Punjab raises TDS rate for contractors to 4 pc

The Punjab government has doubled the rate of Tax Deducted at Source (TDS) for building contractors to four per cent from January 9 this year to boost state revenues and stimulate growth in the local industry.

"Now all the contractees, whether it is private or government organization will be required to deduct TDS at a rate of 4 per cent, under the Punjab Value Added Tax, 2005, from amount payable to a contractor," Punjab Excise and Taxation Department Commissioner A Venu Prasad said on Friday.

The increase in TDS rate would add Rs 5-10 crore to the government's kitty per annum.

He said it would be mandatory for all organisations to deduct TDS from the amount paid to contractors.

Prasad said although contractors would have to pay higher TDS, the decision would benefit them if they start procuring construction raw material from within the state.

Citing an example, he said presently if a contractor procures anything related to construction from out of the state, then he has to pay Central Sales Tax (CST) of 3 per cent and he does not get any benefit of it. And if he starts buying his inputs from within the state, he will be able to avail Input Tax Credit (ITC) against any VAT paid by him, he said.

Moreover, local industry would be encouraged as raw material would be procured by the contractors from here, he said.

Confident of achieving VAT collections of Rs. 6000 crore by the end of this fiscal, he said that Punjab Excise and Taxation had already collected Rs 4500 crore by December 2007 against collections of Rs. 3900 crore in corresponding period of last fiscal, showing a jump of Rs. 600 crore.

Source : Hindu - Chennai,  India, dated 11/01/2008