Tds on vat

We are in a business of selling and purchasing of Fabric & Furnishing. We use to purchase a Plastic bags from one of the vendor. He issue a invoice with 12.50% VAT, we use to debit it to Packing Material Expenses. My question is whether the vendor becomes a contractor in this case, we usually deduct 2% tds. is it right to do so if the VAT is charged and TDS also to be deducted. Can anybody explain with suitable exs and case.