(1) Every registered dealer liable to pay tax under the Act shall collect such tax at the rates at which he is liable to pay tax under the provision of the Act;

(2) The Central Government, State Government, a statutory body or a local authority shall in respect of any sale of taxable goods effected by them be entitled to collect by way of tax any amount which a registered dealer effecting such sale would have been entitled to collect by way of tax under this Act and shall pay the tax so collected into the Government Treasury.

(3) Special provisions to deduction of tax at source in certain cases-

(i) Notwithstanding anything contained in sub-section (5) of Section 28 or any Rules made thereunder or any terms of a contract to the contrary, any person responsible for paying any sum to any dealer for execution of a Works contract or transfer of the right to use any goods, or sale or supply of any goods wholly or partly in pursuance of a contract between such dealer and -

(a) Government,

(b) A local authority,

(c) A Corporation or a body established by or under any law for the time being enforce,

(d) A company incorporated under the Companies Act, 1956 including a Government undertaking,

(e) A cooperative Society registered or deemed to be registered under the Co-operative Societies Act, or

(f) An educational institution,

Shall, at the time of payment of such sum in cash or by issue of a cheque or draft or any other mode of payment, deduct an amount towards tax equal to four per centum of such sum being paid in respect of such Works contract.

(ii) (a). Where on an application being made by the contractor in this behalf, the Prescribed Authority is satisfied that any works contract under reference is separable and involves both transfer of property in goods and labour and services, or involves only labour and services and accordingly, justifies deduction of tax on a part of the sum payable in respect of any works contract or, as the case may be, justifies no deduction of tax at all, he shall, after giving the contractor a reasonable opportunity of being heard, grant him such certificate as may be appropriate.

Provided that the Prescribed Authority may reject such application, or on his own motion, cancel or modify such certificate, after giving the contractor a reasonable opportunity of being heard.

(b) Where such certificate is produced by the contractor before the person responsible for payment, such person shall, unless the certificate is cancelled or modified by the Prescribed Authority, make deduction of tax in accordance with the said certificate. In the event of such certificate being cancelled or modified as provided, such person shall make the deductions accordingly.

(iii) Any person entering into any contract with any contractor for transfer of property in goods (whether as goods or in some other form) involved in the execution of works contract shall furnish within fifteen days from the date of signing of the contract such information as may be prescribed to the Prescribed Authority under whose jurisdiction the contractor's place of business is situated. Failure to do so shall entail a penalty not exceeding five hundred rupees per day of default after affording such person a reasonable opportunity of being heard.

(iv) Notwithstanding anything contained in any other law for the time being in force, every person mentioned in clause (i) of sub-section (3) of section 92 responsible for paying sale price in respect of any works contract or lease or sale or supply of goods shall not enter into such transaction unless the contractor, lessor or seller or supplier, as the case may be, produces an authenticated copy of the certificate of registration under this Act or furnishes an undertaking for getting himself registered and any such contractor, lessor or seller or supplier who is not so registered under this Act shall not be paid by the said responsible person any amount in respect of the sale or supply, before he gets himself registered under this Act and submits an authenticated copy of the certificate of registration.

(v) Every person referred to in clause (i) of sub-section (3) of section 92 responsible for paying sale price shall, within the prescribed time, apply to the Prescribed Authority for allotment of a Value Added Tax deduction number. The number shall be quoted in such documents, statements and returns as may be prescribed.

(vi) No interest or penalty shall be imposed or no recovery proceedings against the dealer or payee shall be initiated in respect of deduction of tax under this section.

(4) Where deduction of an amount is made under sub-section (3) the person making such deduction shall deposit the amount so deducted into a Government Treasury within such time, in such manner and in such form or challan as may be prescribed.

(5) After the deposit of the amount under sub-section (4), the person who makes the deduction and deposit, shall, within fifteen days from the date of such deposit issue to the dealer a certificate in the prescribed form for each deduction and send a copy of the receipted challan or a copy of the account statement referred to in sub-section (2), as the case may be, to the Commissioner along with the relevant certificate of deduction and such documents a may be prescribed.

(6) On receipt of a certificate of deduction referred to in sub-section (5), the deposit of an amount of a dealer referred to in sub-section (4) shall be adjusted by the Commissioner towards tax liability of the dealer in his return under Section 28 and shall constitute a good and sufficient discharge of the liability of the person deducting such amount to the dealer to the extent of the amount deducted and deposited.

(7) Where any person, while paying any sum to a dealer, contravenes the provisions of sub-section (3), sub-section (4) or sub-section (5), he shall be personally liable for such contravention, and the Commissioner may after giving him an opportunity of being heard, by an order in writing may imposed on such person a penalty, not exceeding twice the amount required to be deducted.

(8) Where the dealer from whose account any amount has been deducted under sub-section (3) and deposited under sub-section (4) proves to the satisfaction of the Commissioner that he is not liable not to pay tax under Section 4 and such amount was not wholly or partly payable by him under this Act, the Commissioner shall refund or adjust the amount refundable to the dealer in such a manner as may be prescribed.