VAT deduction at source in respect of works contract- advisory to Govt. deptt.
All the government departments have been advised to deduct tax at the source and deposit the same with the Trade & Taxes Department. This Circular has been issued considering the fact that some of the Government Departments are carrying out works contract activities by assigning various departmental contracts to the contractors without deducting any tax at source. Further, failure to deduct and remit would tantamount to non-compliance of the law attracting penal provisions.
It may be noted that presently tax is deducted at the rate of 4% in case of registered dealer and 6% in case the contractor is unregistered. The same is to be deposited within 15 days following the month in which such deduction is made.