GST Provisions for Tax Deducted at Source ( TDS ) have become applicable since 01-10-2018. Detailed analysis with section, rules, notifications and circulars is as under :
1. Who is liable to deduct TDS ?
The persons specified under clauses (a), (b) and (c) of section 51 (1) and persons notified under clause (d) of section 51 (1) of the CGST Act are liable to deduct tax at source. These persons are as under:
(a) a department or establishment of the Central Government or State Government; or
(b) local authority; or
(c) Governmental agencies; or
(d) notified vide notification no. 50/2018 – Central Tax dated 13-09-2018
(a) an authority or a board or any other body, –
(i) set up by an Act of Parliament or a State Legislature; or
(ii) established by any Government, with fifty-one per cent. or more participation by way of equity or control, to carry out any function;
(b) Society established by the Central Government or the State Government or a Local Authority under the Societies Registration Act, 1860 (21 of 1860);
(c) public sector undertakings.
Local Authority has been defined under section 2 (69) of the Act. It is reproducted as under:
“local authority” means—
(a) a “Panchayat” as defined in clause (d) of article 243 of the Constitution;
(b) a “Municipality” as defined in clause (e) of article 243P of the Constitution;
(c) a Municipal Committee, a Zilla Parishad, a District Board, and any other authority legally entitled to, or entrusted by the Central Government or any State Government with the control or management of a municipal or local fund;
(d) a Cantonment Board as defined in section 3 of the Cantonments Act, 2006 (41 of 2006);
(e) a Regional Council or a District Council constituted under the Sixth Schedule to the Constitution;
(f) a Development Board constituted under article 371 and article 371J of the Constitution; or
(g) a Regional Council constituted under article 371A of the Constitution;
2. On which supply TDS shall be deducted ?
2.1 Taxable Supply of goods or services or both;
2.2 Total value of such supply, under a contract, exceeds two lakh and fifty thousand rupees:
2.3 Taxable value means excluding the central tax, State tax, Union territory tax, integrated tax and cess indicated in the invoice.
2.4 If the Supplier have separate contracts valuing less than 2.50 lakh, TDS shall not be deducted.
2.5 If the contract value say Rs.268800.00 including gst, taxable value on such supply is Rs.240000.00 if rate of GST is 12%. TDS shall not be deducted.
2.6 The contract value is of Rs.360000.00 comprising taxable supply of goods is of Rs.240000.00 and balance Rs.120000.00 pertain to supply of exempted goods. TDS shall not be deducted.
2.7 Contract with composition dealer – If contract value exceeding Rs.2.50 with such dealer, TDS shall be deducted.
3. What are rates of TDS ?
Rate of TDS is 1% under each Act i.e. CGST and SGST and is 2% under the IGST. The TDS shall be deducted from the payment made or credited to the supplier/deductee.
4. At what point the TDS shall be deducted ?
The TDS shall be deducted at the time of payment made or credited to the supplier/deductee account.
For example there is contract for taxable supply of goods say Rs.500000.00 including GST. GST rate is 12%.
1. Advance Payment made Rs.50000.00. TDS shall be deducted from Rs.44643.00 after deducting the amount of tax.
2. Next payment made Rs.120000.00. TDS shall be deducted from Rs.107143.00 after deducting the amount of tax.
TDS shall be deducted from each payment made towards contract of Rs.500000.00.
5. What are the provisions of Registration for the Deductor ?
Deductor is required to be compulsory registration under section 24 (vi) of the CGST Act, 2017 in addition to registration which was got for the regular business.
6. Is TDS be deducted if state, which is same for location of the Supplier and place of supply, but it is differ state from the state of the recipient ?
Proviso to section 51 (1) of the CGST Act say “no deduction shall be made if the location of the supplier and the place of supply is in a State or Union territory which is different from the State or as the case may be, Union territory of registration of the recipient.”
Examples given in FAQ are reproduced as under:
|Situation (in all cases taxable contract value is over Rs.2.5 Lakh)||Location of Supplier||Place of Supply||State of Registration of Recipient||Type of Supply||Tax||TDS Deduction|
|Govt. of WB purchases taxable goods from a local supplier||Kolkata||Kolkata||West Bengal||Intra- State||CGST+ SGST||Yes|
|Govt. of Punjab purchases taxable goods from a Supplier in Delhi||Delhi||Punjab||Punjab||Inter- State||IGST||YES|
|Govt. of WB engages a contractor of Delhi for renovation of Bangla Bhawan in Delhi||Delhi||Delhi||West Bengal||Intra
7. What is the time within which such TDS is to be deposited by the Deductor to the Government account?
According to the section 51 (2) of the Act the amount deducted as tax shall be paid to the Government by the deductor within ten days after the end of the month in which such deduction is made. Such payment shall only be made through electronic cash ledger.
