Scope & Ambit of Works Contract

To get answer for the query raised by the author, we need to understand the common principle of works contract service as defined by various States. The common thread is Central Sales Tax Act, 1956 which says works contract is a contract for carrying out any work which includes assembling, construction, building, altering, manufacturing, processing, fabricating, erection, installation, fitting out, improvement, modification, repair or commissioning of any movable or immovable property. Since Xerox machine is movable goods the transfer of property in goods is covered under works contract service where-as the service of Doctor to Patient does not fall under any of the above defined activity of works contract service even though there is a transfer of property in goods

Similarly under service tax law there is a set of activities i.e. carrying out constructin, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, alteration of any movable or immovable property etc... as per clause 54 of Sec.65B of Finance Act

Mere transfer of property in goods is not covered under works contract service - it should be for the activity defined

Posted by
G. Mani

govindan_mani govindan_mani 26/08/2014

 

works contract is an inclusive definition like manufacture in central excise. works contract itself is not defined. it only said it includes.. that is why xerox paper (not xerox machine) and photograph has been held as works contract. In xerox, VAT is payable on paper, toner etc. I have cited the case law in the article. Photograph was held as not works contract in Rainbow Colour Lab by SC but the same has been negated by larger bench of SC in BSNL and ACC Cement, which held it to be works contract.hence it warrants a relook

26/08/2014