Chapter II Chapter II

Incidence and Levy of Tax

Incidence of Tax.—(1) Every dealer whose turnover of sales during the year immediately preceding the commencement of this Act exceeds the taxable quantum, shall be liable to pay tax under this Act on his taxable turnover of sales effected by him on or after such commencement.

1. (2) Every dealer to whom sub-section
2. (1) does not apply, shall, with effect from the date immediately following the day on which his turnover of all sales calculated from the commencement of any year first exceeds, within such year, the taxable quantum, be liable to pay tax under this Act on all sales effected by him after that date.
3. (3) Every dealer who becomes liable to pay tax under this Act, shall continue to be so liable until his registration certificate is duly cancelled, and upon such cancellation his liability to pay tax, other than tax already levied or leviable, shall, until his turnover of all sales again first exceeds the limit specified in sub-section (1), cease: Provided that where any dealer has become liable to pay tax under this Act, and up to the time when his turnover of all sales does not exceed such limit, no tax shall be payable.
4. (4) For the purpose of this Act "taxable quantum" means five lakh rupees.

Liability of a dealer.—Subject to the provisions of this Act and the rules made thereunder, a tax shall be levied on the taxable turnover involving transfer of property in goods in the execution of works contract commenced or continued for execution on or after the commencement of this Act, whether such contract was entered into prior or subsequent to such commencement.

Levy of Tax.—(1) Same as provided in sub-section (2), there shall be levied a tax on the taxable turnover of sales involving transfer of property in goods in the execution of a works contract relating to such works contracts as may be prescribed, at the rate of four per cent of such turnover.

1. (2) No tax shall be levied on the turnover of sales of transfer of property in goods, specified in the execution of works contract, if such goods are transferred from the contractor to the contractee in the same form in which they were purchased by the contractor.
2. (3) No such tax shall be leviable on turnover of sales for the transfer of property in goods (whether as goods or in some other form) in pursuance of a works contract whether wholly or partly subject to the production of proof, as may be prescribed, that such sub-contractor is a registered dealer liable to tax and that the turnover of such amount is included in the return of the contractor or the sub-contractor.
3. (4) For the purpose of this Act "taxable quantum" means five lakh rupees.

Composition of Tax.—(1) Subject to such conditions as may be prescribed, the Commissioner may, if a dealer so elects, accept in lieu of the amount of tax payable by him under this Act, by way of composition, a lump sum amount at the rate of four per cent of his total amount of valuable consideration paid or payable to him for the execution of the works contract whether wholly or partly under the terms of the contract.

1. (2) Where in respect of sale price referable to any works contract whether involving both transfer of property in goods and labour and service, or involves only labour and service but the dealer is unable to produce accounts to the satisfaction of the assessing authority or, as the case may be, he does not maintain proper accounts of the actual value of labour and services, he shall, after giving the dealer a reasonable opportunity of being heard, calculate the lump sum amount at such rate as may be appropriate: Provided that where any deduction has been made by a contractor from the payments made to his sub-contractor in accordance with sub-section
2. (3) of section 7, the amounts so deducted shall be deducted from the amount on which composition is to be made under this sub-section.

"6A Collection of tax by dealer.-A dealer registered under this Act may collect tax on the works contract executed by him in Delhi in accordance with the provisions of this Act at the rate not exceeding the rates specified under section 5 or section 6, as the case may be, of this Act."

1. (1) Every person, other than an individual and Hindu undivided family responsible for making payment to any dealer (hereinafter referred to as "the contractee") for discharge of any liability on account of valuable consideration payable for the transfer of property in goods (whether as goods or in some other form) in pursuance of a contract shall at the time of credit of such sum to the account of the contractor or at the time of making such payment to the contractor either in cash or in any other manner, deduct an amount equal to two percent from such sum towards the tax payable under this Act.
2. (2) Without prejudice to the provisions of sub-section (7), if any person fails to make deduction, or, after deducting, fails to deposit the amount so deducted, he shall be liable to pay simple interest at the rate of two per cent per month on the amount deductable under this section but not so deducted and, if deducted, not so deposited from the date on which such amount was deductable to the date on which such payment is actually deposited.
3. (3) Any contractor responsible for making any payment or discharge of any liability to any sub-contractor, in pursuance of a contract with the sub-contractor, for the transfer of property in goods (whether as goods or in some other form) involved in the execution, whether wholly or in part of works contract undertaken by the contractor, shall at the time of such payment or discharge, in cash or by cheque or draft or any other mode, deduct an amount equal to two percent of such payment or discharge, purporting to be part or full amount of the tax payable under this Act: Provided that no deduction under this sub-section shall be made on the amount on which deduction has been made under sub-section (1), or sub-section
4. (3) subject to production of a certificate as prescribed in sub-section
5. (5) of this section. (3A)
   • (i) A contractor with respect to the contracts other than the private contracts, may make an application to the concerned assessing authority authorising him to deduct tax at the rate of two percent towards the tax payable under this Act instead of two percent as provided in sub-section
6. (1) of this section.
   • (ii) Where an application is made by the contractor under clause
   • (i) of this sub-section, and a copy thereof is forwarded to the appropriate assessing authority by the contractor, the contractor shall be deemed to have opted for composition under section 6 of this Act.
   • (iii) A contractor, to whom the provision of clause
   • (i) of this sub-section applies, may be assessed in a summary manner on the basis of the annual return filed by him without being called upon to produce the books of accounts and other records relating to his business.
7. (4) The amount deducted under sub-section
8. (1) or sub-section
9. (3) shall be deposited into the government treasury by the person making such deduction within fifteen days following the month in which such deduction is made in the manner as may be prescribed.
10. (5) Any person making such deduction under sub-section
11. (1) or sub-section
12. (3) shall, at the time of making such payment or discharge, furnish to the dealer or contractor from whose bills or invoices such deduction is made a certificate in such form as may be prescribed in respect of the amount so deducted, the rate at which it has been deducted and the relevant assessment year.
13. (6) Any deduction made in accordance with the provisions of this section and credited into the government treasury shall be treated as payment of tax on behalf of the person from whose bills or invoices the deduction has been made and credit shall be given to him for the amount so deducted on the production of the certificate, referred to in sub-section
14. (5) above, in the assessment made for the relevant assessment year: Provided further that where any deduction has been made by a contractor from the payments made to his sub-contractor in accordance with sub-section
15. (3) the amounts of such payments shall be deducted from the amount on which tax deduction is to be made under this sub-section by the contractee at the rate as prescribed in sub-subsection
16. (1) of section 7: Provided that nothing contained in this section shall apply to works contract executed in the course of inter-state trade or commerce or outside the State, or in the course of import or export out of India.
17. (7) If any person, as is referred to in sub-section
18. (1) or sub-section
19. (2) or sub-section
20. (3) or sub-section (3A), fails to make the deduction, or, after deducting, fails to deposit the amount so deducted as required by sub-section (4), the assessing authority may, after giving to such person an opportunity of being heard, by order in writing, direct that such person shall pay, by way of penalty, a sum not exceeding twice the amount deductible under this section besides tax deductible but, not so deducted and, if deducted, not so deposited into the Government treasury.
21. (8) (Omitted / Not applicable)
22. (9) Where the amount has not been deposited after deduction, such amount together with interest and penalty referred to in sub-section
23. (7) and sub-section
24. (8) shall be a charge upon all the assets of the person concerned and recoverable as arrears of land revenue.
25. (10) Every person responsible for making deduction of tax under this section shall apply to the Commissioner for a "Tax Deduction Account Number" within the prescribed time and in the prescribed form and shall also furnish an annual return in the prescribed form within the prescribed period.