8. Which statements/returns shall be furnished by the Deductor and time to furnish such statements/returns ?
9.1 According to section 39 (3) of the Act the Deductor shall furnish, return in form GSTR-7, electronically, for the month in which such deductions have been made within ten days after the end of such month. Submission of return FORM GSTR-7 is not required to be furnished for a month in which no deduction is made.
9.2 According to section 51 (3) of the Act the deductor shall furnish to the deductee a certificate in form GSTR-7A mentioning therein the contract value, rate of deduction, amount deducted, amount paid to the Government and such other particulars in such manner as may be prescribed.
Such certificate shall be furnished by the Deductor to the Deductee within five days of crediting the amount so deducted to the Government.
9. Consequences for non-compliance by the Deductor ?
|51 (4)||Fails to issue the TDS certificate within five days of crediting the amount so deducted to the Government||Late fee, a sum of one hundred rupees per day from the day after the expiry of such five day period until the failure is rectified, subject to a maximum amount of five thousand rupees.|
|47||Fails to furnish return in form GSTR-7 under section 39 (3) by the due date i.e. within 10 days of the month succeeding the month in which deduction was made||The deductor shall pay a late fee of Rs. 100/- per day under CGST Act & SGST/ UTGST Act separately during which such failure continues subject to a maximum amount of Rs. 5000/- each under CGST Act & SGST/UTGST Act.|
|51 (6)||Fails to pay to the Government the amount deducted as tax||The Deductor shall pay interest in accordance with the provisions of sub-section (1) of section 50, in addition to the amount of tax deducted.|
|51 (7)||Determination of the amount in default||Shall be made in the manner specified in section 73 or section 74.|
10. Claim of credit by the Deductee.
Section 51 (5) of the Act – The deductee shall claim credit, in his electronic cash ledger, of the tax deducted and reflected in the return of the deductor furnished under sub-section (3) of section 39.
11. Refund of TDS by the Deductor or Deductee
Section 51 (8) of the Act – The refund to the deductor or the deductee arising on account of excess or erroneous deduction shall be dealt with in accordance with the provisions of section 54:
Provided that no refund to the deductor shall be granted, if the amount deducted has been credited to the electronic cash ledger of the deductee.
12. Details of Section, Rules, Notifications and Circulars
|1||Section 51 of the CGST Act, 2017||Provisions in regard of TDS under GST for intra-state supply|
|2||Section 20 of the IGST Act, 2017||Provisions of the CGST Act shall, mutatis mutandis, apply, so far as may be, in relation to integrated tax.|
|3||Rule 66 of the CGST Rules, 2017||Form and manner of submission of return by a person required to deduct tax at source.|
|4||Rule 87 (9) of the CGST Rules, 2017||The amount deducted shall be credited to the electronic cash ledger of the person from the said amount was deducted.|
|5||Notification No. 33/2017 – Central Tax dated 15-09-2017||Persons notified u/s 51 (d) for deduction of tax|
|6||Notification No. 50/2018 – Central Tax dated 13-09-2018||Notified date as 01-10-2018 for implementation of TDS provisions|
|7||Circular No. 65/39/2018-DOR dated 14-09-2018||Guidelines for Deductions and Deposits of TDS by the DDO (Drawing and Disbursing Officer) under GST.|
|8||Circular No. 67/41/2018-DOR dated 28-09-2018||Modifications in para of circular 65/39/2018 dated 14-09-2018|
|9||Circular No. 76/50/2018-GST dated 31-12-2018||Clarification for long line written in clause (a) in notification No. 50/2018- Central Tax dated 13.09.2018.|
|10||Circular No. 137/07/2020-GST dated 13-04-2020||The due date for furnishing of return in FORM GSTR-7 along with deposit of tax deducted for the said period has also been extended till 30.06.2020 and no interest under section 50 shall be leviable if tax deducted is deposited by 30.06.2020. This is for such returns and deposit of TDS whose due dates falls during the period from 20.03.2020 to 29.06.2020.|
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