Table of Contents
Complete Guidance on TDS applicable on Goods and services
GST TDS is the system through which a certain percentage of tax is collected at the source of the income. Certain Government departments, Local Authorities, Agencies, and Public Sector Undertaking are required to deduct GST TDS. GST TDS is a dynamic tool for the reduction of tax evasion.
Section 51 of the CGST Act, 2017 contains the provisions of TDS under GST. As per the said provisions, the following list of persons are liable to deduct TDS under GST: -
- A department or establishment of the Central Government or State Government
- Local authority
- Governmental agencies
- Such a person or category of persons as may be notified by the Government on the recommendations of the Council.
The Government introduces the following additional category of the person liable to deduct tax at source, via notification no. 33/2017 dated 18.09.2017:
- An authority or a board or any other body which has been set up by Parliament or a State Legislature or by a government, with 51% equity (control) owned by the government;
- A society established by the Central or any State Government or a Local Authority and the society is registered under the Societies Registration Act, 1860;
- Public Sector Undertakings.
Basic understanding of TDS compliances
TDS Rate under GST
TDS @ 2% is expected to be deducted from the payment made to the supplier of taxable products or services if the value of the supply exceeds Rs. 2.5 Lakhs under the contract. The terms of the TDS on GST shall apply from 1 October 2018. For the purpose of determining the value of the contract, the following shall be excluded.
- GST Integrated
- GST Central
- GST Union Territory
- Cess'
- GST State
The TDS rate under GST is 2%. It means that the deductor has to deduct TDS @ 2% on the payment made or credited to the deductee for the supply of taxable goods or services or both.
Is TDS one percent or two percent of GST?
- One % of TDS is expected to be deducted under both the CGST and the SGST Act and hence the total TDS to be deducted is 2 percent. In the case of inter-state trade, IGST would be levied and 2% of TDS would also be levied in this case.
- In the event that an interstate supply is made by the above-mentioned supplier, TDS @2 %, i.e. Rs. 20k will be expected to be deducted under the GST Act and deposited with the Government.
- The meaning for the purpose of measuring the sum of TDS shall not include 18 percent of GST.
GST Registration mandatory
It is mandatory to obtain GST registration for the person who is liable to deduct TDS as per the provisions of section 51 of CGST Act, 2017. If GST registration is not taken, then the exemption limit is not applicable to such persons. The unique feature of GST registration is that PAN is not compulsory for obtaining GST registration, however, GST registration can be obtained on the basis of existing Tax Deduction and Collection Account Number (TAN).
Liability for Deducting TDS under GST
GST TDS is required to be deducted when the total value of supply, under a contract, exceeds an amount of INR 2,50,000/-.
For the purpose of deduction of GST TDS, the amount of value of supply shall be excluding the amount of central tax, state tax, union territory tax, integrated tax and cess as mention in the invoice.
GST TDS Non-Applicable
When both the supplier and the place of supply are different from the recipient, no tax deduction at the source would be made.
Payment of GST TDS to which government
The deductor of TDS is required to deposit the amount deducted to the Government on the 10th day of the succeeding month in which the tax is deducted. The payment of TDS should be made to the respective Government i.e. IGST and CGST should be deposited to Central Government and SGST should be deposited to State Government.
What is the Penalty for not fulfil the compliance of Tax Deducted at Source on Goods and Services Tax?
S. No. |
Event |
Consequence |
|
1. |
Tax Deducted at Source on Goods and Services Tax not deducted |
Interest to be paid along with the Tax Deducted at Source amount; else the amount shall be determined and recovered as per law. |
|
2. |
Tax Deducted at Source on Goods and Services Tax Certificate, not compliance issued or delayed beyond the prescribed period of five days |
Late Fee of Rs. One Hundred per day subject to a maximum of Rs. 5k. |
|
3. |
Tax Deducted at Source on Goods and Services Tax Deducted but not paid to the Govt or paid later than Tenth of the Next month. |
Interest to be paid along with the Tax Deducted at Source amount, else the amount shall be determined and recovered as per law. |
|
4. |
Late filing of Tax Deducted at Source Return |
Late fees of Rs. One Hundred per day for each day for which the failure continues subject to a maximum of Rs. 5k. |
Any insufficient or inaccurate amount deducted and charged to the Government shall be refunded in accordance with Section 54. Although if the amount deducted is already added to the supplier's digital cash account, the same must not be refunded.
Penalty for not issuing a certificate within the time limit
TDS certificate in FORM GSTR-7A is to be issued by the deductor to the deductee within a period of 5 days of crediting the amount to the Government. In case the deductor fails in issuing the certificate in the required time limit, he would be liable to pay a late fee of INR 100/- per day from the expiry of the 5th day till the date certificate has been issued. The maximum amount of late fee payable would be INR 5,000/-.
GST TDS Credit
GST TDS deducted by the deductor and deposited to the Government shall be shown in the electronic cash ledger of the deductee. The deductee would be able to use the said amount against payment of tax.
Liability of Return Filing
The person deducting TDS is liable to file GST return in FORM GSTR-7 within a period of 10 days from the end of the month.
GST TDS Refund
When TDS has been deducted in excess of the amount actually to be deducted, then, in such case deductor or deductee can claim for refund of such excess TDS. However, if the excess amount deducted is already credited in the electronic cash ledger of the deductee then no refund will be given.
Complete Guidance on TDS applicable on Goods and Services Tax
