In this article you will learn:
Initially, as per Notification No. 33/2017 – Central Tax dated 15th September, 2017, the government decided that the provisions of section 51(1) would come into effect from September 18th, 2017.
However, in suppression to this Notification, Notification No. 50/2018 – Central Tax was released by the government on 13th September, 2018. According to this notification, the government decided that the provisions of TDS under GST would come into effect from October 1st, 2018.
This article talks about provisions of TDS under GST, persons liable to deduct TDS, Registration of TDS Deductors, TDS Certificate and Return.[/vc_column_text]
Who Deducts TDS Under GST?
As per section 51 of the CGST Act, 2017, following are the persons who are liable to deduct TDS under GST:
- Department of Central Government or State Government or
- Local Authority
- Governmental Agencies
- Such category of persons as may be notified by the government on the recommendation of the GST Council
In addition to the persons mentioned above, the government via notification no. 50/2018 – Central Tax dated 13th September, 2018, specified additional set of persons liable to deduct GST. These include:
- Any authority, Board or any other Body which is: (i) Set up by an Act of Parliament or State Legislature or (ii) Established by any government with 51% equity share to carry out any function
- Society established by Central Government, State Government or Local Authority under Societies Registration Act, 1860
- Public Sector Undertakings
Deductor and Deductee
The recipients of goods or services who are liable to deduct TDS under GST are called as deductors. On the other hand, the suppliers of goods or services from whose tax invoice TDS is deducted are called as deductees.
Applicability of TDS Under GST
Recipients of goods or services also known as deductors who enter into a contract with a supplier for taxable goods or services of a value exceeding Rs 2.50 Lakhs are required to deduct TDS from the tax invoice of such suppliers.
This TDS is charged on the taxable amount of goods or services which excludes the GST component on such taxable goods or services.
In other words, where the individual supplies maybe less than Rs 2.50 Lakhs but where the taxable value of goods or services exceeds Rs 2.50 Lakhs, TDS would be deducted.
Thus, there are certain conditions that need to be fulfilled in order to deduct TDS from the tax invoice of the supplier of taxable goods and services. These are as follows.
- The aggregate value of taxable supply must exceed Rs 2.50 Lakhs under a single contract. This taxable value does not include CGST, SGST, IGST, UTGST and CESS applicable under GST.
- In case, the recipient enters into a contract with the supplier for both taxable supply and exempted supply, TDS would be deducted only if the value of taxable supply in the contract exceeds Rs 2.50 Lakhs. This taxable value does not include Taxes and CESS applicable under GST.
- Where the location of the supplier and the place of supply are within the same state or UT, it is the case of intra-state supply. TDS at the rate of 1% each under CGST and SGST/UTGST would be deducted, that is, total 2% (1%CGST and 1%SGST/UTGST) where the recipient or the deductor is registered in the same state or UT without legislature.
- In cases where the location of the supplier is in State A and the place of supply is in State or UT B without legislature, it is the case of inter-state supply. TDS at the rate of 2% would be deducted under IGST. Provided the recipient or the deductor is registered in the state or UT B without legislature.
- Where the location of the supplier is in State A and the place of supply is in State or UT B without legislature, it is the case of inter-state supply. TDS at the rate of 2% would be deducted under IGST. Provided the recipient or the deductor is registered in the state or UT A without legislature.
- In cases where advance is paid to the supplier on or after October 1, 2018, for supply of taxable goods or services, TDS at the rate of 2% would be deducted.
When TDS is Not Deducted
Following are the cases when TDS is not to be deducted:
- Where the total value of taxable supply is less than or equal to Rs 2.50 Lakhs under the contract.
- The Total contract value exceeds Rs 2.50 Lakhs both for taxable as well as exempted supply. However, the value of taxable supply under such contract is less than or equal to Rs 2.50 Lakhs.
- Where, the recipient receives exempted services as defined by the GST Law.
- The recipient receives exempted goods as mentioned under the GST Law.
- Cases where supplier/deductee had issued an invoice for sale of goods in regards to which TDS was to be deducted under the VAT Law before July 1st, 2017. However, payment for such a sale is made on or after July 1st, 2017.
