Sec. 51 of the CGST Act, 2017 prescribes the authority and procedure for ‘Tax Deduction at Source’. According to provisions of Sec. 51(1), the Government may mandate or order the following persons (deductor) to deduct TDS:
(a) A department or an 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.
The tax would be deducted @1% of the payment made to the supplier (the deductee) of taxable goods or services or both, where the total value of such supply, under a contract, exceeds Rs. 2,50,000 (excluding the amount of CGST, SGST, UTGST, IGST and cess indicated in the invoice), as provided in Explanation to sub-sec.(1) ). For example if, individual supplies may be less than Rs. 2,50,000, but if contract value is more than Rs. 2,50,000, TDS will have to be deducted.
It has been provided in Proviso to sec. 51(1) 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”. It means, when both the supplier as well as the place of supply are different from that of the recipient, no tax deduction at source would be made.
Applicable date for TDS Provisions
Government vide Notification No. 33/2017 – Central Tax, dated 15.9.2017 has appointed 18.9.2017 as the date on which the provisions of TDS of the said Act shall come into force in respect of following persons:
♠ 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;
♠ society established by the Central Government or the State Government or a Local Authority under the Societies Registration Act, 1860 (21 of 1860);
♠ public sector undertakings
However, the date from which above persons shall be liable to deduct tax from the payment made or credited to the supplier of taxable goods or services or both will be notified subsequently. The provisions of TDS under GST Act were deferred by govt. through press release dated 26/06/2017
Deposit of TDS with the Government:
The amount deducted as tax under this section shall be paid to the Government by the deductor within 10 days after the end of the month in which such deduction is made, (sec. 51 (2)).
Interest for failure to pay TDS deducted
However, if any deductor fails to pay to the Government the amount deducted as tax or paid later than 10th of the succeeding month, he shall pay interest in accordance with the provisions of sec. 50(1), in addition to the amount of tax deducted [sec.51(6)].
As per sub-sec. (3), the deductor shall furnish to the deductee a certificate mentioning therein following:
A TDS certificate is required to be issued by deductor in Form GSTR-7A (format attached) to the deductee, within 5 days of crediting the amount to the Government.
Late Fee for Failure to furnish TDS Certificate to deductee
If any deductor fails to furnish to the deductee the certificate, after deducting the tax at source, within 5 days of crediting to the Government the amount so deducted, the deductor shall pay, by way of a late fee, a sum of 100 rupees per day from the day after the expiry of such 5 days period until the failure is rectified, subject to a maximum amount of 5,000 rupees [sec. 51(4)].
For example, suppose a supplier makes a supply worth Rs. 10,000 to a recipient and the GST @ rate of 18% is required to be paid. The recipient, while making the payment of Rs. 10,000 to the supplier, shall deduct @1% i.e., Rs. 100 as TDS. The value for TDS purpose shall not include 18% GST.
Claiming Credit of TDS in the electronic cash ledger
The deductee shall claim credit, of the tax deducted and reflected in the return of the deductor furnished under sec.39 (3), in his electronic cash ledger [sec.51(5)].
Refund arising on account of excess or erroneous deduction
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 sec. 54 (Refund Process).
It has been 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.
Registration of TDS deductors:
A TDS deductor has to compulsorily register without any threshold limit. The deductor has a privilege of obtaining registration under GST without requiring PAN. He can obtain registration using his Tax Deduction and Collection Account Number (TAN) issued under the Income Tax Act, 1961.
TDS Deductor Registration has been enabled on GST Portal w.e.f. 24.9.2017.
Procedure for getting registered as Deductor
The registration application for Tax Deductor can be filed electronically by submitting a duly signed application in Form GST REG-07. In the place of PAN, such persons will indicate their TAN in the registration application. Obtaining TAN (Tax Deduction Account Number) issued under income tax act is mandatory.
The documents required while getting registered as Tax Deductor include:
The registration application of the applicant will then be processed and approved by the relevant Tax Officer after which he will issue the registration certificate containing the number.
The deductor is required to file a return in Form GSTR-7 within 10 days from the end of the month.
In case of a unregistered supplier, name of the supplier rather than GSTIN shall be mentioned in the return.
The details of tax deducted at source furnished by the deductor in FORM GSTR-7 shall be made available to each of the suppliers in Part C of FORM GSTR-2A electronically through the Common Portal and the said supplier may include the same in FORM GSTR-2. The amounts deducted by the deductor get reflected in the FORM GSTR-2 of the supplier (deductee).
The supplier can take this amount as credit in his electronic cash register and use the same for payment of tax or any other liability.
As per GST Flyers by CBEC, The purpose of TDS is just to enable the Government to have a trail of transactions and to monitor and verify the compliances. Certainly, TDS provisions will help in achieving transparency in the operations of governmental contracts and tax compliance.
The provisions of TDS were deferred by govt. through press release dated 26.6.2017 and though appointed date has been announced for certain categories of persons but the date from which these persons shall be liable to deduct tax from the payment made or credited to the supplier of taxable goods or services or both, will be notified subsequently.