Tax Deduction at Source (TDS) under GST

Tax Deduction at Source is a system, in which as soon as you earn you have to pay certain percentage of the amount being deducted by the recipient at the time of making payment to the supplier. It helps in ensuring regular cash inflow to government.

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, exceed two lakhs fifty thousand (2,50,000/-); (excluding the amount of central tax, state tax, Union Territory tax, Integrated tax and cess indicated in the invoice).

Deposit of TDS should be deposited to the government account by the deductor by 10th of the succeeding month. The TDS so deposited in the government account shall be reflected in the electronic cash ledger of the supplier (i.e. deductee) who would be able to use the same for payment of tax or any other amount.

The deductor could be liable if he does not deposit the amount within the prescribed time limit.

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 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 till the certificate is issued, but will not exceed more than 5000/-.

Example: Suppose a supplier makes a supply worth Rs. 2000/- to a recipient and the GST @18% is required to be paid. The recipient, while making the payment of 2000 rupees to the supplier, shall deduct 1% i.e. 2 rupees as TDS. The value for TDS purpose shall not include 18% of GST.

The purpose of TDS is just to enable the government to have a trail of transactions and to monitor and verify the compliance.