(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
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.