TDS & TCS under GST law

HARSHIT MURLIDHAR KAKWANI , Last updated: 26 June 2019
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Date: July 1 2017. Newspaper: The Times of India. HEADLINES: GST; the way forward, now!

Date: July 1 2017. Newspaper: The Economic Times. Headlines: The new GST Age awaits ?

Date: July 1, 2017. Newspaper: Hindustan Times. Headlines: GST now, but what next!?

It wouldn?t be unfair to say that July 1, 2017 has now become a date of utmost importance in the Indian History. The Indian Government through the implementation of ?One hundred and first Amendment of Constitution of India? replaced existing multiple cascading taxes with one ?The Goods and Services tax?.

And since then, every person right from a ?chai wala? to the person who drinks the same in a 7star hotel have all been discussing about GST. And why not, after all its not every day that the Prime Minister comes and changes the whole of Indirect Tax system prevailing in a country since decades.

But today, the discussion is not going to be about GST. It?s going to be about the most important feature and the emerging area of professional opportunities grown up from its implementation: TDS & TCS PROVISIONS UNDER GST as provided u/s 51 & 52 (Chapter-X) of CGST Act, 2017.

1. LEGAL PROVISIONS:

PROVISIONS OF TDS (Tax Deducted at Source):

SECTION- 51(1):- Notwithstanding anything to the contrary contained in this Act, the Government may mandate,?

(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, ?

to deduct tax at the rate of one per cent from the payment made or credited to the supplier of taxable goods or services or both, where the total value of such supply, under a contract, exceeds two lakh and fifty thousand rupees.

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:

a) 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.

b) 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.

c) 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 requiring PAN. He can obtain registration using his Tax Deduction and Collection Account Number (TAN) issued under the Income-Tax Act, 1961.??????

TDS Payment to the Government: As per Section 51(2) of the CGST Act, the amount of tax so deducted is required to be deposited to the credit of appropriate Government (Central Government for CGST and IGST, State Government for SGST) account within 10 days after the end of month in which such deduction was made.

TDS Certificate under GST Regime: According to Section 51 (4) of the CGST Act, a certificate is required to be issued by deductor to deductee within 5 days of deposit of tax by deductor to the respective Government account.

The certificate to be issued by deductor will have information of:

(a) Total Contract value
(b) Total amount deducted.
(c) Rate of TDS.
(d) Amount paid to the appropriate government.

As per section 51(4) of the CGST Act, if any deductor fails to issue the certificate within time- limit of 5 days of deposit of tax, he shall be liable to pay late fee of Rs. 100/- per day for the period starting from the expiry of 5 days period until it is issued to deductee. However, the maximum late fee will be restricted to Rs.5,000/-.

Credit of TDS under GST: -As per section 51(5) of the CGST Act, the deductee will take the credit of TDS deducted from his payments on the basis of TDS certificate. The deductee will claim the credit in his electronic cash ledger, of the tax deducted and reflected in the return of the deductor filed for the transaction period.

Delay in deposit of TDS under GST :- According to section 51 (6), if any deductor fails to pay the Government the amount so collected as TDS within 10 days of following month, he will be liable to pay interest in addition to the amount tax deducted , interest for the period starting from the due date of deposit till the final date of deposit of TDS amount.

Refund of TDS under GST :- As per section 51 (8), in case of any excess or erroneous deduction of TDS, refund can be sought by deductor or deductee under the relevant section 54 of the CGST Act.

PROVISIONS OF TCS (Tax Collected at Source):

SECTION- 52(1): Notwithstanding anything to the contrary contained in this Act, every electronic commerce operator, not being an agent, shall collect an amount calculated at such rate not exceeding one per cent, as may be notified by the Government on the recommendations of the Council, of the net value of taxable supplies made through it by other suppliers where the consideration with respect to such supplies is to be collected by the operator.

NOTE:

Section 2 (45) of the CGST Act, defines ?Electronic Commerce Operator? means any person who owns, operates or manages digital or electronic facility or platform for electronic commerce.

Section 2(44) of the CGST Act, defines ?Electronic Commerce? means the supply of goods or services or both, including digital products over digital or electronic network.

