Chandigarh: The Punjab government has raised the rate of Tax Deducted at Source (TDS) for contractors from two per cent to four per cent from January 9 this year with an intention of boosting 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 today. He said that it would be mandatory for all the organisations for deducting TDS from the amount paid to contractors.

Although the raising of TDS rate by two per cent would generate an income of just Rs 5 to 10 crore per annum to the state exchequer, he said that it would be the contractors and state industry who would be the main beneficiaries. Citing an example, 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 only, 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 : PTI