Deduction and payment of tax in certain cases

26 : Deduction and payment of tax in certain cases (1) Any person responsible for making payment of any sum to any dealer as a consideration for the sale or supply of any goods in pursuance of a contract between such dealer and the Central Government or a State Government (hereinafter referred to in this Section as the purchaser), shall before crediting such sum to the account of the dealer or before payment thereof in cash or by issue of a cheque or draft or by any other mode, deduct an amount equal to the amount payable by the purchaser to the dealer by way of tax, 4whether or not such amount as is shown by the dealer separately in his bill4, where the total amount of the bill exceeds rupees five thousand and shall pay it to the State Government in such manner as may be prescribed. 3/4 (2) Notwithstanding anything contained in any other provision of this Act, any person letting out a works contract of value exceeding three lac rupees to a contractor involving sale of any goods in the course of execution thereof by the contractor shall before making the payment of any amount towards the value of such contract to him, deduct at the rate of two percent or the prescribed rate for lump sum, in respect of a contractor who has opted for composition under section 11A , an amount towards the tax payable by the contractor under this Act : 3/4 [ Provided that if the value of labour involved in the contract is more than fifty percent of the contract, the deduction towards the tax payable shall be made at the rate of one percent. 3/4 -- 1.4.2006 to 31.3.2007 ] 6 Provided that if the value of labour involved in the contract is more than fifty percent of the contract value and the contractor has not opted for composition under section 11-A, the deduction towards the tax payable shall be made at the rate of one percent. Provided further that no deduction shall be made in respect of any sale or purchase taking place outside the State of Madhya Pradesh or in the course of inter-State trade or commerce or in the course of import of goods into the territory of India. Provided also that no deduction shall be made from any payment made to any sub- contractor by a contractor where the contractor has opted for composition under section 11- A. 6 (3) On deduction of the amount under sub-section (1), or sub-section (2) the person making such deduction shall issue to the dealer or the contractor, as the case may be, a certificate therefor 6 in the prescribed form which is obtained in the prescribed manner6 and shall deposit such amount in to the Government Treasury in such manner and within such period as may be prescribed. (4) Any person making the payment under sub-section (1) or sub-section (2) shall be deemed to have made the payment on the authority and on behalf of the dealer or the contractor and the receipt for such payment shall constitute a good and sufficient discharge of the liability of the purchaser to the dealer or the contractor to the extent of the amount specified in the receipt. 43 (5) Where any payment under sub-section (1) or sub-section (2) is made by a purchaser or the person letting out the contract, on behalf of the dealer or the contractor such payment shall constitute a good and sufficient discharge of the liability of the dealer or the contractor to pay tax in respect of such transaction and the amount so paid shall be adjusted by him in such manner as may be prescribed. (6) Where a person contravenes the provisions of sub-section (1), sub-section (2), or sub- section (3) the Commissioner may impose upon such person by way of penalty an amount which shall be 2 percent per month of the amount required to be deducted under sub- section (1) or sub-section (2). subject to a maximum of 25 percent of such amount. (7) Any sum which a person is required to deduct under sub-section (1) or sub-section (2) or the penalty imposed under sub-section (6) if it remains unpaid, be recoverable as an arrear of land revenue. (8) Every person making a deduction under sub-section (1) or sub section (2) shall furnish a statement in such form, to such authority, in such manner and within such time as may be prescribed. Explanation – For the purpose of sub-section (2), "person" means – (i) Department of the Central or the State Government, (ii) Public Sector Undertaking, (iii)Municipality and Municipal Corporation, (iv) Authority constituted under any law for the time being in force, (v) Public Limited company. 10 26-A. Deduction of tax at source in respect of certain goods (1) Notwithstanding anything contained in any other provision of this Act, every registered dealer (the purchaser) who purchases such goods as may be notified* by the State Government for sale or consumption from another registered dealer, shall deduct input tax from the amount payable by him to the selling registered dealer (the seller) for such purchase. (2) On deduction of the amount under sub-section (1), the purchaser shall issue a certificate of deduction of tax to the seller in such form and manner as may be prescribed. (3) The certificate of deduction of tax shall constitute a good and sufficient discharge of the liability of the seller to pay tax in respect of such transaction and the amount so deducted shall be adjusted by him in such manner as may be prescribed and this certificate shall not be used for discharge of the liability of any other transaction. (4) No input tax rebate shall be claimed or be allowed in respect of the goods notified under sub-section (1). (5) In the event of disposal of,- (a) (i) goods purchased; or (ii) the goods specified in Schedule II, manufactured out of the goods purchased, otherwise than by way of sale within the State of Madhya Pradesh or in the course of inter-state trade or commerce or in the course of export out of the territory of India; or 44 (b) the goods specified in Schedule I, manufactured out of the goods purchased, otherwise than by way of sale in the course of export out of the territory of India, the purchaser shall deposit the amount at the rate of 4 percent of the purchase price, net of input tax, of the goods purchased. (6) The provisions of Sections 18, 20, 21, 24, 25 and 39 shall mutatis mutandis apply to the amount payable under sub-section (5). (7) The purchaser shall retain as refund the amount deducted under sub-section (1) which is equal to the amount of input tax rebate notionally admissible under section 14 on such purchases. 10 6 27.saving for person responsible for deduction of tax at source Notwithstanding anything contained in Section 26 no deduction or deduction at a lower rate at source towards tax payable shall be made under the provisions of the said section from any consideration payable to a dealer or person, if such dealer or person furnishes to the person responsible for paying any amount in respect of the sale or supply or contract referred to in the said section, a certificate in writing in such form issued in such manner and by such authority as may be prescribed. 6