REGISTRATION:

The ecommerce operator as well as the supplier supplying goods or services through an operator need to compulsorily register under GST. The threshold limit of Rs. 20 lakhs (10 lakhs for special category states) is not applicable to them. Section 24(x) of the CGST Act, 2017 makes it mandatory for every e-Commerce Operator to get registered under GST. Similarly, section 24(ix) of the CGST Act, 2017 makes it mandatory for every person who supplies goods/services through an Operator to get registered under GST.

VALUE OF SUPPLY:

For the purposes of collection of tax as specified u/s 52(1), the expression "net value of taxable supplies" shall mean the aggregate value of taxable supplies of goods or services or both, other than services notified under sub-section (5) of section 9, made during any month by all registered persons through the operator reduced by the aggregate value of taxable supplies returned to the suppliers during the said month.

PAYMENT TO THE GOVERNMENT:

?Sub-section (3) of Section 52 of the Act provides that Tax Collected at Source shall be paid to the Government within 10 days after the end of the month of collection.

STATEMENT:

Monthly Statement: Every operator who collects the amount of tax shall furnish a statement, electronically, containing all the details relating to:

a. Outward supplies of Goods and Services.
b. Returned of goods and services.
c. Amount collected during a month.

In Form GSTR-8 within 10 days from the end of the month in terms of sub-rule (1) of Rule 67 of the rules read with sub-section (4) of Section 52 of the CGST Act.

Error in Monthly Statement: If any e-commerce operator who collects the amount under section 52(1) of the Act, after furnishing a statement found any errors or omissions or incorrect particulars therein, other than as a result of scrutiny, audit, inspection or enforcement activity by the tax authorities then he shall rectify the same in the statement of month of such discovery, subject to Payment of interest under sub-section (6) of Section 52 of the Act.

NOTE: No rectification shall be allowed After the due date of furnishing the statement for the month of September following the end of Financial Year, or Actual date of Furnishing the Annual Statement, whichever is earlier.

MATCHING CONCEPT:

Matching of supplies: The Supplies shall match with the corresponding outward supplies of the registered Supplier as the details furnished by the e.commerce operator in Form GSTR-8 shall be made available electronically to each of the suppliers in Part C of Form GSTR -2A on the Common Portal after the due date of filing of Form GSTR-8 in terms of Rule (2) of Rule 67 read with sub-section (8) of Section 52 of the Act.

Discrepancy of supplies: When the Supplies under sub-section (4) do not match with the corresponding supplies of the supplier then, such discrepancy shall be communicated to both the persons in terms of sub-section (9) of Section 52 of the Act.

Payment of differential amount: The amount in respect of which any discrepancy in the value of such supplies, the same would be communicated to both of the under sub-section (9) of Section 52 of the Act. If such discrepancy in value is not rectified within the given time, then such amount would be added to the output tax liability of such suppler. The supplier will have to pay the differential amount of output tax along with interest in terms of sub-section (10) & sub-section (11) of section 52 of the Act.

NOTICE TO THE OPERATOR:

An officer not below the rank of Deputy Commissioner can issue Notice to supplied through electronic commerce operator during any period, stock of goods lying in warehouses/godowns etc., managed by such operator and declared as additional places of business by such supplies u/s 52(12).

REPLY: The electronic commerce operator is required to furnish such details within 15 working days of serve of such notice under sub-section (13) of Section 52 of the Act.

In case an electronic commerce operator fails to furnish the information required by the notice , besides being liable for penal action under section 122 of the Act, states that any person committing the offences as stated under the section, shall be liable to pay a penalty of ten thousand rupees or an amount equivalent to the tax evaded or the tax not deducted under section 51 or short deducted or deducted but not paid to the Government or tax not collected under section 52 or short collected or collected but not paid to the Government or input tax credit availed of or passed on or distributed irregularly, or the refund claimed fraudulently, whichever is higher, it shall also be liable for penalty up to Rs. 25,000/-

RECOVERY PROCEEDING:

I hope I was able to present my matter in a manner which you could relate to.

Thank you and have an amazing day ahead.

The author can also be reached at harshit_kakwani@outlook.com