Tax Evasion in Public Procurement - CVC Cautions
IN a recent publication on 'Check points for various stages of Public Procurement', the Central Vigilance Commission states,
Tax evasion in the procurement contracts could be another area of concern; therefore, it is necessary that tax liability of the contractors/suppliers is examined properly.
Following check-points are suggested:
1. Whether the payment is made as per the terms of the contract?
2. Whether there is any possibility of duplicate payment being made to the contractor/supplier?
3. Whether any over payment is being made to the contractor/supplier?
4. Whether the rates for extra/substituted items have been derived as per the provision in the -contract agreement/Procurement Manual?
5. Whether the payment for extra/substituted items have been made after due approval of the Competent Authority?
6. Whether advances are paid to the contractors/suppliers for the amount specified in the contract agreement?
7. Whether recovery of advances is being made as per the terms of the contract agreement?
8. Whether recovery of mandatory taxes and duties is being done as per the extant instructions of the Government and as per the terms of the contract agreement?
9. Whether reimbursement of service tax, excise duty etc. is being done after obtaining the actual proof of depositing the same with authorities concerned?
10. Some of the contracts provide escalation clause, with detailed formula in order to compensate the contractors for increase in the material cost during the contract period. Whether the formula for escalation is applied correctly or not?
11. Whether hire charges of Plant and Machineries are being recovered from the contractor as per the specified rate?
Some authorities are refusing to reimburse Service Tax or excise duty paid from CENVAT Credit. Only amounts paid by challan are reimbursed. Some contractors even went to a High Court regarding this - without success.