TDS UNDER GST

TDS under GST:

What is TDS:

"TDS" stands for Tax Deducted at Source. Under GST, certain persons are required to deduct TDS while paying for supplies. Seection 51 of the CGST Act, 2017 prescribes the authority and procedure for ‘Tax Deduction at Source’. The Government may order the following persons (the deductor) to deduct tax at source:

  • a department or establishment of the Central Government or State Government; or

  • local authority; or

  • Governmental agencies; or

  • such persons or category of persons as may be notified by the Government on the recommendations of the Council.

However, Government has further notified the following persons to deduct TDS vide its notification 50/2018 – Central Tax dated 13th September, 2018.

  • an authority or a board or any other body (i) set up by an Act of Parliament or a State Legislature; or (ii) established by any Government with fifty-one per cent. or more participation by way of equity or control, to carry out any function;

  • Society established by the Central Government or the State Government or a Local Authority under the Societies Registration Act, 1860 (21 of 1860); and

  • public sector undertakings.

TDS Deduction:

The tax would be deducted @1% of the payment made to the supplier (the deductee) of taxable goods or services or both, where the total value of such supply, under a contract, exceeds two lakh and fifty thousand rupees (excluding the amount of central tax, State tax, Union territory tax, integrated tax and cess indicated in the invoice). Thus, individual supplies may be less than Rs. 2, 50,000/-, but if contract value is more than Rs. 2, 50,000/-, TDS will have to be deducted.

The 1% TDS shuld be deducted on CGST, SGST, UGTST or 2% Should be deducted on IGST as the case may be. Therefore, a total of 2% TDS will be deducted at the time of making payment to the supplier.

Non-Applicability of TDS:

No deduction shall be made if the location of the supplier and the place of supply is in a State or Union territory which is different from the State, or as the case may be, Union territory of registration of the recipient. That means where the location of supplier and place of supply both are in same state but place of recipient of supply is another state, no TDS shall be deductible.

Examples:

Supplier, place of supply and recipient are in the same state. It would be intra-state supply and TDS (Central plus State tax) shall be deducted. It would be possible for the supplier (i.e. the deductee) to take credit of TDS in his electronic cash ledger.

Supplier as well as place of supply are in different states. In such cases, integrated tax would be levied. TDS to be deducted would be TDS (Integrated tax) and it would be possible for the supplier (i.e. the deductee) to take credit of TDS in his electronic cash ledger.

Supplier as well as place of supply are in State A and recipient is located in State B. The supply would be intra-State supply and Central tax and State tax would be levied. In such case, transfer of TDS (Central tax + State tax State B) to the cash ledger of the supplier (Central tax + State tax of State A) would be difficult. So in such cases, TDS would not be deducted. Thus, when both the supplier as well as place of supply are different from that of recipient, no tax deduction at source would be made.

Registration of TDS deductors:

A TDS deductor has to compulsorily register without any threshold limit. The deductor has a privilege of obtaining registration under GST without having required to obtain PAN. He can obtain registration using his Tax Deduction and Collection Account Number (TAN) issued under the Income Tax Act, 1961.

Deposit of TDS with the government:

The amount of tax deducted at source should be deposited to the Government account by the deductor by 10th of the succeeding month. The deductor would be liable to pay interest if the tax deducted is not deposited within the prescribed time limit.

TDS Certificate:

A TDS certificate is required to be issued by deductor (the person who is deducting tax) in Form GSTR-7A to the deductee (the supplier from whose payment TDS is deducted), within 5 days of crediting the amount to the Government, failing which the deductor would be liable to pay a late fee of Rs. 100/- per day from the expiry of the 5th day till the certificate is issued. This late fee would not be more than Rs. 5000/-. For the purpose of deduction of tax specified above, the value of supply shall be taken as the amount excluding the central tax, State tax, Union territory tax, integrated tax and cess indicated in the invoice.

TDS Return:

As per the provision of section 39(3) Return of TDS will be filed within 10 days after the end of the month in which deduction is made. As per rule 66(1), return of TDS is to be filed in FORM GSTR- 7 through common portal either directly or from a facilitation centre notified by the commissioner.

Consequences of not complying with TDS provisions:

The following are the consequences for not complying TDS provisions:

Sl No Event Consequence
1 TDS not deducted Interest to be paid along with the TDS amount; else the amount shall be determined and recovered as per the law.
2 TDS certificate not issued or delayed beyond the prescribed period of five days Late fee of Rs. 100/- per day subject to a maximum of Rs. 5000/-
3 TDS deducted but not paid to the government or paid later than 10th of the succeeding month Interest to be paid along with the TDS amount; else the amount shall be determined and recovered as per the law.
4 Late filing of TDSreturns Late fee of Rs. 100/- for every day during which such failure continues subject to a maximum amount of five thousand rupees.

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