Tax Deducted at Source (TDS) under GST

As per Notification No. 50/2018, dated 13th September, 2018 – Central Government implemented provisions of section 51 of CGST Act (TDS under GST) with effect from 1^st October, 2018

Specified Persons

Under section 51 following persons are required to deduct TDS:

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 on the recommendations of the Council, (Persons specified in table below)

Notified by CG under Notification No. 50/2018, dated 13th September, 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

Further Notified by CG under Notification No. 57/2018: “Provided that with respect to persons specified under clause (a) of sub-section (1) of section 51 of the Act, nothing in this notification shall apply to the authorities under the Ministry of Defence, other than the authorities specified in the Annexure-A and their offices, with effect from the 1st day of October, 2018.”

Further Notified by CG under Notification No. 61/2018: “Provided further that nothing in this notification shall apply to the supply of goods or services or both from a public sector undertaking to another public sector undertaking, whether or not a distinct person, with effect from the 1st day of October, 2018.”

TDS Rate to be deducted

Rate @ 2%

(Intra State: 2% (CGST 1% + SGST 1%) OR Inter State: 2% IGST)

Applicability of TDS

Deductor has to deduct TDS, Where the total value of supply, under a contract, exceeds two lakh and fifty thousand rupees (Rs. 2,50,000) from the payment made or credited to the supplier (deductee) of taxable goods or services or both.

Provided that 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.

For example:

Supplier    →    Place of supply   →   Recipient

(Delhi)                   (Delhi)                  (Mumbai)

No TDS applicable on above transaction

TDS deposit & Return

The dedutor shall require to file TDS return in form GSTR-7 and deposit the tax deducted to the

Notified by CG under Notification No. 66/2018: Commissioner may extends the time limit for furnishing the return by a registered person required to deduct tax at source under the provisions of section 51 of the said Act in FORM GSTR-7 of the Central Goods and Services Tax Rules, 2017 under sub-section (3) of section 39 of the said Act read with rule 66 of the Central Goods and Services Tax Rules, 2017 for the months of October, 2018 to December, 2018 till the 31st day of January, 2019

Government within ten days after the end of the month in which such deduction is made.

TDS Certificate to deductee (form GSTR-7A)

The deductor shall furnish to the deductee a certificate in form GSTR-7A within five days of crediting the amount so deducted to the Government 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

Penalty for not furnishing certificate: If any deductor fails to furnish to the deductee the certificate, 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 days period until the failure is rectified, subject to a maximum amount of five thousand rupees.

Manner to claim credit

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.

Penalty

If any deductor fails to pay to the Government the amount deducted as tax under sub-section (1), he shall pay interest in accordance with the provisions of sub-section (1) of section 50, in addition to the amount of tax deducted.

The determination of the amount in default under this section shall be made in the manner specified in section 73 or section 74.

Refund of excess amount

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.

FAQ’s related to TDS under GST

 Q.1 Are there any situations where TDS not applicable?

Ans. Yes, where:

• Total value of supply under a contract is <= Rs 2.50 lacs or
• Location and place of supply of supplier is different from the place of registration of recipient.

Q.2 Is GST Registration mandatory for TDS?

Ans. A person who is liable to deduct TDS has to compulsorily register and there is no threshold limit for this.

The registration under GST can be obtained without PAN and by using the existing TAN issued under the Income Tax Act.

Q.3 Is tax amount excluded in limit of 2,50,000?

Ans. For the purpose of deduction of tax, 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.

Q.4 How to discharge TDS liability?

Ans. TDS liability can be discharged through Electronic Cash Ledger only at the time of filing return.

Q.5 Can the deductee take action on the TDS credit declared by deductor?

Ans. The deductee can accept/ reject the TDS details auto-populated to TDS and TCS Credit received table of his/her return. Taking action by deductee is mandatory for crediting the amount of TDS to cash ledger.

Q.6 When TDS amount will be credited to deductee’s Electronic Cash Ledger?

Ans. Only after his/ her accepting of TDS and TCS credit received

Q.7 What if TDS credit entry rejected by the deductee?

Ans. TDS credit entries rejected by the deductee will be auto-populated into GSTR-7 and the relevant details will be required to be amended by the deductor in Form GSTR-7 of next tax period.

Post correction of such details in Form GSTR-7, the data will automatically flow to concerned GSTIN (supplier) for accepting or rejecting it. This process will be repeated until TDS details are accepted by counter-party.

Q.8 Any need to file Form GSTR-7 in case of no TDS is deducted in the tax period?

Ans. It is not mandatory to file nil return, in case of no TDS deducted.

Q.9 What are the modes of signing Form GSTR-7?

Ans. You can file Form GSTR-7 using DSC, or EVC.

Q.11 Can I preview the Form GSTR-7 before filing?

Ans. Yes

Q.12 What happens after Form GSTR-7 is filed?

Ans. After Form GSTR-7 is filed:

• ARN is generated on successful filing of the Form GSTR-7 Return.
• An SMS and an email are sent to the applicant on his registered mobile and email id.

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