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Delhi government tightens noose on builders evading VAT on work contract
February, 25th 2013

Builders and ancillary units in the construction industry evading VAT on 'work contract' need to watch their step as the trade and taxes department of the Delhi government is tightening its noose on defaulters .

The department's special zone is preparing a list of contractors and builders in consultation with municipal bodies.

The data is being collated considering rampant construction of buildings in posh colonies of the city.

The department observed that many contractors have not even got themselves registered with the special zone and are evading taxes.

Officials said that, so far, only Rs.180 crore has been collected as tax against a target of Rs.282 crore under this segment. This shortfall is one of the main reasons that the department is cracking down on defaulters .

"We had requested municipal agencies for sanctioned plans of buildings which have been recently constructed or where the construction was under way. After getting the details of the owners, we issued notices to them seeking information about the contractors or builders involved in the construction," said V.K. Tripathi, joint commissioner, trade and taxes.

The officer said about 2,500 notices had been sent and a list of defaulters prepared.

Officials said they had conducted raids on the premises of many contractors for tax assessment under the provision of work contract. The department has sealed the premises of over a dozen defaulters.

Recently, a raid was conducted on the Okhla-based premises of a prominent contractor who has been working on many government projects in the city.

"When raided, records of business transactions were not found at their registered office in Okhla. They had shifted all the documents to some other office. We had to seal their office," said an official of the VAT department.

Similarly, the office of a lift manufacturer was raided in Pitampura and the property subsequently sealed for violations. "They went to court and the court asked them to pay a heavy fine as a pre-condition for unsealing," said a senior official.

The special zone of the trade and taxes department deals with cases of dealers engaged in executing the work contract and transferring the right to use the goods in a specialised manner.

Builders, contractors, interior decorators and maintenance contractors providing services to private or government buildings, malls and other service providers come under the purview of the special zone and are needed to pay 5-12.5 per cent under different slabs for different services.

"Those who avail of the services of any contractor should deduct four per cent of the total payment as VAT at source and pay it to the department through the registered tax account number," added Tripathi.

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