Labour Contract FOR construction of building

Sir,

I am working as an accountant having Business of Builders and Developers.

Now my querry is as follows:

we are constructing new project having total 4 building in the name of one project.

for all the building construction we have appointed 1 Labour Contractor.

We have made an arrangement for contract with the said Labour Contractor as Labour with Material.

out of the same contract it was decided that upto Rs. 250 per bag of Cement and Rs, 35 per kg. of iron & steel has be bourn by Labour contractor, The said material purchased by Developers and adjusting Labour Bill.

Next, While Labour Contractor deducting Cement and Steel in proportionate rate in the Labour bill, and

Sand, Metal, Bricks not deducting in the Bill.

At present we are deducting TDS from him @ 2% upon Total payment made to him during one  Financial year.

Now my question is if Contractor is giving bill after deducitng part material amount only then how we will deduct TDS there on ? and what will be liability on us as well as on Contractor side

 Also please clarify whether this implies Works Contract also?

Thanks I will need the urgent reply for the same. My Email ID is manoj.asher00 @ gmail.com