18      Tax deduction at source          

          1.       a)      Where a works contract is awarded to a VAT dealer by any contractee other than Government or local authority, the tax shall be deducted from the payment made to the contractor at the rate of * (two percent) four percent of the amount paid or payable to the contractor at the time of each payment as specified in sub-section (4) of Section 22;

                            *(substituted by the G.O.Ms.nO.1614, Revenue (CT.II), 31^st August, and 2005 w.e.f 31-8-2005)

                   b)      The contractee shall complete Form VAT 501A supplied by the contractor indicating the TIN, the amount of tax deducted and details of the related contract. The Contractor, VAT dealer shall send the Form VAT 501A to the authority prescribed together with proof of payment within fifteen days from the date of each payment made to the contractor.

                   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) ;