What is work contract?
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Answer / abhivirthi tax and industrial
A person gives white cloth in bulk; say 1000 meters (for 500
shirts) for stitching purpose. The tailor takes the sizes
of shirts and stitches and delivers the same to the
customer. This is called pure labour job.
The same person gives the same white cloth and sizes
of shirts for stitching purpose. The customer orders the
tailor to deliver the shirts in various colours after dying.
The tailor after receiving the white cloth handed over the
same to a skilled person for dyeing purpose. The person who
received the white cloth converted the white cloth into
colour cloth and then handed over to the tailor and receives
certain amount.
If the tailor supplies the white cloth and raw
materials for dyeing and the skilled person completes the
dyeing work only with the materials supplied by the tailor,
such kind of works is called pure labour job.
If the tailor supplies the white cloth only and the
other raw materials are purchased by the skilled person at
his own sources and completes the dyeing work and handed
over the same to the tailor, transfer of raw materials like
Dyes etc., are involved and such kind of work is called
works contract. The skilled person charges on contract
basis for the works done by him i.e. dyeing of white cloth
into colour cloth by utilising the materials purchased by
him and such completion of work is called works contract.
In simple, gray cloth rolls were divided into 5.5
meters, or 6.00 meters and dyed and converted into printed
sarees or bedspreads or other materials by a person
utilizing the dyes and chemicals purchased by him is called
works contract. If the gray cloth and other materials are
supplied by the same party, and if there is no transfer of
property involved such kind of work is called pure labour
job.
Reply From:
ABHIVIRTHI Tax and Industrial Consultancy
R.R.JAGADEESAN
VAT PRACTITIONER AND INDUSTRIAL CONSULTANT
H-63, Palaami Enclave, New Natham Road,
Madurai-625014.
Cell: 9994990599
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Answer / rajesh kumar sahoo
The works contracts are not normal sales. In the normal sale there is a transfer of property in definite or ascertained goods. The goods remain same before and after the delivery of the goods. However, in works contracts it does not happen. The goods before the delivery and after the execution of works contracts are different, many times in different form also. For example, at the site of construction of a building, before the Construction (works contract) commences, the goods like cement, steel, sand etc. are lying but after the Construction a building (immovable goods) comes to an existence. This is the difference between the ` Normal” sale and the “deemed sale” in the indivisible works contract .
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