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Tds on vat portion

Deepthi Srivastava (Chartered Accountant) (81 Points)

31 October 2012

Hello,

I need to know if TDS can be deducted on VAT portion as well.

We work for the Govt organisations (defence). We are required to raise 2 bills.. one for the material amount and second for the VAT amount. The VAT amount is paid on actual basis i.e. it a reimbursement after the VAT is actually paid.
Our customer is deducting TDS on Both the bills under sec 194C.

I do not understand why TDS is being deducted on VAT portion. We only collect and pay it to the government. Where is income portion in this? Plus in our case, we pay first and then get reimbursed for VAT. I tried looking for answers in the APVAT Act, but couldn't find any solution.

Please reply with relevant refernce to a section/notification.

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4 Replies

Ankit a shah (Internal auditer) (92 Points)
Replied 31 October 2012

As per my knowlage if you are contractor tha tds deducted in your total bill and at end of year u that company give you form16A and that deduction u can set off

Look whtaever you amount you raise it your income

About vat it is your otu put vat that you can set off with your input

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Sumit Grover (Chartered Accountant ) (3652 Points)
Replied 31 October 2012

Refer Section 22(4) of APVAT Act

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Deepthi Srivastava (Chartered Accountant) (81 Points)
Replied 31 October 2012

Thats ok Ankit. I understand that we can take it as credit and the whole concept of TDS and VAT credit. My quesion is different here. I would understand the deduction of TDS on if we raise a single bill.

As far as I know, they are going by the TDS provisions which says deduction on amount paid- irrespective of what is the amount. Even a 2% here actually is a huge amount in our case.

Looking for more answers with references to sections/notifications.

Deepthi Srivastava (Chartered Accountant) (81 Points)
Replied 31 October 2012

Sumit,

Looks good to me.. Thanks. Effort apprecited.

22 (4) Any authority or person deducting any sum in accordance with the sub-section (3) or sub section (3-A) or sub-section (3-B) above shall pay within the prescribed time, the sum so deducted to the credit of the State Government. If the authority or the person does not deduct or after deducting fails to pay 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 original sub-section “(4) In case of (a VAT dealer) a dealer executing works contract (for a company) for Central Government or a Company or a statutory body or an undertaking or an institution other than Government or local authority irrespective of the quantum of value of the contract or for any other dealer or a firm where the value of the contract exceeds Rs.10,00,000/-(Rupees ten lakhs only), a tax (at the rate of 2%) at the rate of four percent (4%) shall be deducted from the amount payable to him and such contractee deducting tax at source shall remit such amount in the manner as may be prescribed.(The words “for a company” and “at the rate of 2%” are substituted by the Act No 23 of 2005 dated 26^th Oct 2005 w.e.f 29-8-2005) (The words “a VAT dealer” substituted by the Act No 10 of 2006 dated 4^th Jan 2006 w.e.f 24-11-2005)” was substituted by the Act No 5 of 2007 dated 22-01-2007 w.e.f 01-09-2006.)

(The words in italics i.e sub-section (3) or sub section (3-A) or sub-section (3-B) are substituted by Act No 4 of 2009 dated 03-03-2009 w.e.f 01-05-2009)