Saawariya & Co.

26 : Deduction and payment of tax in certain cases M.P. ACT

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.

(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 ]

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 subcontractor

by a contractor where the contractor has opted for composition under section 11-A.

(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.

(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 subsection

(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 subsection

(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.

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