GST is in the eighth year of its implementation. When the CGST Act was enacted in 2017, Section 51 contained the provisions of TDS. But this section was made applicable only w.e.f 01.10.2018. Section 51 of the CGST Act causes obligation on the recipient of the supplies (deductor) to deduct some percentage as tax at source from the payments to be made to supplier (deductee) and pay it to the Government.
Till now the provisions were made applicable only to government bodies and PSUs. However, clause (d) of section 51(1) empowers the government to notify any other category for the purpose.
The 54th GST Council made two paradigm changing recommendations in the Metal Scrap Sector of India:
- Reverse Charge Mechanism (RCM) to be introduced on supply of metal scrap by unregistered person to registered person provided that the supplier shall take registration as and when it crosses threshold limit and the recipient who is liable to pay under RCM shall pay tax even if supplier is under threshold.
- A TDS of 2% will be applicable on supply of metal scrap by registered person in B to B supply.
On 08. 10.2024, the Central Government made RCM applicable for metal scraps under Notification No. 06/2024-Central Tax (Rate) which amends basic notification 4/2017- Central Tax (Rate) dated 28.06.2017 w.e.f. 10.10.2024.[1]
Now, the Government has issued Notification 25/2024-Central Tax Dated 09.10.2024 to implement the second recommendation of the GST Council regarding TDS on B to B supply of metal scrap. This notification, issued under section 1 (3) read with section 51 of the CGST Act, inserts clause (d) in the basic Notification 50/2018 dated 13.09.2018, making registered recipients of supplies of metal scrap – falling under chapters 72 to 81 of CTH – from other registered persons as liable to deduct tax at source. The text of the Notification is as follows:
NOTIFICATION
New Delhi, the 9th October, 2024.
No. 25/2024-Central Tax
G.S.R. 629(E).— In exercise of the powers conferred by sub-section (3) of section 1 read with section 51 of the Central Goods and Services Tax Act, 2017 (12 of 2017), hereafter in this notification referred to as the said Act, the Central Government, on the recommendations of the Council, hereby makes the following further amendment in the notification of the Government of India in the Ministry of Finance, Department of Revenue No. 50/2018-Central Tax, published in the Gazette of India, Extraordinary, Part II, section 3, sub-section (i) vide number G.S.R 868 (E), dated 13th September, 2018, namely:–
In the said notification,
(i) after clause (c) and before the first proviso, the following clause shall be inserted,-
“(d) any registered person receiving supplies of metal scrap falling under Chapters 72 to 81 in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), from other registered person”;
(ii) for the third proviso, the following proviso shall be substituted, namely-
“Provided also that nothing in this notification shall apply to the supply of goods or services or both, which takes place between one person to another person specified under clauses (a), (b), (c) and (d) of sub-section (1) of Section 51 of the said Act, except the person referred to in clause (d) of this notification.”
2. This notification shall come into force with effect from the 10th day of October, 2024.
[F No. CBIC-190354/149/2024-TO(TRU-II)]
AMREETA TITUS, Dy. Secy.
Note:- The principal notification no. 50/2018- Central Tax, was published in the Gazette of India, Extraordinary, Part II, section 3, sub-section (i) vide number G.S.R 868 (E), dated 13th September, 2018 and last amended vide notification no. 73/2018-Central Tax, number G.S.R 1250(E), dated 31st December, 2018.
As a result, TDS provisions become effective for B to B supplies of Metal Scrap with effect from 10.10.2024.
Here are some general provisions regarding TDS under GST Law.
Amount of Tax to be Deducted at Source
The rate of TDS for intra –state supply is one percent each under both CGST and SGST Acts. This deduction is to be made from the payment made or credited to the supplier (deductee) where the total value under the contract exceeds 2.5 lacs. Accordingly, as per first proviso of Section 20 of the IGST Act, 2017 this rate is 2% in case of intra-state supply. The term contract is not defined under the GST law, and the meaning of the term under section 2 (h) of the Indian Contract Act, 1872 can be applied.
How Value is to be Taken
As per Explanation to Section 51 (1), the value of supply for the purpose of deduction of tax is the amount indicated in the invoice excluding the central tax, State tax, Union territory tax, integrated tax and cess.
When TDS is Not Applicable
As per proviso to Section 51 (1), no deduction shall be made if the location of the supplier and the place of supply is in a State /Union territory which is different from the State/ Union territory of registration of the recipient. Say a recipient registered at Noida receives the supply having place of supply at Delhi from a supplier having location at Delhi, TDS will not be applicable.
Recipient of Supplies Needs Registration as a TDS Deductor
As per Section 24 (vi) persons who are required to deduct tax under section 51 need compulsory registration whether or not separately registered under GST. As per Rule 12 of the CGST Rules, 2017, the tax deductor shall electronically submit an application, duly signed or verified through electronic verification code, in FORM GST REG-07 for the grant of registration through the common portal.
When Payment Is To Be Made To Government By The Deductor
As per Section 51 (2), the amount deducted as tax under this section shall be paid to the Government by the deductor within ten days after the end of the month in which such deduction is made.
TDS Certificate
As per Section 51 (3), a certificate of tax deduction shall be issued to the deductee in the prescribed manner. As per Rule 66 of the CGST Rules, 2017, this certificate shall be made available electronically to the deductee on the common portal in FORM GSTR-7A on the basis of the return furnished under sub-rule 66 (1). This is generated by the system itself.
Return to be filed by the Deductor
As per Section 39 (3) read with Rule 66 (1) and (2), every registered person required to deduct tax at source under section 51 shall furnish a return in FORM GSTR-7 electronically and the details furnished by the deductor shall be made available electronically to each of the deductees on the common portal for claiming the amount of tax deducted in his electronic cash ledger after validation.
Claim of TDS Credit by Deductee
As per Section 51 (5), the deductee shall claim in his electronic cash ledger credit of TDS as reflected in the return of the deductor. As per Rule 87 (9), any amount deducted under section 51 shall be credited to the electronic cash ledger of the deductee.
Whether Refund of excess balance of TDS IN cash ledger Admissible
CBIC vide S. No. 3 of Circular No. 166/22/2021-GST dated 17th November 2021 has clarified that the amount deducted/collected as TDS by TDS deductors under the provisions of Section 51 of the CGST Act, and credited to electronic cash ledger of the registered person, is equivalent to cash deposited in electronic cash ledger. It is not mandatory for the registered person to utilize the TDS/TCS amount credited to his electronic cash ledger only for the purpose for discharging tax liability. …..Any amount which remains unutilized in electronic cash ledger, after discharge of tax dues and other dues payable under CGST Act and rules made thereunder, can be refunded to the registered person as excess balance in electronic cash ledger in accordance with the proviso to sub-section (1) of section 54, read with sub-section (6) of section 49 of CGST Act.
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Disclaimer: The article is only for information purposes and is not a legal opinion of any sort. The views, thoughts, and opinions expressed in the text belong solely to the author, and these are purely for educational purposes, not a substitute for actual legal provisions. For any query, the author can be reached at [email protected].
[1] https://taxguru.in/goods-and-service-tax/metal-scrap-supplied-unregistered-suppliers-brought-reverse-charge.html
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