CHAPTER VII

PAYMENT OF TAX AND RECOVERY

31. Deduction of tax at source:-

(1) (a) Subject to the provisions contained in clause (b), theCommissioner may, by a *notification in the Official Gazette, subject to such conditions and restrictions as may be specified in the notification, require any dealer or person or class of dealers or persons (hereinafter in this section referred to as “the employer.”) to deduct the tax or such amount of tax as may be specified in the notification, payable on the purchases other than the purchases to which section 8 applies, effected by them in the period or periods specified in the said notification.

Explanation.- For the purposes of this section, the tax payable on purchases shall mean the sum collected separately from the said employer by way of sales tax by the supplier on the corresponding supplies effected by him in the said period or periods and the deduction is to be made from the sums payable to the supplier on account of the said supply.

(b) (i) The Commissioner may by a like *notification require any class of employers to deduct tax or such amount of tax as may be specified from and out of the amount payable 1[(excluding the amount, if any, separately charged as tax or service tax levied by the Government of India, by the contractor)] by such employer to a dealer to whom a works contract has been awarded, towards execution of the said works contract:

Provided that, the quantum of such deduction shall not exceed the quantum of tax payable towards such works contract:

Provided further that, 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:

Provided also that, no deduction as provided under this clause shall be made in respect of any sale or purchase to which section 8 applies.

Explanation.-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 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.

(ii) Where on an application being made by any contractor in this behalf, the Commissioner is satisfied that the contract under reference is not a works contract and therefore justifies no deduction at all, he shall grant him such certificate :

Provided that, the Commissioner may, after giving the contractor a reasonable opportunity of being heard, reject such application or cancel or modify such certificate :

Provided further that, nothing in the said certificate shall affect the tax liability of the contractor.

(iii) Where such certificate is produced by the contractor, before the employer, the employer shall, unless the certificate is cancelled or modified by the Commissioner, make deduction of tax in accordance with the said certificate.  In the event of such certificate being cancelled or modified as provided, the employer shall make the deductions accordingly.

(2) For the purpose of this section, where any amount of tax referred to in sub-section (1) is credited to any account whether called the “suspense account” or by any other name, in the books of accounts of the employer, such crediting shall be deemed to be credit of such tax to the account of the employer and the provisions of this Act shall apply accordingly.

(3) * * * deleted w.e.f. 20-6-2006  

(4) Any amount or any sum deducted on or after the 1st April 2016 in accordance with the provisions of this section and paid to the State Government may be,—
(i) claimed as a payment of tax by the person making the said supply to the employer, or
(ii) transferred as a credit to the sub-contractor in the prescribed manner, if sub-contract has been awarded, in respect of the concerned contract.
The principal contractor shall be eligible to claim credit of such amount or sum, in the period in which the certificate for payment is furnished to him by the person deducting tax. The sub-contractor may claim the credit of such amount in the period in which the principal contractor has transferred the credit of such amount to him or in any subsequent period.

(5) Any employer deducting any sum in accordance with this section, shall pay within the prescribed time, the sum so deducted to the credit of the State Government.  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.

(6) The power to recover tax by deduction at source shall be without prejudice to any other mode of recovery.

(7) Every person deducting tax in accordance with the provisions of this section shall within such periods as may be prescribed, furnish to the person to whose account the credit of the tax is to be given under this section, a certificate in the prescribed form.

(8) Every employer liable to deduct tax at source shall in the prescribed manner apply to the commissioner for allotment of a sales tax deduction account number. The number shall be mentioned in documents, statements and returns to be filed by him:

Provided that, if an employer is registered under the Act, then he shsll not be required to apply under this sub-sction, (3) in sub-section (9), after the words " in respect of the said supply" the following portion shall be added, namely:- and not transferred to the sub-contractor. Similarly, the sub-contractor shall not be called upon to pay tax himself to the extent to which the tax has been transferred to him.

(9) Where tax is deductible at source by any employer, the person making the said supply shall not be called upon to pay tax himself to the extent to which the tax has been deducted in respect of the said supply.

(10) The employer, who has deducted and paid any amount in any period under the provisions of this section, shall in the prescribed form and manner by such date as may be prescribed, file return for the said period.

(11) The employer who has furnished a return under this section, discovers any omission or incorrect statement therein, may furnish a revised return in respect of the period covered by the said return on or before the expiry of a period of nine months from the end of the year to which the return relates.

(12) Where the employer has failed to apply for the sales tax deduction account number, as required under sub-section (8), then the Commissioner may, after giving the employer a reasonable opportunity of being heard, impose upon him, by way of penalty, a sum upto the amount of tax deductible by the employer, for the period during which he had failed to obtain the sales tax deduction account number.

(13) Where the employer has failed to file the return as provided under subsection (10) within the prescribed time, the Commissioner shall impose on him a sum upto rupees five thousand by way of penalty.