18 Tax deduction at source

1.(a) The tax deduction at source shall be in general at the rate of either 5% or 2.5% as prescribed in sub clause (i) or (ii) respectively of clause (b) below and it shall be based on adoption of 70% of the total consideration payable for the execution of works contract as taxable turnover unless an application has been made by the dealer to the Assistant Commissioner or Commercial Tax Officer concerned for specific quantification or provisional assessment to determine the correct amount of taxable turnover for a specific contract or agreement.,

(b) The rate of tax for the purpose of tax deduction at source shall be as prescribed below:-

(bb) In case of works, where tax is provided at the rate prescribed under section 22(3-A) of the Act over and above the estimated value of the contract and executed for the Government or the Local Authorities, the VAT dealer shall obtain Form 501 with unique ID from the Assistant Commissioner Commercial Tax Officer, concerned, and supply the same to the Government contractee. The contractee shall complete Form 501, supplied by the contractor, indicating the TIN of the contractor, the amount of tax deducted at source and the details of the related contract and supply the same to the contractor within fifteen days from the date of each payment.

(bc) In case of works, other than those falling under clause (bb) of this rule, the VAT dealer shall obtain Form 501A with unique ID from the Assistant Commissioner / Commercial Tax Officer concerned, and supply the same to the contractee. The contractee shall complete Form 501A, supplied by the contractor, indicating the TIN of the contractor, the amount of tax deducted at source and the details of the related contract and supply the same to the contractor within fifteen days from the date of each payment.

(bd) The contractor shall submit Form VAT 501 or 501A, as the case may be, duly certified by the contractee together with Form VAT 200 by 20th of the month, following the month in which the payment was received;

(c) Where the VAT dealer has opted to pay tax by way of composition, he shall declare on the Form VAT 200 the value of the amount received and the tax due. The amount of tax deducted by the Contractee should be declared on Form VAT 501A and any balance of tax payable shall be paid by the contractor. In the case where the amount of TDS exceeds the liability the prescribed authority shall issue a notification for a credit to be claimed on the Form VAT 200.

(d) Where the VAT dealer pays tax on the value of the goods incorporated in the contract he shall declare on Form VAT 200 the value of the goods and tax due on the goods incorporated in the contract. The appropriate adjustment for the tax deducted by the Contractee shall be carried out as in clause (c);

(e) Where any tax is deducted under sub section (3) in respect of any dealer executing works contracts and work in whole or any part of such work is awarded to a sub contractor by him, the tax proportionate to the amounts paid as consideration to the subcontractor out of the tax deducted by the contractee shall be transferred to the subcontractor by issuing Form 501B to the subcontractor. The sub contractor shall file Form 501B to the authority prescribed along with the return in Form VAT 200;”

(f) The application to be made for quantification or provisional assessment to determine the taxable turnover shall be in form 501 C and the order to be passed by Assistant Commissioner or the Commercial Tax Officer concerned shall be in Form 501 D. The order shall be deemed to have been passed by accepting the claim at the end of sixty days from the date of receipt of Form 501 C.2. Any amount or any sum deducted in accordance with the provisions of sub section (3) of Section 22 and paid to the State Government shall be treated as a payment of tax on behalf of the dealer executing the works contract and credit shall be given to the said dealer for the period for which amount was so deducted on production of the certificate furnished by the contractee under this rule.

3. (a) Where tax is collectable at source as per sub-section (3A) of section 22 of the Act, tax @ 5% on the total value of the contract shall be collected and remitted by the contractee within fifteen days from the date of each payment made to the contractor.

(b) Where tax, collected at source as above, is in excess of the liability of the contractor, who have not opted for payment of tax by way of composition, such amount of tax, collected in excess of the liability shall be deemed to have been payable by the contractor and shall be liable to be forfeited.

4. Where the contractee fails to remit such tax deducted at source within fifteen days of the date of payment to the contactor, the person, authorized to make payment and to deduct tax, shall be liable to pay interest for the delayed payment as may be applicable under the Act.