TDS under MVAT Act

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CA Ashish (Querist)
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09 February 2011 Dear All

Can anyone explain me about tds to be deducted under MVAT act while making payment for work contract related payments like?
and who has to deduct tds whether register dealer or non register dealers or both..

Is there any limit for deducting tds under mvat act?

Hitender Gaur

Hitender Gaur (Expert)
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10 February 2011 Section 31 provides that the Commissioner may, by notification, require any dealer or person or class of dealers or persons (hereafter referred as ‘the employer’) to deduct tax on such amount payable on the purchases effected by them, as may be notified.

11. All such employers shall have to: –
. Take a Tax Deduction Number (Works Contract) from the Sales Tax Department. Application to be made, in Form 401, within three months from the day he becomes liable to deduct TDS.
a. Deduct tax, at prescribed rate, from the amount paid or payable to a contractor during a given period.
b. Deposit the amount so deducted with the Govt. treasury within 10 days from the end of month in which such tax deducted or required to be deducted.
c. Issue a certificate of deduction of tax, immediately, in Form 402.
d. Submit monthly (quarterly) statement of tax deducted at source, in respect to each of such contractor, to the respective prescribed officer, in Form 403, within 20 days from the end of the month.
e. Maintain necessary records in prescribed format, Form 404.
f. File an annual return of TDS, in Form 405, within 3 months from the end of the year.
g. Attend and produce records before the assessing authority as and when asked to do so.
Notes: –
8. The TDS provisions are applicable only to specified employers.
9. The tax is required to be deducted only in such cases, where payment to a dealer (contractor) is Rs. 5,00,000/- or more during a year.
10. There are provisions for reduced rate of deduction or no deduction certificate, granted by the Commissioner, on an application, in Form 410, made by the concerned dealer (contractor).
11. A contractor, awarding sub-contracts, is not required to deduct TDS from such sub-contractor.
12. TDS provisions are not applicable in respect of works contract liable to tax under the CST Act.

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CA Ashish

CA Ashish (Querist)
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18 February 2011 thanks a lot for reply;
one more thing I want to know is that there is a finance company (NBFC) and provisions of VAT are not at all applicable to this finance company since the company does not deal into selling / buying sort of things. however, the company during the year has made huge payments to civil and interior contractors for restructuring of new premises including payments made for furnishing of office and related payments. The finance company is not a registered dealer and hence does not have TIN number for VAT under MVAT.

However, refering to provisions of TDS under MVAT Act for payments made which read as: " Section 31 provides that the Commissioner may, by notification, require any dealer or person or class of dealers or persons (hereafter referred as ‘the employer’) to deduct tax on such amount payable on the purchases effected by them, as may be notified. and it is also provided under MVAT for specified employers to deduct the TDS on amount payable on the purchases effected by them, as may be notified..

My Queries in relation to deduction of TDS amount is as under:

1) can the finance company (NBFC) fall within the definition of specified employers though MVAT is not applicable to it and it is not a registered dealer?

2)the above provisions of section 31 talk about the amount payable on purchases effected by them (ie specified employer);My question is whether TDS is also to be deducted or not on the payments made for work carried out, nature of work being structural and furnishing done at new office premises.

3)if TDS is required to be deducted by finance company; for that, company is supposed to hve Tax deduction number, how the number can be availed? what is procedure?

4) and finally, if TDS is anyhow required to be deducted for payments made even on civil structural and furnishing done at new office premises (work contract as generally we call it), and company has not deducted the TDS on the payments have already been made. CAN TDS now be deducted (after obtaining TDS number from sales tax department)on the amount (which have already been paid) and deposited with Exchequer along with interest. what would be the rate of interest since TDS is supposed to be paid late as of now..???

can anyone explain the same on the above issues??

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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02 August 2025 Sure! Here's a detailed explanation addressing your queries on **TDS under the Maharashtra VAT (MVAT) Act**, especially concerning work contract payments and the scenario of a non-registered finance company (NBFC):

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### 1) **Can the finance company (NBFC), which is not a registered dealer and not liable for VAT, be a ‘specified employer’ under MVAT TDS provisions?**

* **MVAT TDS provisions (Section 31)** empower the Commissioner to notify *any person or class of persons* (called “specified employers”) liable to deduct TDS on payments made for works contracts.
* Importantly, the notification can apply to **persons who are not VAT-registered dealers** if specified by the Commissioner.
* So, **even if NBFC is not a registered dealer and VAT is not applicable, it can still be notified as a specified employer** under Section 31 if the government/Commissioner issues a notification covering such entities.
* Therefore, **check the latest notifications by Maharashtra Sales Tax Department** to see if NBFCs or similar financial institutions are covered.

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### 2) **Is TDS under MVAT required on payments made for work contracts like structural and furnishing work?**

* Yes. **Work contracts involving transfer of property in goods in some form** are liable under MVAT, and TDS provisions are specifically targeted for such payments.
* Section 31 requires deduction of TDS on payments made for **work contracts** exceeding the prescribed limit (currently Rs. 5,00,000/- per year per contractor).
* So, **payments for structural work and furnishing (which are generally treated as works contracts) fall under the purview of TDS under MVAT.**
* However, note: TDS provisions are **not applicable** if the contract is liable to tax under the CST Act (interstate sales).
* Also, **sub-contractors are exempt from deducting TDS if the main contractor has already deducted it.**

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### 3) **If TDS is required, how does the company get the Tax Deduction Number (TIN for TDS) from the Sales Tax Department?**

* The employer (payer) must **apply for a Tax Deduction Number (Works Contract)** from the Sales Tax Department.
* Application is made on **Form 401** within **3 months from the date when the person becomes liable to deduct TDS.**
* After receiving the TDS number, the employer must:

* Deduct tax at the prescribed rate from payments,
* Deposit it with the government treasury within 10 days from month-end,
* Issue TDS certificates (Form 402) to the contractors,
* File monthly/quarterly TDS statements (Form 403),
* Maintain proper records (Form 404), and
* File annual TDS returns (Form 405).

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### 4) **If TDS was not deducted at the time of payment, can it be deducted later on already paid amounts?**

* **Yes, TDS can be deducted late** on payments already made (called "deemed deduction") after obtaining the TDS number.
* The company should deposit the deducted tax with the government along with **interest for delayed deduction**.
* Interest is generally calculated under MVAT provisions for delayed payments, commonly at **1% per month or part thereof** on the amount of tax (including TDS).
* It is advisable to consult with the Sales Tax department or a tax advisor to:

* Calculate the exact interest due,
* Ensure correct compliance, and
* Possibly apply for any relief or waiver if available.

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### **Summary Table:**

| Question | Answer |
| ---------------------------------------------------------- | -------------------------------------------------- |
| Can NBFC (non-registered) be specified employer? | Yes, if notified by Commissioner under Section 31. |
| Are structural/furnishing payments liable for TDS? | Yes, these fall under works contract TDS. |
| How to get Tax Deduction Number (TIN for TDS)? | Apply on Form 401 within 3 months of liability. |
| Can TDS be deducted after payment without prior deduction? | Yes, with payment of interest on delayed TDS. |

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### **Additional Notes:**

* The rate of TDS under MVAT is generally **4%** on the contract amount.
* Threshold limit for deduction is aggregate payment to a contractor exceeding **Rs. 5,00,000/- per year**.
* TDS provisions **do not apply to sub-contractors** if the main contractor has deducted TDS.

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If you want, I can also help draft the application format for TDS number or explain the forms (401 to 405) in detail. Would that be helpful?

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