Tds threshold limit under chapter via - gst included or not
This query is : Resolved
10 September 2018
Circular 23/2017 dt 19.7.17 clarifies that TDS should be deducted on amount excluding GST, provided GST is indicated separately.
Now, under Income Tax act, for what purpose should this circular be applied.
1. For the purpose of ‘determining the amount’ on which TDS should be calculation
2. For the purpose of ‘determining TDS APPLICABILITY’ ie: scope of TDS threshold limits
If the scope of the above circular be applied on point no 2, please support your answers with applicable Caselaws or guidance note issued on this.
Eg: If excluding GST, TDS threshold limit is not triggered, but the limit is triggered on including GST. So should TDS be deducted ?
Now, under Income Tax act, for what purpose should this circular be applied.
1. For the purpose of ‘determining the amount’ on which TDS should be calculation
2. For the purpose of ‘determining TDS APPLICABILITY’ ie: scope of TDS threshold limits
If the scope of the above circular be applied on point no 2, please support your answers with applicable Caselaws or guidance note issued on this.
Eg: If excluding GST, TDS threshold limit is not triggered, but the limit is triggered on including GST. So should TDS be deducted ?
10 September 2018
Scope of the circular to be applied on point No 1
10 September 2018
Thanks Mr Seetharaman. But should not we take into consideration the spirit of the circular and apply the same on TDS applicability as well ?
I am looking for any caselaws / guidance on this matter, where GST should be excluded even for TDS applicability
I am looking for any caselaws / guidance on this matter, where GST should be excluded even for TDS applicability
10 September 2018
GST should not be excluded for GST applicability.
12 September 2018
Friends and colleagues, below is my analysis on TDS and GST, more specifically for section 194IA. But the principle can be applied for entire chapter XVII-B (TDs section).
The wordings used in sec 194IA is “…any sum paid to transferor by way of consideration for transfer of any immovable property…” Section does not defines 'consideration', this is where the confusion arise. To clarify the confusion, below is my personal opinion, according to which, GST should not be considered for the purpose of arriving at the threshold limit of Rs 50 lakhs:
1. “… any sum paid…”:
The word used in this section ‘any sum paid’ relate to ‘sum paid for purchase of immovable property’. As per the agreement of sale, GST component is to be paid separately as per the prevailing rates and is not included in the consideration payable to transferor for purchase of immovable property. High court in the case of CIT (TDS) Jaipur vs Rajasthan Urban infrastructure, has also given a similar judgement in case involving TDS under chapter XVII-B of Income Tax act. Further, CBDT’s circular 1/2014 dated 13.1.14 has extended the scope of circular 4/2008 dated 28.4.08 beyond section 194I, to include entire chapter XVII-B, which clarifies that the intent of the law is to charge TDS only on ‘income’ of the recipient, and not ‘any sum’ paid.
2. GST is not sum paid to ‘transferor’:
GST is a sum paid to transferor, for onward payment to Government. Transferor only acts as a collecting agency for government for collection of tax.
3. GST not ‘income’ of the recipient transferor:
GST collected by recipient transferor is paid to Government. The ultimate beneficiary of the tax so collected is Government (and not recipient transferor). Therefore, GST is ‘diversion at source’ of GST so collected. Hence, recipient transferor cannot accrue GST collected as income.
4. GST is not a sum paid by way of ‘consideration’:
GST is not a sum paid by way of consideration, pursuant to agreement of sale. It is a ‘tax’ levied and paid by way of statutory compliance, pursuant to prevailing laws. This levy may vary from time to time. If the rates go down, the charge will go down. If the goods or services are exempted from tax, there will be no charge of GST.
While section 194IA of Income tax act does not defines consideration, section 2(d) of Indian Contracts Act 1872 defines consideration, relevant extracts of which reads as follows “Where, ‘at the desire of promisor’, promisee does something, such an act is called consideration for the promise”. This definition says that the action has to be ‘at the desire of parties involved’. Payment of GST is neither at the desire of transferor nor transferee. It is as per the statutory requirement of prevailing laws. So payment of GST is not at the desire of either parties involved, but to comply with the law.
5. GST is not sum paid for ‘transfer of immovable property’:
GST is a sum paid for complying with the prevailing laws.
6. Cannot and should not differentiate ‘amount which is subject to tax’ and ‘amount used in threshold’:
Going by the spirit of the circular and intent of law, circular No 23/2017 dated 19.7.17 clarifies that wherever in terms of the agreement, GST component is indicated separately, TDS should be deducted on amount without including such GST. If the principle used in the circular is to exclude GST from tax, we cannot include GST while arriving at Rs 50 lakhs threshold limit for scope of section 194IA.
