Tax Deducted at Source under GST -Anti-Tax Evasion Measure

♦ Executive Summary :

We are very much Familiar with the TDS mechanism under Income Tax, which works as Monitoring and Anti Tax Evasion Measure and Compel tax deductee to File his Return of Income, Similarly we have mechanism of Deduction of Commercial Tax under VAT laws prevailing in Different states which is applicable on Government Departments only. On Same lines TDS under GST has been introduced and same is applicable on Government Owned Undertakings which will work as Anti Tax Evasion Mechanism and put Control on Government authorities on Payment made on high value contracts. Read on to know more …

♦ Key Objectives of TDS GST :

a) Works as anti tax evasion measure as it provide information to government about person supplying goods and/or services to Government authorities.

b) Compel Tax Deductee to File GST Return to claim TDS(GST) , thus it ensure proper and Timely Compliance by TAX DEDUCTEE.

c) Encourage Registered Tax Payers and also Force Government Department to deal with only registered tax payers.

d) Work as a Control Mechanism on Government authorities.

e) Collection of tax at early stage by Government results in Interest earning on same.

♦ Who is Liable to Deduct TDS (GST)?

Here are the entities to whom Provisions of TDS (GST) is applicable as Extended through Notification Below:

(a) a department or establishment of the Central Government or State Government; or

(b) local authority; or

(c) Governmental agencies; or

(d) such persons or category of persons as may be notified by the Government

[Notified by Notification No. 50/2018–Central Tax , Dated 13/09/2018] as under :

(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 percent 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);

(b) public sector undertakings:

The scope of above Provision is very wide and will cover almost all the establishment in which Central / State Government has Participation  by way of equity or Control over its Management.

♦ Requirement for Registration under GST?

> Sec 24 of CGST acts provide for Compulsory registration irrespective of Turnover also covers persons who are required to deduct tax under section 51, whether or not separately registered under this Act;

> So the Persons (as per above list) required to deduct TDS irrespective of Turnover for the purpose of Deduction of Tax even when they are separately registered for payment of tax.

♦ When to Deduct TDS (GST)?

> Where the total value of such supply, under a contract, exceeds two lakh and fifty thousand rupees. [Contract > 2.5 Lakhs ]

> The provision is applicable for Every Payment even below 2.5 Lakhs where value of Contract in Aggregate exceeds 2.5 Lakhs in a year.

♦ Rate of TDS (GST)?

> Rate of TDS (GST) will be 2 % [i.e. 1% CGST , 1 % SGST ] irrespective of Rate of GST on Goods Purchase or Services Procured.

> For the purpose of deduction of tax specified above, the value of supply shall be taken as the amount excluding the central tax, State tax, Union territory tax, integrated tax and cess indicated in the invoice.

> The amount as deducted will be eligible for claim by Deductee in his Electronic Cash ledger.

♦ When TDS (GST) not to be Deducted ?

> 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.

> So provision of GST (TDS) applicable on Intra state Transaction only.

♦ When TDS (GST) to be Deposited/Paid ?

> 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.

♦ Time limit to Issue TDS(GST) Certificate to Deductee ?

> The deductor shall furnish to the deductee a certificate mentioning therein the contract value, rate of deduction, amount deducted, amount paid to the Government within 5 Days of Crediting the amount to the Government.

♦ Penalty and Interest for Non Compliance with TDS(GST) Provision ?

> If any deductor fails to furnish to the deductee the certificate, after deducting the tax at source, within five days of crediting the amount so deducted to the Government, the deductor shall pay, by way of a 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.

> If any deductor fails to pay to the Government the amount deducted as tax , he shall pay interest at the Rate of 18 % per Annum.

> If Deductor fails to Deduct TDS or Short Deducton of TDS OR non deposit of TDS than he will be liable to penalty of Rs 10000 or Amount of default Whichever is Higher

♦ Officer Responsibility for Above Compliance?

> Compliance with the Provisions of GST(TDS) is the responsibility of DDO (Drawing and Disbursing Officer) of the Office Concerned and he is also held Personally liable for Interest and Penalty for Non Compliance.

♦ Date from which above provision is applicable?

> The provisions of GST (TDS) are effective from 1st October 2018 as same is exempt till 30/06/2018 through press release issued by Central Government on Recommendation of 26th GST Council meeting.

♦ Returns to be Filled under GST

> GSTR-7 to be filled by Government department to whom above provisions is applicable by 10th of Next Month.

Similarly certificate GSTR-7a to be issued to Tax Deducted within 5 days of Payment /credit of Tax Deducted to Government.

Click here to know how to save TDS from using Form 15G