TDS is deducted on the contract value. If you have given any contract to a vendor and which includes materal and labour. and material is as per your specification then tds has to deduct on entire amount. If he is just suppling material and labour bill is diff. then no TDs on material. one more thing from 01/05/2009 it is clear that TDS not to deduct on VAT,service tax central sales tax etc.