TDS UNDER GST

Meaning of Tax Deduction at Source TDS

Tax Deduction at Source (TDS) is a system, introduced by the Income Tax Department. It is one of the mode to collect tax, under which, certain percentage of amount is deducted by a recipient at the time of making payment to the supplier. It acts as a powerful instrument to prevent tax evasion and expands the tax net, as it provides for the creation of an audit trail.

Under the GST law as per section 51 of CGST/SGST Act 2017 authorization for Tax Deduction at Source (TDS).as 28th GST council meeting held on 21.07.2018 recommended that the introduction of TDS from 01.10.2018

Brief Diagrammatic presentation of the TDS provisions in GST:

When tax deduction is required to be made in GST:

 Tax is required to be deducted from the payment made / credited to a supplier, if the total value of supply under a contract in respect of supply of taxable goods or services or both, exceeds Rs. 2,50,000/-.

This value shall exclude the taxes leviable under GST (i.e. ‘Central tax’, ‘State tax’, ‘UT tax’, ‘Integrated tax’ & Cess).

3.1 Conditions for & amount of deduction:

 Þ Tax deduction is required if all the following conditions are satisfied –

a. Total value of taxable supply > Rs.2.5 Lakh under a single contract. This value shall exclude taxes & cess leviable under GST.

b. If the contract is made for both taxable supply and exempted supply, deduction will be made if the total value of taxable supply in the contract > Rs.2.5 Lakh. This value shall exclude taxes & cess leviable under GST.

c. Where the location of the supplier and the place of supply are in the same State/UT, it is an intra-State supply and TDS @ 1% each under CGST Act and SGST/UTGST Act is to be deducted if the deductor is registered in that State or Union territory without legislature.

d. Where the location of the supplier is in State A and the place of supply is in State or Union territory without legislature - B, it is an inter-State supply and TDS @ 2% under IGST Act is to be deducted if the deductor is registered in State or Union territory without legislature - B.

e. When advance is paid to a supplier on or after 01.10.2018 to a supplier for supply of taxable goods or services or both.

Tax deduction is not required in following situations:

a) Where the tax is to be paid on reverse charge by the recipient i.e. the deductee.

 b) Where the payment is made to an unregistered supplier.

c) Where the payment relates to “Cess” component.

d) supply of service is exempt in terms of Sl. No. 3A of notification No.12/2017 – Central Tax (Rate) dated 28.06.2017 as amended by notification no. 2/2018- Central Tax (Rate) dated 25.01.2018

Persons liable to deduct tax under GST Law:

 As per the provisions of the GST Law, the following persons are mandatorily required to deduct TDS:-

(a) A department or establishment of the Central/ 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.

 The following class of persons under clause (d) of section 51(1) of the CGST Act, 2017 has been notified vide notification No. 33/2017 – Central Tax dated 15.09.2017 :-

(a) An authority or a board or any other body,—

      (i) Set up by an Act of Parliament or a State Legislature; or

     (ii) Established by any Government, with fifty-one percent or more participation by way of equity or control, to carry out any function;

(b) Society established by the Central/ State Government or a Local Authority under the Societies Registration Act,1860;

(c) Public sector undertakings.

TDS return:

a) Every registered TDS deductor is required to file a Return in FORM GSTR 7 electronically within 10th of the month succeeding the month in which deductions have been made to avoid payment of any late fee, interest.

b)The filing the TDS Return in FORM GSTR-7 can be done both through the online mode in the GST portal as well as by using the offline tool.

Late fee, interest and penalty:

The provision of late Fees in respect of TDS in the GST is a two layered provision.

• If the deductor fails to furnish the return in FORM GSTR-7 (under Section 39(3)) by the due date (i.e. within 10 days of the month succeeding the month in which deduction was made) he shall pay a late fee of Rs. 100/- per day under CGST Act & SGST/UTGST Act separately during which such failure continues subject to a maximum amount of Rs. 5000/- each under CGST Act & SGST/UTGST Act.