the contract containing the prescribed particulars along with a copy of contract. A contractor shall pay lump sum in respect of every work contract awarded to him after the award of the contract in respect of which he first opted to pay lump sum and he shall continue to pay tax in respect of contracts awarded before as if he is not a lump sum contractor.
b. The contractor shall pay lump sum quarterly at 4% of the payments received or receivable by him during the quarter. The payment of lump sum shall be made within 30 days from the end of the quarter after deducting there from tax deducted by contractee u/s 24 for that quarter.
c. The contractor shall file returns at quarterly intervals in Form VAT-R6 within a month of the close of the quarter.
d. Contractor shall not issue a tax invoice for sale of goods by him and no dealer to whom goods are sold by such contractor shall be entitled to any claim of input tax in respect of the sale of the goods to him.
e. Input tax credit is not available to lump sum contractor.
4. What are registration requirement for a contractor under HVAT Act 2003?
A contractor has to get himself registered u/s 11 of the HVAT Act 2003.
5. Can a lump sum contractor purchase against C-Form etc?
The lump sum contractor shall be entitled to make purchase of goods for use in execution of the contract both on the authority of declaration in Central form C as well as Form VAT-D1 prescribed under clause (a) of sub-section (3) of section 7 and for this purpose he shall be deemed to be a manufacturer.
6. Who is required to deduct Tax at source under HVAT?
Every contractee shall deduct from the payment made to the contractor, tax @4% of the amount paid in any manner. The tax so deducted will be deposited with the government with in 15 days from the end of the month and TDS certificate will be issued to contractor.
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