You might be aware of the concept of TDS & TCS in the Income tax Act. Similar concepts were introduced in GST, though these were deferred to a later date. Recently, government has notified that the provisions relating to TDS under GST would become applicable w.e.f. 01st October 2018.
So, the laws around these concepts become relevant & thus we aim to let taxpayers be acquaint with the applicable laws.
TDS is one of the modes/methods to collect tax, under which, certain percentage of amount is deducted by a recipient at the time of making payment to the supplier.
GST law has mandated a certain class of persons listed below to deduct TDS while making payments to the supplier of goods or services:
The above persons are required to deduct TDS at 2 % where the total value of such supply, under an individual contract, exceeds INR 2,50,000 (excluding the amount of GST). This also means that TDS would be deducted on the value exclusive of GST and no TDS would be deducted on the GST component.
It is also to be noted that TDS is not required to be deducted if the location of the supplier and the place of supply is in a State which is different from the State of registration of the recipient.
For example: Supplier as well as the place of supply are in State A and the recipient is in State B. The supply would be intra-State supply. In such case TDS would not be deducted.
Any amount deducted as TDS and reported in GSTR 7 will automatically reflect in the electronic cash ledger of the deductee. 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.
(The author is a CA in practice at Delhi and can be contacted at: E-mail: email@example.com, Mobile: +91-9811741451)