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Practical issues faced in TDS under GST

vaishak prasad 
on 23 September 2018

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With the notification 50/2018 (Central Tax) Dated 13.09.2018, TDS under section 51 of the CGST Act is coming into force from 01.10.2018. Let us discuss some issues that we might face.

Issue - 1

The act says “TDS to be deducted if Value of supply, under a contract, exceeds two lakh and fifty thousand rupees”.

Here, we need to understand two things, what is “Value of supply” and what is “A Contract”.

  1. Value of supply refers to Value for the purpose of deduction of TDS i.e. Taxable value mentioned in the Invoice, excluding CGST, SGST, IGST, UTGST, cess under GST.
  2. A Contract means a purchase order (PO) or an agreement entered between the parties involved in the transaction.

Examples:

Scenario 1

Mr. A enters into a contract with Mr. B to supply “Air-conditioners”. Contract value is Rs.8,00,000 (Excluding GST). Mr. A raises multiple invoices during the year for RS.1,00,000 each +GST @ 18% i.e. Total Value = 1,18,000.

Here, Mr. B (Deductor) will deduct Rs. 2,000 (Rs. 1,00,000 * 2%) as TDS on GST on each such invoices. Even though the invoice value is less than Rs.2,50,000, the contract value exceeds Rs. 2,50,000, so TDS is applicable on the above transaction.

Scenario 2

Mr. A enters into a contract with Mr. B to supply “Air-conditioners”. Contract value is Rs.2,00,000 (Excluding GST). Mr. A raises multiple invoices during the year for RS.50,000 each +GST @ 18% i.e. Total Value = 59,000.

Here, Mr. B (Deductor) will not deduct any TDS on GST on such invoices since the contract value does not exceed Rs. 2,50,000, so TDS is not applicable on the above transaction.

Scenario 3

Mr. A raises an invoice to Mr. B during the year for Rs.10,00,000 each +GST @ 18% i.e. Total Value = 11,80,000 for the supply of “Air-Conditioner”. Here since there is no specific contract between parties, the Invoice value is taken into consideration for determining the TDS liability.

Here Mr. B (Deductor) will deduct Rs. 20,000 (Rs. 10,00,000 * 2%) as TDS on GST on such invoice as the invoice value exceeds Rs. 2,50,000.

Scenario 4

Mr. A raises an invoice to Mr. B during the year for Rs.1,00,000 each +GST @ 18% i.e. Total Value = 1,18,000 for the supply of “Air-Conditioner”. Here since there is no specific contract between parties, the Invoice value is taken into consideration for determining the TDS liability.

Here, Mr. B (Deductor) will not deduct any TDS on GST on such invoice since the Invoice value does not exceed Rs. 2,50,000.

Issue - 2

The act says “Provided that no deduction shall be made if the location of the supplier and the place of supply is in a State/UT which is different from the State/UT in which the recipient is registered.

I have tried to explain the same with an example below along with the reason,


Sl. No.

Location of supplier

Place of supply

Location of recipient

TDS applicability

Reasoning

1.

Karnataka

(CGST and SGST of Karnataka)

Karnataka

(Intra-state supply)

Karnataka

(CGST and SGST of Karnataka)

YES

Since CGST and SGST are of the same state (i.e. Karnataka), deductee can utilize the TDS amount for his CGST/SGST liability.

2.

Karnataka

(IGST)

Tamilnadu

(Inter-state supply)

Maharashtra

(IGST)

YES

Since it is IGST, deductee can utilize the TDS amount for his IGST liability.

3.

Karnataka

(CGST and SGST of Karnataka)

Karnataka

(Intra-state supply)

Tamilnadu

(CGST and SGST of Tamilnadu)

NO

Since CGST and SGST are of a different state (i.e. Karnataka and Tamilnadu), deductee cannot utilize the TDS amount for his CGST/SGST liability.


Clarification required.

Some clarification is required Whether TDS under GST is applicable on “Contract” entered prior to 01/10/2018?

For example:

Mr. A has entered into a contract with Mr. B for Rs. 5,00,000 on 12/08/2018 for the supply of “Air-conditioner”. Mr. A is raising the invoicing on monthly basis, accordingly, he raised an invoice for the month of October for Rs.1,00,000. Is TDS deductible on such invoice for the month of October?

The act nowhere talks anything with respect to retrospective contracts. It’ll be helpful if we could get a clear picture regarding the above issue at the earliest.


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