The wordings used in sec 194IA is “…any sum paid to transferor by way of consideration for transfer of any immovable property…” Section does not defines 'consideration', this is where the confusion arise. To clarify the confusion, below is my personal opinion, according to which, GST should not be considered for the purpose of arriving at the threshold limit of Rs 50 lakhs:
1. “… any sum paid…”:
The word used in this section ‘any sum paid’ relate to ‘sum paid for purchase of immovable property’. As per the agreement of sale, GST component is to be paid separately as per the prevailing rates and is not included in the consideration payable to transferor for purchase of immovable property. High court in the case of CIT (TDS) Jaipur vs Rajasthan Urban infrastructure, has also given a similar judgement in case involving TDS under chapter XVII-B of Income Tax act. Further, CBDT’s circular 1/2014 dated 13.1.14 has extended the scope of circular 4/2008 dated 28.4.08 beyond section 194I, to include entire chapter XVII-B, which clarifies that the intent of the law is to charge TDS only on ‘income’ of the recipient, and not ‘any sum’ paid.
2. GST is not sum paid to ‘transferor’:
GST is a sum paid to transferor, for onward payment to Government. Transferor only acts as a collecting agency for government for collection of tax.
3. GST not ‘income’ of the recipient transferor:
GST collected by recipient transferor is paid to Government. The ultimate beneficiary of the tax so collected is Government (and not recipient transferor). Therefore, GST is ‘diversion at source’ of GST so collected. Hence, recipient transferor cannot accrue GST collected as income.
4. GST is not a sum paid by way of ‘consideration’:
GST is not a sum paid by way of consideration, pursuant to agreement of sale. It is a ‘tax’ levied and paid by way of statutory compliance, pursuant to prevailing laws. This levy may vary from time to time. If the rates go down, the charge will go down. If the goods or services are exempted from tax, there will be no charge of GST.
While section 194IA of Income tax act does not defines consideration, section 2(d) of Indian Contracts Act 1872 defines consideration, relevant extracts of which reads as follows “Where, ‘at the desire of promisor’, promisee does something, such an act is called consideration for the promise”. This definition says that the action has to be ‘at the desire of parties involved’. Payment of GST is neither at the desire of transferor nor transferee. It is as per the statutory requirement of prevailing laws. So payment of GST is not at the desire of either parties involved, but to comply with the law.
5. GST is not sum paid for ‘transfer of immovable property’:
GST is a sum paid for complying with the prevailing laws.
6. Cannot and should not differentiate ‘amount which is subject to tax’ and ‘amount used in threshold’:
Going by the spirit of the circular and intent of law, circular No 23/2017 dated 19.7.17 clarifies that wherever in terms of the agreement, GST component is indicated separately, TDS should be deducted on amount without including such GST. If the principle used in the circular is to exclude GST from tax, we cannot include GST while arriving at Rs 50 lakhs threshold limit for scope of section 194IA.
28 July 2025
Great detailed question! Here’s a clear summary and analysis of **TDS threshold limits under Income Tax Act (Chapter XVII-B) and whether GST is included or excluded** for:
---
### Key Point from CBDT Circular 23/2017 (19 July 2017):
* TDS should be deducted **on the amount excluding GST**, **provided GST is shown separately** on the invoice/bill.
* This circular clarifies **the basis for computing TDS amount (i.e., the amount on which TDS is to be calculated).**
---
### Your questions:
1. **Is this circular applicable for:**
* **(1) Determining the amount on which TDS is calculated?**
* **(2) Determining applicability of TDS i.e., whether threshold limits are crossed or not?**
---
### Clarifications and Analysis:
* The **CBDT Circular is explicitly related to Point 1**:
* It clarifies that TDS should be deducted on **value excluding GST** (the actual taxable value or income of the recipient) because GST is a tax collected on behalf of the government, not income of the payee.
* **For TDS Applicability (Threshold Limits) - Point 2:**
* The circular **does not explicitly mention whether GST should be excluded or included when deciding if threshold limits are crossed** for applicability of TDS.
* So, the **default approach** is to consider the **gross amount (including GST)** for threshold applicability **unless otherwise clarified by specific law or case law**.
---
### What do courts and other rulings say?
* **High Court Judgement (Jaipur CIT (TDS) vs Rajasthan Urban Infrastructure & Dev. Ltd):**
* Held that GST is **not income** of the recipient and TDS should be on actual income excluding GST.
* GST is a statutory levy collected on behalf of government, not consideration/payment for the transfer.
