Section 51 of the CGST Act, 2017 lays down the rules and the procedure for tax deduction at source (TDS) under GST. In the 28th GST Council meeting, the Council suggested that TDS be introduced from October 1, 2018.
Therefore, it is important to know the persons liable to deduct TDS in order to understand the concept of TDS under GST. These persons are known as deductors and are the recipients of goods or services that a supplier offers. The deductors are the special category of persons under GST who deduct TDS from the payment made to the suppliers of goods or services or both at a specified rate. Thus, the suppliers from whose payment the TDS gets deducted are known as deductees.
Who Can Deduct TDS Under GST?
As per section 51 of the CGST Act, following are the deductors who can deduct TDS under GST:
- Department or establishment of central government or state government
- Local authority
- Governmental agencies
- An authority or a board or any other body
- Set up by an Act of Parliament or State Legislature
- Established by any government (with 51% or more participation by way of equity or control to carry out any function)
- A society established by Central Government or State Government or Local Authority under Societies Registration Act, 1860.
- Public sector undertakings
When is TDS Deducted?
The deductors mentioned in the above section are required to deduct TDS from the payment made to the supplier. Such a tax is deducted if the total value of the supply under a single contract exceeds Rs 2.50 Lakhs. It must be noted that such a value of supply under a contract does not include the taxes levied under GST. That is Central Tax, State Tax, UT Tax, Integrated Tax and Cess.
Furthermore, the rate of TDS is 2%, that is 1% CGST and 1% SGST in case of intra-state supply under GST. And, the rate of TDS is 2%, that is 2% IGST for inter-state supplies.
Conditions For Deducting TDS
The deductors are required to deduct TDS from the payment made to the supplier when:
- The total value of supply under a single contract is more than Rs 2.50 Lakhs. This taxable value shall not include taxes and Cess charged under GST.
- Contract made for the purchase of goods or services contains both taxable and exempt supplies. In such a case, the deduction is made if the total value of taxable supply under the contract exceeds Rs 2.50 Lakhs. Further, such taxable value does not include taxes and Cess charged under GST.
- The location of the supplier, place of supply and the recipient are in the same state or union territory. Such a case relates to intra-state supplies. Furthermore, TDS at the rate of 1% each for CGST and SGST is required to be deducted by the deductor.
- Location of the supplier is in State A whereas the place of supply is in State B. Further, the recipient too is registered in State B. This case relates to the inter-state supplies. Furthermore, TDS at 2% IGST is to be deducted by the deductor.
- The location of the supplier is in State A and the place of supply is in State B. Whereas, the recipient is registered in State A. Such a case relates to inter-state supply. Furthermore, TDS at 2% IGST is required to be deducted by the deductor.
But, TDS is not deducted where the state of the supplier and the place of supply is different from the state where the deductor is registered.
What is GSTR-7?
GSTR 7 is a monthly return that is required to be filed by the deductors who are required to deduct TDS under GST. Such a return consists of the details regarding:
- tax deducted at source,
- the liability towards TDS,
- TDS Refund claimed if any
- Interest, late fees etc. paid or payable
GSTR-7 provides details with regards to the TDS deducted, TDS payable etc. by the deductor for a particular month. This information is made available to the deductees (suppliers) in Part C of Form GSTR-2A electronically via the common portal. Further, this information can be included by the deductee in Form GSTR-2. The TDS deducted by the deductor gets reflected in Form GSTR-2 of the supplier. Further, the supplier can take the credit of this TDS amount in his electronic cash ledger. Thus, he can utilize this credit to make payment for his output tax or any other liability.
The deductor deducts TDS at the time of crediting the payment to the supplier or the deductee. Further, he files return in Form GSTR-7 and pays the deducted tax to the government within 10 days succeeding the month in which the deduction is made.
Due Date For Filing GSTR-7
GSTR-7 is required to be filed by the deductor within 10 days after the end of the month in which the deduction was made. For example, the due date for filing GSTR-7 for the month of June 2018 would be 10th July, 2018.
Penalty For Not Filing GSTR-7
The deductor is liable to pay interest, penalty or fees if he does not comply with the provisions of TDS under GST. Following are the cases of non – compliance of TDS provisions by the deductor and its following consequences:
- The deductor fails to deduct TDS from the payment of the supplier. In such a case, the deductor is liable to pay interest not exceeding 18% along with TDS amount. Or else the amount payable is calculated and recovered according to the law.
- Deductor fails to issue TDS Certificate or gets delayed in issuing the same beyond the prescribed period of 5 days from filing of return. In this case, the deductor is liable to pay a late fee of Rs 200 per day (Rs 100 each for CGST and SGST), subject to a maximum of Rs 5,000.
- The deductor deducts TDS but fails to pay the same to the government. Or makes the payment of TDS later than 10th of the succeeding month. In this case, the deductor is liable to pay interest not exceeding 18% along with the TDS amount. Or else the amount shall be calculated and recovered according to the law.
- Late filing of TDS return, that is, Form GSTR-7A. In this case, the deductor is liable to pay a late fee of Rs 200 (Rs 100 each for CGST and SGST), subject to a maximum of Rs 5,000.
Contents of GSTR-7
Goods and Services Tax Identification Number (GSTIN) of the deductor deducting TDS under GST. Each person registered under GST is given state-wise, PAN based GSTIN number. This gets auto-populated at the time the deductor is filing return for GST.
2. Business Name
- Legal name of the deductor
- Trade name if any
This section too gets auto-populated at the time of signing in to the common GST portal. If there exists any trade name of the registered person, such a number too gets auto-populated.
3. Details of the tax deducted at source.
This section contains the details with regards to the:
- amount of payment made to the deductee on which TDS is charged
- GSTIN of the deductee and
- the amount of tax deducted at source in terms of Central, State and Integrated tax.
4. Amendments to details of tax deducted at source in respect of any earlier tax period.
The deductor can make any modifications with regards to the information furnished in the returns of the previous months. This is undertaken by mentioning the original and the revised details in the table under this section. The information furnished in the table under this section includes:
- original and revised details of the GSTIN of the deductee,
- amount paid to the deductee on which TDS is deducted and,
- the amount of TDS deducted
5. Tax deduction at source and paid
This section includes the details with regards to central, state and integrated tax deducted from the payment made to the deductee. Furthermore, it also includes the central, state and integrated tax paid to the government.
6. Interest, late Fee payable and paid
This section would include the details of any interest, late fee payable or paid if applicable.
7. Refund claimed from electronic cash ledger
The deductor must make a mention of the details regarding TDS refund under this section. This must be done to claim a refund for TDS from his electronic ledger. He should also provide the bank details where the TDS refund should be deposited.
8. Debit entries in electronic cash ledger for TDS/interest payment (to be populated after payment of tax and submissions of return)
This section gets auto-populated after the deductor files the TDS return and makes the payment for the same along with interest.