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Reduction of Set-off for Dealers opting for "Composition Scheme for Works Contract" under Rule 53(4), Works Contract Regular Scheme of Sales-tax under MVAT Act.

Composition scheme for Works Contractor in Maharashtra is given in Section 42(3) of Maharashtra Value Added Tax Act, 2012 under MVAT Act, Sec. 42(3)
·         Where a dealer is liable to pay tax on the sales effected by way of transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract,

·         he may subject to such restrictions and conditions as may be prescribed, in lieu of the amount of tax payable by him under this Act, whether in respect of the entire turnover of sales effected by way of works contract or in respect of any portion of the turnover corresponding to individual works contract,

·         pay lump-sum by way of composition,—
(a) equal to five per cent. of the total contract value of the works contract in the case of a construction contract, and

(b) eight per cent. of the total contract value of the works contract in any other case, after deducting from the total contract value of the works contract, the amount payable towards sub-contract involving goods to a registered sub-contractor.
Construction Contract shall mean construction contract as may be notified by the State Government in the Official Gazette, from time to time, and
“the amount payable towards sub-contract involving goods" means the aggregate value of the goods on which tax is paid and the quantum of said tax paid by the sub- contractor or the subcontract value on which tax by way of composition is paid by the sub-contractor, as the case may be.
Reduction in set-off.- The set-off available for dealer carrying on Works Contract and opting for "Composition Scheme for Works Contract" u/s : 42(2) of MVAT Act shall be reduced as under:
a.    Set-off on Purchases of Capital Goods by Work Contractor : Reduced by Nil
b.    Set off on any goods not transferred in works Contract : Reduced By Nil
c.    In case of Property in Goods transferred in Works Contract : Reduction as under
d.     
Sr. No.
Rate of MVAT under Composition Scheme
Reduction in Set off
1.
MVAT payable @ 8% of Contract Value
36% of set-off available in goods covered in (c) above i.e. 64% set-off will be allowed
2.
MVAT payable @ 5% of Contract Value (incase of Construction Contracts after 20-6-2006)
4% of set-off  available on goods covered in (c) above.
3.
MVAT payable @ 1% of Contract Value (For Agreement Registered on or after 1st April 2010)
No Setoff of Input VAT

Where the dealer (principal dealer) has opted for composition scheme and awarded part of the contract to sub-contractor, then such dealer will also have to calculated set-off as per this rule.

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