26 February 2012

TDS on Works Contract In Maharashtra

Section 31 of Maharashtra Value Added Tax Act, 2002 (MVAT, 2002) lays provision for Deduction of Tax At Source (TDS under MVAT) on payments made for transaction covered under MVAT Act.

u/s.31(1) Commissioner is empowered to issue notification requiring dealers (registered or not registered) or any person to deduction tax or such amount of tax as specified in the notification. Tax is to deducted on such purchase as may be notified. Tax cannot be deducted on purchase exempted from MVAT u/s.8 of MVAT Act.

u/s.31(2) Commissioner is empowered to issue notification requiring any class of employer (registered or not registered under MVAT Act) to deduct tax (TDS under MVAT) on amount paid to dealer to whom the employer has awarded works contract and payment is made towards execution of works contract.

  • The tax is to be deducted on amount paid after excluding amount of tax or service tax levied by the Government of India on such contract by the contractor.
  • Quantum of such deduction shall not exceed the quantum of tax payable towards such works contract.
  • No deduction shall be made from any payment made to any sub-contractor by a principal contractor where the principal contractor has assigned the execution of any works contract, in whole or in part, to the said sub-contractor.
  • no deduction shall be made in respect of any sale or purchase to which section 8 applies. Sec.8 applies to sale and purchase outside the state, or in course of import or export into or out of territory of India,  or in course of interstate trade, or sale to unit in Special Economic Zone, Software Technology Park, Electronic Hardware Technology Park, or Certified Export Oriented Unit, etc.
  • Where any payment in the nature of an advance payment towards the execution of a works contract is made by an employer to a dealer/contractor and such amount is adjustable against the total contract value payable to the said dealer, then, for the purposes of this clause, the advance payment shall be deemed to be the amount paid towards the execution of the works contract only as and when such advance payment is adjusted, in part or otherwise, against the total amount payable towards the works contract.
  • The Employer who is required to deduct tax under clause (b) of sub-section (1)of section 31 shall within 21 days from the expiry of the month during which tax is so  required to be deducted, remit the full amount of such tax due and deductible in challan in Form 210 into the Government Treasury irrespective of the actual amount of tax deducted by him, from such dealer. 
  • If the Employer does not deduct or after deducting fails to pay the tax as required by this section, he shall be deemed not to have paid the tax within the time he is required by or under the provisions of this Act to pay it and all the provisions of this Act including the provisions relating to interest shall apply mutatis mutandis to such unpaid tax.
  • The employer required to remit tax, shall furnish a certificate in Form 402 in respect of the amount so remitted immediately after the deduction is made, to the dealer in respect of whom such deduction is made. 
  • Any employer issuing a certificate in Form 402 shall maintain for each year a separate account in Form 404 showing the amount of tax deducted, certificate of tax deduction issued, and the particulars of remittances made to the Government treasury and shall file a return in Form 405 with the Joint Commissioner of Sales Tax (Returns), in Mumbai or as the case may be the Joint Commissioner of Sales Tax (VAT Administration) in the rest of the State of Maharashtra in whose jurisdiction the place of business of the employer is situated within three months of the end of the year to which the return relates.

    Notification has been issued by Commissioner (No.JC(HQ)1/VAT/2005/97 dt.29-8-2005) requiring 9 Classes of Employers to deduct tax on payment made for Works Contract to Contractors. Tax is to be deducted only when  aggregate of the amounts payable to a dealer by such employer is less than rupees 5 Lakh during any year. However in case of Co-operative Housing Society which has awarded contracts of value aggregating to rupees 10 lakh or more in the previous year or as the case may be, in the current year is also required to deduct tax on such payments.
    Amount to be deducted: Two percent of the amount payable as above in the case of a contractor who is a registered dealer and four percent in any other case.