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Under the GST regime, section 51 of the CGST Act, 2017 prescribes the authority and procedure for 'Tax Deduction at Source'.

PERSONS LIABLE TO DEDUCT TDS UNDER GST LAW

The Government may order the following persons (the deductor) to deduct tax at source:

(a) a department or establishment of the Central Government or State Government; or

(b) local authority; or

(c) Governmental agencies; or

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

As per the latest Notification dated 13th September 2018, the following entities also need to deduct TDS-

  • An authority or a board or any other body which has been set up by Parliament or a State Legislature or by a government, with 51% equity (control) owned by the government.
  • A society established by the Central or any State Government or a Local Authority and the society is registered under the Societies Registration Act, 1860.
  • Public sector undertakings.
Summary of TDS provisions in GST

TDS RATE

TDS is to be deducted at the rate of 2 % (1% CGST+1% SGST) on payments made to the supplier of taxable goods and/or services, where the total value of such supply, under an individual 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. However, 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. This can be explained in the following situations.

  1. 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.
  2. 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.
  3. 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 of 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 tax deductor must compulsorily register without a threshold. The tax deductor is entitled to the privilege of registering under GST without having to get a PAN. They can get registration with the tax deduction and collection account Number (TAN) that is issued pursuant to the Income Tax Act, 1961.

Due Date to DEPOSIT OF TDS WITH THE GOVERNMENT

The tax amount deducted at source must be paid into the account of the Government by the tax deductor before the 10th day of the month following. The deductor will be required to pay interest if tax deducted is not paid within the specified timeframe.

TDS CERTIFICATE

The TDS Certificate would be required to be issued by the deductor (the person who is deducting the tax i.e. the recipient) in GSTR 7A to the deductee (the supplier whose payment is being deducted) within 5 days of depositing the TDS to the Government.

If the TDS Certificate is not issued within 5 days from the date of deposit with the Govt., the deductor would be liable to pay late fees of Rs. 100/ day. However, the late fees levied should not be more than Rs. 5,000.

The TDS so deducted would also be visible to the suppliers in Form GSTR 2A and the supplier can include and avail the same in GSTR 2. The supplier can take this amount as credit in his electronic cash register and use the same for payment of tax or any other liability.

For instance, suppose a supplier makes a supply worth Rs. 1000/- to a recipient and the GST @ rate of 18% is required to be paid. The recipient, while making the payment of Rs. 1000/- to the supplier, shall deduct 1% viz Rs. 10/- as TDS.

 

VALUE OF SUPPLY ON WHICH TDS SHALL BE DEDUCTED

In order to deduct of TDS the amount of the purchase is calculated as the total amount that excludes the tax stated by the invoice. This means TDS shall not be deducted on the CGST, SGST or IGST component of invoice.

For example, supplier A makes a supply worth Rs.5,000 to B. The rate of GST is 18%. When B pays A, he/she will pay Rs.5,000 (worth of Supply) + Rs.900 (GST) to A and Rs. 100 (RS. 5000*2%) as TDS to the government. So, it can be said that TDS is not deducted on the tax element (GST) of a transaction.

TDS RETURN FORM

The Tax Deductor is obliged to file a TDS return in form GSTR-7 within 10 days from the end of the month. When GSTIN of the unregistered supplier is not available, their name can be mentioned. The robustness of the system reflects these filled-in details in the electronic ledger of the supplier.

BENEFIT OF TDS TO THE DEDUCTEE (SUPPLIER)

As stated above, there will be an automatic reflection in the electronic ledger of the deductee (supplier) once the deductor files his/her returns. The deductee can claim credit in his electronic cash ledger of this tax deducted and use it for payments of other taxes.

 

REFUND OF TDS UNDER GST

If any excess amount is deducted and paid to the government, a refund can be claimed as this is not the tax amount that the government has a right on. However, if the deducted amount is already added to the electronic cash ledger of the supplier, the amount so added cannot be got back as a refund by the deductor. Deductee can claim a refund of tax subject to refund provisions of the act

PENALTY FOR NOT COMPLYING WITH PROVISIONS OF TDS ON GST

S. 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 TDS returns

Late fee of Rs. 100/- for every day during which such failure continues subject to a maximum amount of five thousand rupees.

Any excess or erroneous amount deducted and paid to the government account shall be dealt for refund under section 54 of the CGST Act, 2017. However, if the deducted amount is already credited to the electronic cash ledger of the supplier, the same shall not be refunded.

LEGAL REFERENCES

Details

Sections of CGST/SGST Act, 2017

Rules of CGST/SGST Rules, 2017

GST Forms

Deduction of TDS, Persons liable to deduct, Conditions & Rate of deduction

Section 51

Rule 66

 

Compulsory Liability of Registration for TDS deductors

Section 24(vi)

   

Application for registration

Section 25

Rule 12(1)

GST REG-07

Grant of Registration Certificate

 

Rule 12(2)

GST REG-06

Cancellation of Registration

 

Rule 12(3) read with Rule 22

GST REG-08

Payment of TDS

Section 51(2)

Rule 85(4)

GST PMT-05

Payment through GST Challan GST PMT-06

 

Rule 87(2) & Rule 87(3)

GST PMT-06

Communication to Bank in case amount paid is debited but CIN not generated

 

Rule 87(8)

GST PMT-07

TDS Return

Section 51(5) read with Section 39(3)

Rule 66(1)

GSTR-07

Issue of Certificate of deduction

Section 51(3)

Rule 66(3)

GSTR-7A

Late Fees (for late filing of GSTR-7)

Section 47(1)

   

Late Fees (for late furnishing of GSTR-7A)

Section 51(4)

   

Interest

Section 51(6) read with Section 50(1); Sec 20(xxv)of IGST Act read with section 51(6) & section 50(1) of the CGST/SGST Act

   

Penal provisions Demands & recovery

Section 51(7) read with Section 73 & Section 74 & Section 122(1)(v) and Section 20(xxv) & 4th proviso to Section 20 of IGST Act

Rule 142

DRC 1 to DRC 8

Refund

Section 51(8) read with Section 54

   

Transitional Provisions

Section 142(13)

   
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Category GST, Other Articles by - Abhishek Raja 



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