Concept of TDS under GST

Hearing a lot about TDS under GST recently? Read out the blog to know more the concept, applicability, responsibilities, benefits, penalties, etc. of TDS under the indirect tax regime of GST.

Introduction

The term of Tax Deduction at Source (TDS) was first introduced in India, under Income Tax Act, 1961, wherein the receiver of certain specified services has to deduct a portion of tax from the amount payable to the supplier.

The government has now introduced the concept of TDS in the newly introduced indirect tax law, i.e. GST.

The provisions for Tax Deducted at Source for GST as is specified under section 51 of the CGST Act, 2017. The provisions are as follows.

Person liable to deduct TDS

The Government may order the following persons to deduct tax at source

1. A department or an establishment of the Central Government or the State Government; or

2. Local Authority; or

3. Governmental agencies; or

4. Such persons or category of persons as may be notified by the Government on the recommendation of the Council.

Thus the liability for deducting TDS is currently over the governmental organizations, but the provisions may be extended to Non-Government bodies at a later day by the virtue of clause D.

Tax rate for Deducting Tax- 1%

• The tax shall be deducted @ 1%;

• Of the payments made or credited;

• To the supplier of the taxable goods or service or both;

• Where the total value of such supply under a contract;

• Exceeds Rs. 2,50,000/-

Thus TDS shall be deducted at the time of credit in the books or payment whichever is earlier, for all the supply made even if the value of individual supplies is less than Rs. 2,50,000/- but the value of contract thereof is more than Rs. 2,50,000/-

Situations where TDS shall not be deducted

As per proviso to section 51(1),

• Tax shall not deducted;

• If the location of the supplier AND the place of Supply;

• Is in a State/ UT, which is different from the State/ UT of the recipient

The same can be understood through following situations

In the 3rd scenario above, TDS will not be deducted as it is a case of Intra State Sale and CGST + SGST has to be deducted and the supplier will not be able to take credit of SGST as the same will be of Gujarat (as the place of TDS deductor is Gujarat) and the supplier registered place is in Maharashtra.

Thus when both the supplier as well as the place of supply is different from that of the recipient, no tax deduction at source would be made.

Registration of Tax Deductor

It is compulsory for a tax deductor to be registered under GST. The threshold limit does not apply in case of persons responsible to deduct tax.

The tax deductor need not quote PAN while obtaining registration under GST. He can register using TAN issued under Income Tax Act, 1961

Deposit of Tax with Government

The TDS should be deposited by the deductor to the Government by 10th of the next month. The deductor will be liable to pay interest if TDS is not deposited within the prescribed time.

TDS Certificate

The person deducting tax shall be required to issue a TDS certificate to the supplier within 5 days of crediting the amount to Government.

TDS Return

The deductor is also required to file a return in GSTR- 7 within 10 days from the end of the month.

Time Line for TDS under GST

Penalty for Non-Compliance of TDS Provision

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