After going through lot of ups & downs, twists & turns, government has finally notified the TDS provisions under GST w.e.f 01-10-2018. Let us discuss in a simple yet comprehensive manner, everything about TDS in GST.
|Category of persons||Section||Example|
|Department or an establishment of CG/SG||Category of persons notified u/s 51(1)||ISRO (Department of space)|
|Local authority||Panchayat, as defined in Article 243(d) of Constitution|
|Governmental agencies||Defence Research and Development Organisation (DRDO)|
|Authority or board, set up by an act of parliament or state legislature||Category of persons notified vide Notification 50/2018 CT dated 13-09-2018||IIM’s (set up by IIM Act)|
|Authority or board, established by any govt. with 51% or more participation by way of equity or control||Bharat Heavy Electricals Limited|
|Society established under CG/SG/local authorities||Amul|
|Public sector undertakings||Air India Limited|
1. Assume, the payer is a society registered under Central Govt; state whether TDS would apply or not in the following cases:-
|Taxable value||GST rate (%)||Invoice value||TDS deductible||Reasons|
|2,00,000||12||2,24,000||No||As value of supply is less than 2.5 lakhs, TDS is not applicable.|
|2,45,000||5||2,57,250||No||Value of supply is the value excluding GST, which is 2, 45,000. Since, it is less than 2.5 lakhs, TDS is not deductible|
|2,50,000||18||2,95,000||No||Value of supply is Rs 2.5 lakhs; it doesn’t exceed Rs. 2, 50,000.|
|2,60,000||12||2,91,200||Yes||Applicable as value of supply(excluding GST) exceeds Rs. 2.5 lakhs|
|2,70,000||Exempt||2,70,000||No||TDS is applicable only to taxable goods or services.|
2. Suppose Supplier X entered into a works contract agreement with ONGC (public sector undertaking), wherein the payment is to be made and invoices to be issued in installments, as given below. Determine the applicability of TDS provisions.
|Percentage of completion||Payment (Rs. excluding GST at 18%)|
|6 months after completion||1,50,000|
Answer: – TDS will have to be have to be deducted, as the total value of supply under a contract is Rs. 5.75 lacs. It is immaterial if the payment are made in installments or if the invoice is issued in smaller chunks. As long as the total value of the contract (excluding GST) exceeds Rs. 2.5 lacs and the payer is a person specified u/s 51, TDS at the rate of 2% would be deductible.
No deduction needs to be made if the location of the supplier and the place of supply is in a State/UT, which is different from the State/ UT of registration of the recipient [Proviso to section 51(1)]
|Location of Supplier||Delhi||Delhi||Delhi|
|Place of Supply||Delhi||Bangalore||Delhi|
|Type of Tax||CGST, SGST(Delhi)||IGST||CGST, SGST(Delhi)|
|Location of recipient||Delhi||Bangalore||Bangalore|
|Whether TDS deductible||Yes; deduct 1% CGST, 1% SGST||Deduct 2% IGST||No; as location of supplier and POS is in Delhi, whereas location of recipient is in Bangalore.|
√ The amount would be credited to the electronic cash ledger of the deductee (supplier). [Section 51(5)]
√ The supplier may use the same to set off against his output tax liability for the period.
√ Balance, if any, after set off against output tax liability, may be claimed as refund in form RFD-01 on the common portal.
√ The deductor or deductee may claim refund of the same, in accordance with section 54.
√ However, if amount has already been credited to electronic cash ledger of the deductee, refund would not be granted to the deductor. In other words, deductee has to obtain the refund himself in such cases. [Proviso to section 51(8)]
|Whether amount has been credited to the electronic cash ledger||No||Yes|
|Persons eligible for refund||Deductor or deductee||Deductee only|
√ TDS would be applicable on IGST transactions as well, provided the place of supply and location of recipient fall in the same state. [Proviso to section 20 of IGST Act]
√ However, notification 50/2018 CT has notified effective date of TDS as 01-10-2018 for intra-state supplies; similar notifications have been issued in SGST also. However, no notification is issued in IGST till date. Thus, the effective date of TDS for IGST transactions is yet to be notified.
√ In terms of section 51(1), TDS is to be deducted from the payment made or credited to the supplier. In other words, the factor to be considered for deducting TDS is payment, not supply.
√ So, even if the supply has taken place before the appointed date (01-10-2018), payment is made after the appointed date; thus, TDS would be deductible.
√ TDS would be deductible from the payment made to supplier of taxable goods or service [section 51(1)]. As the goods are exempt, no need to deduct TDS.
√ Further, the objective of TDS is to ensure better compliance, not to tax exempt supplies. Thus, no need to deduct TDS.
Answer: – As URP cannot issue a tax invoice, there is no need to deduct TDS in case of supplies from unregistered persons.
|Liability to pay tax||Liability to pay tax with supplier; deductor only deduct and pay 2% to govt. which will be credited to the cash ledger||The onus to pay tax lies wholly with the recipient of goods/service|
|Collection of GST on invoice||The supplier would collect GST from the payer. Only 2% of basic value is withheld and paid to govt.||The GST portion is not paid to supplier. Recipient directly pays the same to govt.|
|Documents to be issued||TDS certificate to be issued||Self-invoice and payment voucher to be issued|
|Payment of tax to govt.||Payment to govt. will always be at 2% of taxable value||Payment to govt. will be on applicable rates(5/12/18/28) on taxable value|
|Requirement for separate return||Requirement for separate return, i.e. GSTR-7; in addition to the monthly GSTR-3B||No requirement for separate return, these details to be disclosed in monthly return (GSTR-3B)|
√ Exempt supplies are to be wholly ignored for the purpose of TDS deduction. If the value of supply of taxable portion(excluding GST and cess) exceeds RS. 2.5 lakhs, then TDS would be deductible (only on the taxable portion).
√ In the given case, taxable portion is Rs. 2,25,000; thus, TDS is not applicable.
√ However, if the taxable portion is Rs. 3,75,000, TDS at 2% would be deductible on Rs. 3,75,000.