Applicability of TDS Under GST

TDS under GST is notified through N.N.50/2018 dated 13/09/18 to be applicable with effect from 01/10/2018.

Liability to deduct of TDS Under GST

Classes of persons notified by the government are liable to

i. Deduct TDS under GST

ii. File GST TDS returns

iii. Issue TDS Certificate

iv. Other compliances as notified by the government

Who is liable for TDS provision?

1. Department/Establishment of Central/State Government

2. Local Authority

3. Government Agencies

4. Authority/Board/Body set up by any act of parliament/state legislature

5. Establishment by any government with 51% or more participation by way of equity/control

6. Society established by the central/state/local authority under the Society Registration Act,1860

7. Public Sector Undertakings(Direct shareholding by government of 51% or more)

# Crux is only government undertakings (whether direct/indirect) are liable to comply under GST-TDS provision (Sec. 51)

Rate of GST-TDS deduction

√ 2% IGST (If Interstate supply)

√ 1% CGST & 1% SGST (If Intrastate supply)

Threshold limit for GST TDS deduction

ONLY IF VALUE OF CONTRACT EXCEEDS BY RS. 2,50,000/-

Kindly note down that if contract value exceeds Rs. 2,50,000, TDS is required to be deducted with respect to payment for each invoice even if the value of the stand alone invoice is less than Rs. 2,50,000. TDS is to be deducted on the value (excluding GST). Eg. Value of supply is Rs. 4,00,000 & GST is Rs. 72,000. TDS @ 2% will be deducted on Rs. 4,00,000 i.e Rs. 8000.

Important: Also for checking applicability contract value as mentioned above should be exclusive of CGST/SGST/IGST/UGST. For eg. If contact value is Rs. 2,95,000 including GST of Rs. 45000. No TDS is required to be deducted as contract value excluding GST is equal to Rs. 2,50,000.

TDS Under GST

Important Points in respect of TDS Under GST

√ GST TDS has to be deducted on the value including any retention monies withheld as even though the payment to the vendor is not made immediately, the liability towards the same is credited to the supplier in the books of accounts of the deductor.

√ TDS to be deducted

If payment made to supplier (whether advance or full both covered)

or

If credited to supplier in the books of accounts

Whichever is earlier.

√ TDS to be deducted on TAXABLE SUPPLIES of goods/services. It should not be deducted if supply is exempt/non taxable.

√ TDS is also applicable where contract is entered before 01/10/2018 but payment & invoice is made after 01/10/2018 for eg. If contact of Rs. 20 lakhs entered on 20/09/2018 and payment of Rs. 5 lakhs made in respect of invoice dated 11/10/2018, TDS is liable to be deducted in this case as payment and invoice is issued after the applicable date i.e 01/10/2018.

√ TDS not to be deducted in instances where the location of the supplier (deductee) AND the place of supply are in a state which is different from the state of GST registration of the recipient (Deductor). For eg. Deductor location is Punjab, deductee location is Mumbai and the

Place of supply is also in Mumbai (CGST+SGST of Maharashtra). In this case NO TDS is required to be deducted.

Registration Requirement for TDS Under GST

 Liable persons are required to take separate registration under GST irrespective of the fact that you are already registered under Normal GST or not. Form for registration is GST REG-07 and certificate will be granted in Form GST REG-06. Registration will be done online on GST website https://www.gst.gov.in and select registration as Tax Deductor.

Tax Deductor

Return Filing in respect of TDS deducted under GST

Every tax deductor is required to file return in Form GSTR-07 by the 10th of the succeeding month in which such tax deduction is made.

Issue of TDS Certificate under GST

Every tax deductor is also required to issue TDS Certificate to all deductee’s in Form GSTR-7A giving details of GSTIN of supplier, Invoice Details, Value of supply/ TDS Deducted etc. within 5 days of date of remittance of TDS to the government. In case of failure to issue certificates a late fees of Rs. 100 per day have to be paid subject to a maximum of Rs. 5000.

How TDS  under GST appear in the ledger of deductee

The amount of TDS deducted shall appear as a credit in the cash ledger of the deductee and would be available as cash equivalent at the time of his monthly form GSTR-3B for payment of tax. There is difference of opinion in this case as some persons say that it will go to Credit ledger of the supplier but in my view it should not be part of credit ledger as the supplier will not be able to claim refund in that case as refund is allowed only in 2 cases – zero rated supply or inverted duty structure.

Points on which Clarification required

As per study material by NACIN – TDS not required to be deducted in case

√ Where tax is paid on reverse charge by recipient.

√ Where payment is made to an unregistered supplier.

Similar happens in the case of composition dealer where the tax rate is 1% in some cases and TDS deduction rate is 2%, so it appears to be unjustified if we apply the TDS provision in the above 3 cases. Clarity is required at the government end.

References

(i) Section 24 & Section 51 of the CGST Act, 2017

(ii) Section 20 of the IGST Act, 2017

(iii) Rule 66 of CGST Rules, 2017

(iv) FORM GSTR-7 & FORM GSTR-7A

(v) Notification No. 33/2017-Central Tax, dated 15th September, 2017, Notification No. 50/2018-Central Tax, dated 13th September, 2018

(vi) Circular No. 65/39/2018-DOR, dated 14th September, 2018 amended vide Circular No. 67/41/2018-DOR, dated 28th September, 2018

Author Bio

Qualification: CA in Practice
Company: GOURAV CHHABRA & CO.
Location: JALANDHAR, Punjab, IN
Member Since: 03 Dec 2018 | Total Posts: 1

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Tags : goods and services tax (6504) GST (6105)

6 responses to “Key Points of TDS Under GST”

  1. Shankara says:

    Can private establishments deduct TDS

    • CAGOURAVCHHABRA says:

      Dear Shankara,

      Only Government/ Government controlled entities need to deduct TDS.
      Please read “who is liable for TDS provision para” in the above article.

  2. MANOJ says:

    If GST is not charged by supplier in a bill of rs. 5,00,000/- is it necessary to deduct TDS on GST. supplier is GST registered.

    • CAGOURAVCHHABRA says:

      Dear Manoj,
      TDS deduction is mandatory in case where contract value exceeds by Rs. 2,50,000. In your case the receiver will deduct TDS on the amount excluding the GST part. Supplier issuing invoice including GST or GST seperately charged does not matter.
      Please note TDS to be deducted on value excluding GST.

  3. Jimesh Shah says:

    Please clarify whether TDS need to deducted in the case of interstate supply or not ?
    As you mentioned in your example that Deductor location Punjab & deductee location is Mumbai than TDS not required to deduct.

    Please confirm this lines.

    • CAGOURAVCHHABRA says:

      Dear Jimesh,
      TDS is required to be deducted in case the contract value exceeds by Rs. 2,50,000 irrespective of the fact that the supply is interstate or intrastate.
      Here one point needs to noted that TDS is not required to be deducted if:
      The location of the supplier (deductee)
      AND
      The place of supply are in a state
      which is different from the state of GST registration of the recipient (Deductor).
      Only in the above case tds deduction is not required.

      For example:
      Location of supplier is in Punjab
      and POS also in Punjab (In this case supplier will charge CGST and SGST of punjab)

      Location of recipient is in Mumbai
      In this case if we required to deduct TDS, the recipient will deduct TDS as CGST & SGST of Maharashtra state.

      In such case, transfer of TDS (CGST + SGST) of deductor State i.e Maharashtra) to the cash ledger of the deductee (CGST + SGST of another State i.e Punjab) would be difficult and therefore, the TDS provisions would not apply.

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