Mostly after Tsunami, the attention of Many International NGOs (INGO) have been drawn on Coastal Areas which underwent the wrath of the killer waves. Those Ngos have entered into an understanding with local Ngos and have granted funds for :
1. Rehabilitation & Sustainability
2. Community Resource Centres
3. Permanent Housing
4. Community Buildings etc.
The local NGos after MOU with INGOs have been left with huge funds and responsibilities. Most of the NGOs have sought Professional help to perform the duties related to their activities.
Housing Construction would be contracted to a Construction Company. In the above circumstance, the question as to whether the NGO is responsible to collect any tax towards Value Added Tax (VAT) arises. The following discussion would throw some light into this matter.
In Tamilnadu, Tamilnadu Value Added Tax, 2006 received the accent of the Governor of Tamilnadu on the 14th of December, 2006 and was enacted in the Legislature as Act No. 36 of 2006. This act repealed TNGST Act, 1959 and TNAST Act, 1970.
The bare Provisions relating to Tax deduction at Source is contained in Section 13 which is reproduced below;
Section 13. (1) Notwithstanding anything contained in this Act, every person responsible for paying any sum to any dealer for execution of works contract shall, at the time of payment of such sum, deduct an amount calculated, at the following rate, namely:-
Deduction of tax at source in works contract.
(i) civil works contract --two per cent of the total amount payable to such dealer;
(ii) civil maintenance works contract --two per cent of the total amount payable to such dealer;
(iii) All other works contracts --four per cent of the total amount payable to
such dealers:
Provided that no deduction under sub-section (1) shall be made where --
(a) no transfer of property in goods (whether as goods or in some other form) is involved in the execution of works contract; or
(b) transfer of property in goods (whether as goods or in some other form) is involved in the execution of works contract in the course of inter-State trade or commerce or in the course of import; or
(c) the dealer produces a certificate in such form as may be prescribed from the assessing authority concerned that he has no liability to pay or has paid the tax under section 5:
Provided further that no such deduction shall be made under this section, where the amount or the aggregate of the amount paid or credited or likely to be paid or credited, during the year, by such person to the dealer for execution of the works contract including civil works contract does not or is not likely to, exceed rupees one lakh.
Explanation.-- For the purpose of this section –
(a) the term ‘ person’ shall include –
(i) the Central or a State Government;
(ii) a local authority;
(iii) a corporation or body established by or under a Central or State Act;
(iv) a company incorporated under the Companies Act, 1956 including a Central or State Government undertaking;
(v) a society including a co-operative society;
(vi) an educational institution; or
(vii) a trust;
(b) the term “civil works contract” shall have the same meaning as in the Explanation to section 6.
(2) Any person making such deduction shall deposit the sum so deducted to such authority, in such manner and within such time, as may be prescribed.
(3) Any person who makes the deduction and deposit, shall within fifteen days of such deposit, issue to the said dealer a certificate in the prescribed form for each deduction separately, and send a copy of the certificate of deduction to the assessing authority, having jurisdiction over the said dealer together with such documents, as may be prescribed.
(4) On furnishing a certificate of deduction referred to in sub-section (3), the amount deposited under sub-section (2), shall be adjusted by the assessing authority towards tax liability of the dealer under section 5 or section 6 as the case may be, and shall constitute a good and sufficient discharge of the liability of the person making deduction to the extent of the amount deposited:
Provided that the burden of proving that the tax on such works contract has already been deposited and of establishing the exact quantum of tax so deposited shall be on the dealer claiming the deduction.
(5) Any person who contravenes the provisions of sub-section (1) or sub-section (2), shall pay, in addition to the amount required to be deducted and deposited, interest at one and a quarter per cent per month of such amount for the entire period of default.
(6) Where the dealer proves to the satisfaction of the assessing authority that he is not liable to pay tax under section 5, the assessing authority shall refund the amount deposited under sub-section
(2), after adjusting the arrears of tax, if any, due from the dealer, in such manner as may be prescribed.
(7) The tax or interest under this section shall become due without any notice of demand on the date of accrual for the payment by the person as provided under sub-sections (1) and (2).
(8) If any person contravenes the provisions of sub-section (1) or sub-section (2), the whole amount of tax payable shall be recovered from such person and all provisions of this Act for the recovery of tax including those relating to levy of penalty and interest shall apply, as if the person is an assessee for the purpose of this Act.
What does the TNVAT Rules Say about the TDS ?
Rule No. 9 governs the TDS provisions found in Section 13 of the TNVAT Act. The following is the reproduction of rule 9 of TNVAT Rules.
9. Tax deduction at source.—
(1) Any person who makes a deduction under section 13, shall deposit the sum so deducted to the assessing authority having jurisdiction over the person or to any other authority authorised by the Deputy Commissioner to receive such payment, on or before the 20th day of the succeeding month in which the deduction was made with a statement in Form R.
(2) The certificate that a dealer has no liability to pay or has paid the tax under section 5, referred to in
clause (b) of the first proviso to sub-section (1) of section 13 shall be in Form S.
(3) The certificate of deduction of tax referred to in sub-section (3) of section 13 shall be in Form T.
(4) The notice in writing, indicating the amount payable under the Act, referred to in sub-section (5) of
section 45 shall be in Form U.
Wrap UP:
As provided in Section 13 of TNVAT Act and Rule 9 of TNVAT Rules, it could be concluded that tax should be deducted on TOTAL PAYMENT, if it exceeds or is likely to exceed Rs. ONE LAKH per annum, at the rates prescribed in section 13 and should be handled as directed in rule 9.
Further resources related to the above subject may be found at http://www.tnvat.gov.in
If you have any further queries, you are free to mail it to ngocare@gmail.com
A. Joseph Arputharaj
Mobile : 9842350776