- Where, the location of the supplier and the Place of Supply is in a State or UT that is different from the State or UT the recipient/deductor is registered in.
- In cases where the contract includes activities or transactions that are included in Schedule III of CGST/SGST Acts regardless of their value.
- Cases where payment to be made to the supplier relates to the tax invoice that has been issued before October 1st, 2018.
- In cases where advance amount was paid before October 1st, 2018 and the tax invoice was issued on or after October 1st, 2018. Thus, TDS will not be deducted to the extent of the advance payment made prior to October 1st, 2018.
- Cases where tax is required to be paid on reverse charge basis by the recipient
- In cases where payment is made to the supplier
- Where the payment is with regards to the CESS component
TDS Rate Under GST
TDS under GST is deducted at the rate of 2% on the payment made to the supplier of taxable goods and services.
TDS Under GST With Example
As mentioned above, the value of supply is taken as the amount on which TDS is charged. Accordingly, TDS is charged only on the taxable value of supply excluding the Central Tax, State Tax, UT Tax, IGST and Cess mentioned in the invoice.
To understand how TDS is charged, let us consider an example.
A vendor supplies services worth Rs 3,00,000 to a recipient on which GST at the rate of 18% is to be charged. The recipient would deduct Rs 6,000 as TDS while making the payment to the supplier.
Accordingly, the amount of TDS would not include 18% GST. TDS of 2%, therefore would be charged on the value of supply which is Rs 3,00,000 (Excluding GST) in this case and not Rs 3,18,000 (Value of Supply + GST).
Registration of TDS Deductors
The TDS Deductors need to mandatorily register irrespective of their turnover. The deductors can register under GST without obtaining PAN. Accordingly, registration can be availed via tax deduction and collection number that is issued under the Income Tax Act, 1961 (TAN).
Due Date for Depositing TDS
Tax Deducted At Source (TDS) must be deposited in the government account by the 10th of the succeeding month. Thus, in case the deductor fails to deposit the TDS within the prescribed time limit, he is liable to pay interest for the same.
Every Deductor who is liable to deduct Tax at Source must issue a TDS Certificate in Form GSTR-7A to the supplier/ deductee. Such a certificate must be issued within 5 days of depositing TDS to the government. In case, the deductor fails to do so, he is liable to pay a late fee of Rs 100 per day.
Such a fee is paid from the expiry of the 5th day until the certificate is issued. However, this late fee should not be more than Rs 5,000. The TDS so deposited to the government account shall be reflected in the electronic cash ledger of the deductee. Therefore, the deductee can use such an amount to pay tax or any other amount.
The recipient/TDS Deductor is required to file return in Form GSTR-7 within 10 days from the end of the month for which TDS is deducted. In cases where the supplier is unregistered, the name of the supplier in place of his GSTIN would be mentioned in the Return.
Further, the details in respect of TDS as filed by the Deductor in Form GSTR-7 would be provided to each of the supplier or the deductee in Part C of Form GSTR-2A electronically via the common portal. Such details can then be included by the supplier in Form GSTR-2.
The supplier can avail credit of such an amount in his electronic cash register and use it for payment of tax or any other liability.
Penalty for Non-Compliance
- Where the Deductor fails to deduct TDS, he needs to pay interest along with the TDS amount. Otherwise, the amount shall be determined and recovered as per the Law.
- In cases where TDS Certificate is not issued or is issued beyond the prescribed time period of 5 days, late fee of Rs 100 per day subject to a maximum of Rs 5,000 would be charged.
- There can be a case where TDS is deducted but is not deposited to the government account or is paid later than 10th of the following month. In such a case, the deductor needs to pay interest along with the TDS Amount. Otherwise the amount shall be estimated and recovered by the Law.
- In case where the TDS Return is filed late, a late fee of Rs 100 per day subject to a maximum of Rs 5,000 would be charged until such time the default continues.
TDS Refund Under GST
There can be cases where excess amount or a wrong amount of TDS is deducted or deposited to the government account. Such a TDS Deduction can be claimed as refund as per section 54 of the CGST Act, 2017.
But if such a TDS Deduction is already credited to the electronic cash ledger of the supplier, then such a deduction cannot be refunded.