TAX DEDUCTED AT SOURCE As per Revised Model GST Law

CA Atin Harbhajanka

Synopsis

1. Who is Deductor and deductee?
2. What is the rate of TDS?
3. What is the limit on which TDS provisions are applicable?
4. What is the due date by which TDS deducted should be deposited?
5. Issuance of TDS Certificate and details to be mentioned therein?
6. Due date of Furnishing the TDS Certificate?
7. Late fees if Certificate not furnished within due date?
8. Whether any interest is chargeable if TDS not deposited within due date?
9. Refund in case of excess or erroneous deduction?

1.1 Deductor

Sec. 46(1) Notwithstanding anything contained to the contrary in this Act, the Central or a State Government MAY mandate, – [Deductor]

(a) A department or establishment of the Central 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 Central or a State Government on the recommendations of the Council,

1.2 Rate of TDS?

Tax should be deducted at the rate of 1% from the payment made or credited to the supplier [hereinafter referred to in this section as “the deductee” of taxable goods and/or services,notified by the Central or a State Government on the recommendations of the Council.

1.3 When TDS is required to be made?

Where the total value of such supply, under a contract, exceeds five lakh rupees.

Explanation. – For the purpose of deduction of tax specified above, the value of supply shall be taken as the amount excluding the tax indicated in the invoice.

Q.1 Mr. A enters into the following contract with Mr. B in the month of April, Nov. and Dec. of Rs. 5 Lacs, Rs. 5 Lacs and Rs. 5 Lacs in total aggregating Rs. 15 Lacs. Whether A is liable for TDS?

Ans: Section 46 of the proposed model GST Law if read along with the Sec. 194C of the Income Tax Act, then it is clear that aggregate of the amount of contract will be considered if entered with a single person. Since in the given case aggregate amount in a financial year exceeds Rs. 5 Lacs i.e. 15 Lacs. TDS provisions will be applicable on entire 15 Lacs i.e. 15*1%=Rs. 15000/-.

Q.2 In the above case if Mr. A enters into a contract with Mr. B of Rs. 5 Lacs, Mr. C of Rs. 5 Lacs and with Mr. C of Rs. 5 lacs in total aggregating to Rs. 15 Lacs? Whether A is liable for TDS?

Ans: In the given since Mr. A enters individual contract with different persons, hence limit is to be seen for each contract separately. Since the amount in each contract do not exceeds Rs. 5 Lacs hence no liability of TDS would arrive in the given case.

Q.3 Mr. A total value of supply under a contract including tax of Rs. 10,000/- is Rs. 5,10,000/-? Whether TDS Liability in such case will arise?

Ans: TDS Liability will arise only if total value of a supply excluding the Tax under a contract exceeds Rs. 5 Lacs. Since in the given case excluding the tax element total value of supply is only Rs. 5 lacs hence no liability of TDS will arise in the given case.

Q.4 Mr. A total value of supply under a contract excluding tax of Rs. 10,000/- is Rs. 5,10,000/-? Whether TDS Liability in such case will arise?

Ans: TDS Liability will arise only if total value of a supply excluding the Tax under a contract exceeds Rs. 5 Lacs. Since in the given case excluding the tax element total value of supply exceeds Rs. 5 lacs i.e. Rs. 5,10,000/- hence liability of TDS will arise in the given case.

1.4 When TDS should be paid to the account of appropriate government?

As per sub section (2) of section 46 the amount deducted as tax under this section shall be paid to the account of the appropriate Government by the deductor within ten days after the end of the month in which such deduction is made, in the manner prescribed.

1.5 Details to be furnished in TDS Certificate?

As per sub section (3) of section 46, the deductor shall, in the manner prescribed, furnish to the deductee a certificate mentioning therein the contract value, rate of deduction, amount deducted, amount paid to the appropriate Government and such particulars as may be prescribed in this behalf.

1.6 When TDS certificate to be furnished by deductor?

As per sub section (4) of section 46, the deductor should furnish to the deductee the certificate, after deducting the tax at source, within five days of crediting the amount so deducted to the appropriate Government.

1.7 Failure to furnish TDS certificate within due date and penal provisions?

As per sub section (4) of section 46, 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 appropriate Government, the deductor shall be liable to pay, by way of a late fee, a sum of one hundred rupees per day from the day after the expiry of the five day period until the failure is rectified: PROVIDED that the amount of fee payable under this sub-section shall not exceed five thousand rupees.

Q.5 Mr.A, deductor have deducted TDS for the month of June and deposited to the credit of government on 15^th July? He issued the TDS certificate on 18^th July? Whether he liable for to pay late fees or interest or both?

Ans: TDS certificate should be issued within 5 days of crediting the amount so deducted to the appropriate government, since in the given case the amount is credited on 15^th July and the certificate is issued on 18^th July hence no Liability of late fees is going to arise,but since the amount is not deposited within the due date i.e 10^th July Hence the liability of interest will arise.( Interest rate not yet specified).

Q.6 Mr.A, deductor have deducted TDS for the month of June and deposited to the credit of government on 15^th July? He issued the TDS certificate on 21^st July? Whether he liable for to pay late fees or interest or both?

Ans: TDS certificate should be issued within 5 days of crediting the amount so deducted to the appropriate government, since in the given case the amount is credited on 15^th July and the certificate is issued on 28^th July hence Liability of late fees is going to arise i.e. Rs. 100/- since the delay is by one day only, but since the amount is not deposited within the due date i.e 10^th July Hence the liability of interest will arise.( Interest rate not yet specified).

1.8 When deductee can claim TDS credit?

As per sub section (5) of section 46, 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 34, in the manner prescribed.

1.9 What if the deductor fails to deposit the tax deducted within due date?

As per sub section (6) of section 46, if any deductor fails to pay to the account of the appropriate Government the amount deducted as tax under sub-section (1), he shall be liable to pay interest in accordance with the provisions of sub-section (1) of section 45, in addition to the amount of tax deducted.

1.10 How to determine the amount in default under this section?

As per sub section (7) of section 46, determination of the amount in default under this section shall be made in the manner specified in section 66 or 67, as the case may be.

1.11 Refund to the deductor or deductee on account of excess or erroneous deduction?

As per sub section (8) of section 46,refund to the deductor or the deductee, as the case may be, arising on account of excess or erroneous deduction shall be dealt with in accordance with the provisions of section 48.

Provided that no refund to deductor shall be granted if the amount deducted has been credited to the electronic cash ledger of the deductee.

The author is a practicing Chartered Accountant cum Mentor based in Indore and can be reached at atinharbhajanka.ca@gmail.com or +91 9827 54 54 75)

Disclaimer: The contents of this document are solely for informational purpose. While due care has been taken in preparing the above article, possibility of any errors and omissions cannot be ruled out. Moreover, the views expressed herein above are solely author’s personal views. No part of it should be copied or reproduced without written or express permission of the Author.