Saturday, February 18, 2012

Valuation of works contract under Delhi VAT (DVAT)

Valuation of works contract under DVAT   
 
Option 1*: When Bifurcation ascertainable from Books
 
Value at the time of transfer of property in goods (whether as goods or in some other form) involved in the execution of work contract and shall exclude –
 
a. the charges towards “labour, services and other like charges**”; and
 
b. the charges towards cost of land, if any, in civil works contracts
 
*subject to the dealers maintaining proper records such as invoice, voucher, challan or any other document evidencing payment of referred charges to the satisfaction of the Commissioner.
 
** Separately defined in Rule 3 of DVAT Rules, 2005 as:
 
a. labour charges for execution of works;
 
b. charges for planning and architects fees;
 
c. charges for obtaining on hire or otherwise machinery and tools used for the execution of the works contract; d. cost of consumables such as water, electricity, fuel, etc. used in the execution of the works contract the property in which is not transferred in the course of execution of a works contract;
 
e. cost of establishment of the contractor including cost of marketing, finance expenses and securities deposits to the extent it is relatable to supply of labour and services;
 
f. other similar expenses relatable to supply of labour and services;
 
g. profits earned by the contractor to the extent it is relatable to supply of labour and services subject to furnishing of a profit and loss account of the works sites:


Option – 2: When Bifurcation not ascertainable from Books

Value at the time of transfer of property in goods (whether as goods or in some other form) involved in the execution of work contract and shall exclude –
 
a. the charges towards “labour, services and other like charges^”; and
 
b. the charges towards cost of land, if any, in civil works contracts
 
^ the amount of such charges shall be calculated at the percentages specified in rule 3 of Dvat Rules, 2005.The general rate being 20% of the total contract value.

CA Ankit Gulgulia

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