This article is based on difficulties facing by person claiming TDS and adjusting the same against their liability while filing belated returns.
In order to understand the problem first have a look on certain statutory Provisions:-
As per section 51(1) of CGST ACT, certain class of persons (referred as deductor) to deduct tax at the rate of one percent, from the payment made or credited to the supplier’s(referred as deductee) of taxable goods or services or both, where the total value of such supply, under a contract, exceeds two lack and fifty thousand rupees.
As per section 51(5) ,The deductee shall claim credit, in his electronic cash ledger, of the tax deducted and reflected in the return of deductor furnished under sub-section (3) of section 39.
As per section 51(6), if deductor fails to pay amount deducted to the government than he shall pay interest in accordance with the provision of sub section (1) of section 50.
As per the above provisons after acceptance of TDS by deductee, it’s reflects in their cash ledger. Now when deducteefiled their belated GSTR3B and even adjust their liability limited to amount less than TDS then also they have to pay interest on the same.
Let’s understand the problem with the following example:-
|Total TDS reflected in Cash ledger of deductee||50000/=|
|Total Output tax liability for Aug 21 month||40000/=|
|Due date of GSTR3B Return for Aug||20-09-2021|
|GSTR3B filed on||08-10-2021|
|Total Input available||Nil|
Now from the above example there is no additional cash required to pay taxes, so question of interest should not arise, but department is seeking interest on the same by saying that any delayed payment made by debiting cash ledger is subject to Interest.
Now the moot question is Whether TDS is part of Cash Ledger or Credit Ledger. As stated above section 51(5), deducted have to claim the credit after filing of return by deductor and also in case of any late payment of TDS by deductor, they have to pay interest. This TDS is also reflected in “GSTR2A” of deductee, and interestingly “GSTR2A form is only meant for reflection on Eligible Tax Credit available for utilization.
Even Section 49(1) says that “Every deposit made towards tax, interest, penalty, fee or any other amount by a person by internet banking or using credit or debit card or NEFT or RTGS or by such other mode and subject to such condition and restriction as may be prescribed, shall be credited to electronic cash ledger of such person to be maintained is such manner as may be prescribed”.
By now by virtue of section 49(1), TDS should not be reflected in cash ledger of deductee as the deposit is made by deductor and it’s a part of cash ledger of deductor.
In order to come out of above dispute either government either has to amend section 50(1) for payment of interest by excluding the TDS amount or TDS should be merged with special credit ledger which will be subject to refund in case remain unutilized.