we are approached by a client who is engaged in fixing alumium frames and windows for new construction flats. he is engaged by the builder as sub contractor. He considers himself as a works contractor (may be told by some vat consultant). But in his bills to the builder he is charging only serice tax on full amount. Now the issue is that he was filing form 231 return and was paying tax on 20% of the value of the contract amount under MVAT.
Our view is (1) if he is a works contractor he should be filing form233 and even the deduction available to him will be either 30% as civil contractor or 20% as other works contract. So he should be paying VAT on 70% or 80% of the contract value. (2) if he is only a labour contractor, which appears to be true in his case, he need not file any return under MVAT or file NIL returns. He is already filing his service tax returns also.
since he is filing form 231 on the basis of advice from a consultant, we wish to have clarity before advising the client.
Kindly share your views on this. |
