Article explains Objective of TDS under GST, For whom deduction of TDS under GST is Mandatory, Computation of Value of Supply under contract for TDS, When TDS under GST is not require to be deducted, Registration as a Deductor of TDS under GST, Return to be filled by Deductor of TDS under GST, Utilisation of TDS Deducted under GST and Penalty for TDS Provisions.
1. Objective of TDS under GST
- 1. Objective of TDS under GST
- 2. For whom deduction of TDS under GST is Mandatory
- 3. Computation of Value of Supply under contract
- 4. When TDS under GST is not require to be deducted
- 5. Registration as a Deductor of TDS under GST
- 6. Return to be filled by Deductor of TDS under GST
- 7. TDS Certificate under GST
- 8. Utilisation of TDS Deducted under GST
- 9. Penalty for TDS Provision
-As we all know that the concept of TDS is initially introduced under Income Tax Act and has now been introduced under GST regime.
-The intention of legislature behind introduction of TDS under GST is to enable the Department/ Government to have a trail of transactions and to monitor and verify the compliances under GST.
-As it provides an audit trail, it can be a powerful weapon to prevent Tax evasion and expand tax base.
-Like TDS under Income Tax the TDS should be deducted and deductor requires to deposit the same with govt and Issue TDS Certificate.
2. For whom deduction of TDS under GST is Mandatory
♠ As per section 51 read with notification no 50/2018, dated 13/09/2018, following category of person would have to deduct tax at the rate of one per cent (effective rate would be 2 % i.e. 1 % as CGST and 1% as SGST) from the payment made or credited to the supplier of taxable goods or services or both, where the total value of such supply, under a contract, exceeds two lakh and fifty thousand rupees.
1. A department or establishment of the Central Government or State Government; or
2. Local authority; or
3. Governmental agencies;
4. Such persons or category of persons as may be notified by the Government Notification No 50/2018
a. An authority or a board or any other body, ‑
i. set up by an Act of Parliament or a State Legislature; or ( Example :- ICAI)
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);( Example: Amul)
c. Public sector undertakings. ( Example : ONGC, IOCL etc.)
3. Computation of Value of Supply under contract
Computation of Value of Supply under contract for 2.5 Lack limit can be best explained with the help of following example.
|SR No.||Particulars of Invoice||Amount (Rs.)|
|1)||Value of Exempted Supply||1,35,000|
|2)||Value of Taxable Supply||2,55,000|
|3)||Add :-GST @ 18% on Taxable Supply||45,900|
|4)||Add:- Compensation Cess @ 15% on Taxable Supply||38,250|
Value of Supply under contract :-Rs. 2,55,000/- (It Is more than Rs.2,50,000/- TDS is required to be deducted.)
Value of Exempted Supply, GST component, Compensation Cess cannot be considered for Computation of Value of Supply under contract.
It is to note the fact that the limit has been set contract-wise and not invoice-wise to avoid raising of multiple invoices of smaller values in a contract of higher value to defeat the provisions of TDS.
4. When TDS under GST is not require to be deducted
♥ In Following two situation TDS is not require to be deducted.
1) If value of supply under a contract less than Rs. 2,50,000/-
2) No deduction of Tax is required when the location of supplier and place of supply is different from the State of the registration of the recipient.
|Location Of Supplier||Place Of Supply||Location Of Recipient||TDS|
♥ In short we can say that is CGST/SGST charged in the invoice and the Location of Recipient is different then TDS is not required to be deducted.
♥ Some practical example where there is no requirement of TDS Under GST.
1) Under “Bill To Ship To Model” Supplier (Maharashtra) delivers material to recipient in Rajasthan on the instruction of third person (Maharashtra). The supplier will raise invoice on third person registered in Maharashtra and Place of supply shall be assumed as Maharashtra (Bill to address). But, the location of recipient is Rajasthan.
2) Immovable Property Linked Services
Place of Supply in case of Immovable Property Linked Services is the place where Immovable Property is situated. Hence, if XYZ Ltd. (registered in Maharashtra) take Immovable Property Linked Services in Delhi, then in this case Location of Supplier and Place of Supply is Delhi but location of recipient is Maharashtra. There is no need to deduct TDS.
5. Registration as a Deductor of TDS under GST
- A persons as mentioned in point no. 2 above 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 Tax Deduction and Collection Account Number (TAN) issued under the Income Tax Act, 1961.
- From above discussion it can be said that TAN No is mandatory.
6. Return to be filled by Deductor of TDS under GST
- The person who is registered as a TDS deductor have to furnish a return in Form GSTR-7 electronically through GST portal for the month in which such deductions have been made within 10 after the end of such month. (i.e. Due date of return for month of October-2018 will be 10th Nov 2018.)
- After filling return , The registered person would have to issue certificate in Form GSTR-7A to the deductee which would be available electronically on the GST portal.
7. TDS Certificate under GST
♠ As per the TDS provisions under GST, The Deductor has to issue TDS Certificate in GSTR-7A within 5 Days of crediting the amount deducted to government.
♠ Important Analysis:-
The deductor have to be very careful while issuing TDS certificate as the limit of issue of TDS certificate counted from the date of deposit of amount deducted but the certificate under Form GSTR – 7A can be generated only after filling of GSTR- 7 ( i.e. TDS Return).
Example: If the deductor deposited the amount deducted for the month of Oct-2018 on 2nd Nov, 2018. And filled return of TDS i.e. GSTR-7 on 9th Nov 2018. The due date for issue of TDS certificate will be counted from 2nd Nov, 2018 that will be 7th Nov, 2018 but the GSTR-7A can not be generated unless an until you file GSTR-7 which is filled on 9th Nov, 2018.
8. Utilisation of TDS Deducted under GST
- This is one of the good thing about the TDS Under GST that, Any amount shown as TDS will be reflected in the GST electronic cash ledger of the concerned GST supplier.
- Therefore, Such GST supplier can utilize this amount towards discharging his liability towards tax, interest fees and any other amount.
9. Penalty for TDS Provision
- Where a taxable person who fails to deduct the tax in accordance with the provisions of section 51, or deducts an amount which is less than the amount required to be deducted under the section, or where he fails to pay to the Government under sub-section (2) thereof, the amount deducted as tax; he shall be liable to pay a penalty of Rs.10,000/- or an amount equivalent to the tax evaded or the tax not deducted under section 51 or short deducted or deducted but not paid to the Government, whichever is higher.
(Author is a CA In Practice associated with Manish Watmode & Associates, Nagpur.)