VAT 'exemption' suspected
Source: The Sangai Express

Imphal, March 31 2016: A strong suspicion has been raised that VAT (Value Added Tax) is not deducted from contract works undertaken by the State Government.

According to information received from Taxation De- partment, the main sources of the State's revenue collected in the form of VAT are major business establishments and Government Departments which undertake contract works like Education, RD&PR, PHED, PWD IFCD and Minor Irrigation.

VAT is also collected from contract works undertaken by other public undertakings as well as private sectors.

As per a notification is- sued by Finance Department (Expenditure section) on Sep- tember 3, 2009, 8 per cent of the work order amount after subtracting labour charge should be deducted as VAT.

After studying the number of contract works the Gov- ernment may undertake within a financial year and the average amount collected from other sources, a provi- sional amount is fixed by Finance Department for Taxa- tion Department to collect as VAT.

The VAT amount fixed by Finance Department for 2015-16 was Rs 560 crore.

This was later revised to Rs 500 crore.

Taxation Depart- ment was quite close to the VAT targets set for 2013-14 and 2014-15. However for the current financial year which is clos- ing today, only Rs 290 crore has been collected as VAT.

Work agencies engaged under different engineering departments of the Govern- ment are one factor for this huge gap between perform- ance and the annual target.

VAT is deducted from work agencies which execute contract works under PHED, PWD, IFCD and Minor Irri- gation Department.

But the amount deducted did not reach Taxation De- partment to the full quantum.

Another source maintained that it is not clear whether VAT is deducted or not at all from these work agencies.

If VAT is deducted, challans should be submitted duly to the Govern- ment.

But this is also not done.

At present, engineering departments issue cheques to work agencies for their liabilities after CDA (Cheque Drawal Au- thority) is released.

Once the cheques are issued, work agencies go to banks to encash them.

As such there is a need to ascertain the number of CDAs released by the Government in a year in order to check how much money can be collected by Taxation Department from engineering departments as VAT within the particular year.

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