* **CBDT Circular 1/2014 (Extending Circular 4/2008) clarifies:**
* The **intent of TDS is on income, not any sum paid**.
* GST being a tax collected for government is **not income** for payee, hence excluded for TDS deduction.
---
### Specific Example: Section 194IA (TDS on Property Purchase)
* The section states TDS on **any sum paid as consideration** for transfer of immovable property.
* GST is usually paid separately and is not part of ‘consideration’ for the property transfer.
* The **threshold limit Rs 50 lakhs is generally considered excluding GST** based on the above principles.
* If GST is included, the threshold may get triggered wrongly. Hence, GST exclusion aligns with the intent of law.
---
### Conclusion and Practical Takeaway:
| Aspect | GST Included? | Explanation |
| ------------------------------------------------ | -------------------------- | ---------------------------------------------------------------------------------------- |
| Amount on which TDS is *calculated* | No | Deduct TDS only on amount excluding GST as per Circular 23/2017 |
| Threshold limit to *determine TDS applicability* | Generally No | Threshold limit should be considered excluding GST (per spirit of law and court rulings) |
| Invoices showing GST separately | GST excluded from TDS base | GST is not income of payee, so exclude GST |
---
### Any case law or authoritative guidance on threshold + GST?
* No direct CBDT circular on threshold limit specifically excluding GST, but
* The principle from Circular 23/2017 and HC rulings supports excluding GST from threshold computation.
* Professional tax experts and authorities generally follow **GST exclusion both for threshold applicability and for TDS calculation**.
---
If you want, I can help prepare a concise note or summary citing these points with references for your official use! Would you like that?
---
### Key Point from CBDT Circular 23/2017 (19 July 2017):
* TDS should be deducted **on the amount excluding GST**, **provided GST is shown separately** on the invoice/bill.
* This circular clarifies **the basis for computing TDS amount (i.e., the amount on which TDS is to be calculated).**
---
### Your questions:
1. **Is this circular applicable for:**
* **(1) Determining the amount on which TDS is calculated?**
* **(2) Determining applicability of TDS i.e., whether threshold limits are crossed or not?**
---
### Clarifications and Analysis:
* The **CBDT Circular is explicitly related to Point 1**:
* It clarifies that TDS should be deducted on **value excluding GST** (the actual taxable value or income of the recipient) because GST is a tax collected on behalf of the government, not income of the payee.
* **For TDS Applicability (Threshold Limits) - Point 2:**
* The circular **does not explicitly mention whether GST should be excluded or included when deciding if threshold limits are crossed** for applicability of TDS.
* So, the **default approach** is to consider the **gross amount (including GST)** for threshold applicability **unless otherwise clarified by specific law or case law**.
---
### What do courts and other rulings say?
* **High Court Judgement (Jaipur CIT (TDS) vs Rajasthan Urban Infrastructure & Dev. Ltd):**
* Held that GST is **not income** of the recipient and TDS should be on actual income excluding GST.
* GST is a statutory levy collected on behalf of government, not consideration/payment for the transfer.
* **CBDT Circular 1/2014 (Extending Circular 4/2008) clarifies:**
* The **intent of TDS is on income, not any sum paid**.
* GST being a tax collected for government is **not income** for payee, hence excluded for TDS deduction.
---
### Specific Example: Section 194IA (TDS on Property Purchase)
* The section states TDS on **any sum paid as consideration** for transfer of immovable property.
* GST is usually paid separately and is not part of ‘consideration’ for the property transfer.
* The **threshold limit Rs 50 lakhs is generally considered excluding GST** based on the above principles.
* If GST is included, the threshold may get triggered wrongly. Hence, GST exclusion aligns with the intent of law.
---
### Conclusion and Practical Takeaway:
| Aspect | GST Included? | Explanation |
| ------------------------------------------------ | -------------------------- | ---------------------------------------------------------------------------------------- |
| Amount on which TDS is *calculated* | No | Deduct TDS only on amount excluding GST as per Circular 23/2017 |
| Threshold limit to *determine TDS applicability* | Generally No | Threshold limit should be considered excluding GST (per spirit of law and court rulings) |
| Invoices showing GST separately | GST excluded from TDS base | GST is not income of payee, so exclude GST |
---
### Any case law or authoritative guidance on threshold + GST?
* No direct CBDT circular on threshold limit specifically excluding GST, but
* The principle from Circular 23/2017 and HC rulings supports excluding GST from threshold computation.
* Professional tax experts and authorities generally follow **GST exclusion both for threshold applicability and for TDS calculation**.
---
If you want, I can help prepare a concise note or summary citing these points with references for your official use! Would you like that?
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