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TDS refund Eligible or not?

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Jay Raj

37 Points Posted on 16 June 2023

A dealer has made exemt supply to govt department of more than 2.5 lacs and the Govt dept deducted 2% Tds from the payment to be made to the supplier and also showed in their GSTR-7 and issued Tds certificate in 7-A format. The dealer who supplied exemted goods accepted the Tds credit in his 2-A and hence it is trsnsferred to his cash ledger. Supplier has made refund application on the grounds of excess balance in cash ledger. Is he eligible for refund? As per Section 51, Tds is to be deducted on taxable supply but here the supply is exempt. Please offer your comments. Thanks

Replies (4)

Quick Summary

This discussion explores whether a dealer is eligible for a TDS refund when tax was incorrectly deducted on an exempt supply to a government department. Although TDS is typically on taxable supplies, the dealer accepted the credit, which moved to their cash ledger. The consensus suggests that while refunds for erroneous TDS deductions are possible under Section 54 of the CGST Act, if the deducted amount has already been credited to the supplier's electronic cash ledger, a refund may not be granted based on Section 54(8).

CA Mohd Firoz Khan

Chartered Accountant

90 Points Posted on 16 June 2023

Legal Position :

TDS is to be deducted at the rate of 2% on payments made to the supplier of taxable goods and/or services, where the total value of such supply, under an individual contract, exceeds Rs.2,50,000. No deduction of Tax is required when the location of supplier and place of supply is different from the State of the registration of the recipient.

Conclusion :

Yes, there is remedy. 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.

Best Regards,

CA Mohd. Firoz Khan

ca.mfkhan @ gmail.com

Jay Raj

37 Points Posted on 16 June 2023

Thanks for your response,Sir. the question is: can the supplier claim the refund? Because as per 54(8), the deductor is not eligible for such erroneously deducted refund if the supplier has accepted the same and transferred to his cash ledger. the section 54(8) is binding only for the deductor?