Tax Deducted At Source (TDS) Under GST – With Examples

By virtue of Section 51 of CGST Act 2017, government has introduced the concept of Tax Deducted at Source under GST, unlike it is there under Income Tax. TDS refers to the tax which is to be deducted when the recipient of goods/ services makes some payments under contract.

Intention behind this seems to be, early and definite tax collection from unorganised sector. The purpose of TDS is just to enable the government to have a trail of transactions and to monitor and verify the compliances.

In this article, we will be understanding, various provisions with respect to GST TDS.

A. Who Is Required To Be Deduct GST TDS:

  • Department or establishment of the Central Government or State Government; or
  • local authority; or
  • Governmental agencies
  • Person notified [ Vide Notification No 50/2018 CT dated 15th Sep 2018, Govt has notified below persons ]
  1.  - An authority or a board or any other body [ set up by an Act of Parliament or a State Legislature; or established by any Government ] with 51% or more participation by way of equity or control, to carry out any function;

     - Society established by the Central Government or the State Government or a Local Authority under the Societies Registration Act, 1860 (21 of 1860);

     - Public Sector Undertakings

B. Applicable From:

  • Even though GST was implemented from 1st July 2017 throughout the country. However, implementation of GST TDS was delayed due to IT and legal infrastructure for GST TDS provisions were not ready and its adaptability amount the tax payers.
  •  However, GST TDS Provisions were made effective from 1st Oct 2018, vide Notification No 50/2018 CT dated 15th Sep 2018. This provision is applicable on supply of goods as well as on supply of services.

C. TDS Not Required To Be Deducted If

  • If supply is made by person other than person specified under Para ‘A’ above
  • If value of contract is not more than Rs 2.5 lakhs
  • If supply is of exempted goods or services.
  • If supply of goods or services or both which takes place between one person to another person specified under Para ‘A’ above. [ Notification No. 73/2018 – CENTRAL TAX 31ST Dec 2018 ]
  • 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. For more understanding of this refer below hypothetical example:

Location of Supplier

Place of Supply

State in which recipient is located

Nature of Supply

Whether GST TDS is to be deduced ?

Maharashtra

Maharashtra

Maharashtra

Intra State Supply ( CGST + SGST)

YES (1% CGST + 1% SGST )

Maharashtra

Maharashtra

Gujrat

Intra State Supply ( CGST + SGST)

No [ This is because supplier of Gujrat cant deduct and pay CGST + SGST of Maharashtra ]

Maharashtra

Gujrat

Gujrat

Inter State (IGST)

YES (2% IGST)

D. Procedural Aspect  - Due Date for
Payment, Return and Certificate

  • Due date for Payment: The amount tds shall be paid to the Government by the deductor within 10 days days after the end of the month in which such deduction is made.
  • TDS Return: The deductor is also required to file GST return in Form GSTR-7 within 10 days from the end of the month. The details of tax deducted at source furnished by the deductor in FORM GSTR-7 shall be made available to each of the suppliers in Part C of FORM GSTR-2A electronically through the Common Portal. The supplier can take this amount as credit in his electronic cash register and use the same for payment of tax or any other liability.
  • TDS Certificate: The deductor shall furnish to the deductee a certificate (Form GSTR-7A) mentioning therein the contract value, rate of deduction, amount deducted, amount paid to the Government
  • Due date for TDS Certificate:If any deductor fails to furnish to the deductee the certificate, after deducting the tax at source, within 5 days of crediting the amount so deducted to the Government, the deductor shall pay, by way of a late fee, a sum of Rs 100 per day from the day after the expiry of such five day period until the failure is rectified, subject to a maximum amount of Rs 5000
  • Credit of TDS in Cash Ledger: The deductee shall claim credit, in his electronic cash ledger, of the tax deducted and reflected in the return of the deductor

E.Individual Supplies Under Contract:

  • If value of Individual supplies is less than Rs. 2, 50,000/-, but if contract value is more than Rs. 2, 50,000/-, GST TDS will have to be deduced.

F. COMPULSORY REGISTRATION FOR
 GST TDS DEDUCTORS:

  • As per Sec 24 of CGST Act 2017, TDS deductor has to compulsorily register without any threshold limit as GST TDS Deductor. The deductor has a privilege of obtaining registration under GST without having required to obtain PAN. He can obtain registration using his TAN Number issued under the Income Tax Act, 1961

G. Clarification With Respect To
Applicability Of TDS -
Circular No. 76/50/2018-GST:

  • A doubt has arisen about the applicability of long line mentioned in clause (a) of notification No. 50/2018- Central Tax dated 13.09.20
tds under GST

It is clarified that, the provisions of section 51 of the CGST Act are applicable only to such authority or a board or any other body set up by an Act of parliament or a State legislature or established by any Government in which fifty one per cent. or more participation by way of equity or control is with the Government.

Read More -   GST on Housing Society - July 2019 Update

Extension Of Due Date For GST TDS Return:

  • Vide Notification No 26/2019 dated 28th June 2019, government has extended due date for furnishing the return by a registered person, required to deduct TDS as per Sec 51 of CGST Act in FORM GSTR-7 of the Central Goods and Services Tax Rules, 2017, under Sec 39(3) read with rule 66 of the Central Goods and Services Tax Rules, 2017, for the months of October, 2018 to July, 2019 till the 31st day of August, 2019.

Penal Provisions Under GST TDS:

  • Vide Notification No 26/2019 dated 28th June 2019, government has extended due date for furnishing the return by a registered person, required to deduct TDS as per Sec 51 of CGST Act in FORM GSTR-7 of the Central Goods and Services Tax Rules, 2017, under Sec 39(3) read with rule 66 of the Central Goods and Services Tax Rules, 2017, for the months of October, 2018 to July, 2019 till the 31st day of August, 2019.

NATURE OF DEFAULT

CONSEQUENCES

TDS not deduced or deducted but not paid

TDS is required to be paid along with interest

TDS certificate not issued or delayed

Late fee of rs 100/- + rs 100/- per day subject to maximum of rs 5000/- + rs 5000

Late filing of TDS return

Late fee of rs 100/- + rs 100/- per day subject to maximum of rs 5000/- + rs 5000

This article is only for educational purpose.
For any clarification, you may contact us.

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