SECTION 51 : CHAPTER X :PAYMENT OF TAX OF CGST ACT , 2017

1. TDS under GST will be applicable from 1st October 2018.

Major Heads of Taxes under GST are CGST, SGST & IGST .In addition, as per the GST law, certain categories of registered persons will be required to deduct taxes while making payments to supplier i.e TDS and deposit it with the government. Let’s try to understand TDS related procedures under GST.

2. Introduction to TDS under GST Law:

Concept of TDS came into Force from Income Tax Act, 1961, Basically for the purpose of tracking of income of the Taxable person.

TDS Refers to certain % of the amount which is to be deducted by the receiver of Goods/services on the amount payable on account of Supply made if Transaction Value as per Section 15 of CGST act 2017 exceeds 2.5 Lakhs.

GST TDS is different from TDS under Income-tax Act. If a transaction is covered under both GST Act and Income-tax Act, both the deductions are required.

3. Person liable to deduct TDS under GST law? ( Section 51(1)

(a) A department or an establishment of the Central Government or State Government; or

(b) Local authority; [Section 2(69)] or

(c) Governmental agencies; or

(d) Such persons or category of persons as may be notified by the Government.

TDS under GST3.1 As per the latest Notification dated 13th September 2018, the following entities also need to deduct TDS- Notification No. 50/2018 – Central Tax the Central Government hereby appoints the 1st day of October, 2018, as the date on which the provisions of section 51 of the said Act shall come into force with respect to persons specified.

(a) An authority or a board or any other body which has been set up by Act of Parliament or a State Legislature or by a government, with 51% equity or control owned by the government.

(b) A society established by the Central or any State Government or a Local Authority and the society is registered under the Societies Registration Act, 1860.

(c ) Entity controlled by Government companies is liable to deduct tax at source under GST. In WEBFIL Ltd., In re [2019] (AAR-WEST BENGAL), the applicant was a joint venture between Government of West Bengal undertaking and a Central Government undertaking. It was held that they ‘control’ the applicant within the meaning of section 2(27) of the Companies Act, 2013 and hence liable for TDS and covered under the clause – control owned by the Government

4. Rate of TDS under GST?

TDS is to be deducted at the rate of 2 percent on payments made to the supplier of taxable goods and/or services, where the total value of such supply, under an individual contract, exceeds two lakh fifty thousand rupees.

4.1. Example: For example Sushant Basra supplied certain machinery to PUBLIC SECTOR UNDERTAKING under an contract.:-The total value of contract was Rs 2,49,999 plus GST as applicable. Tax is not liable to be deducted in such cases as contract value excluding taxes is below Rs 2,50,000.

5. Value for deduction of tax : CGST, SGST, IGST and Cess levied under GST has to be excluded for the purpose of determining total value. Contract Value is to taken and not Individual Invoice Wise for Determination of Deduction Of TDS.

6. TDS is not required to be deducted :Proviso To Section 51(1) States that No deduction of Tax is required when the

(a) Location of supplier(LOS) and

(b) Place of supply(POS) is different from the State of the registration of the recipient . (Recipient means those people who will deduct TDS )( ie LOR).

Reason : POS : Punjab , Supplier will Deposit CGST & SGST(PUNJAB) , But Receiver of Haryana cant pay TDS deducted to SGST(PUNJAB) , He can only deposit TDS to SGST(Haryana)

Location Of Supplier Place Of Supply Location Of Receiver TDS Tax
Punjab Punjab Punjab Yes CGST (Punjab) SGST (Punjab)
Punjab Haryana Punjab Yes IGST (Interstate Always TDS Applicable)
Punjab Punjab Haryana No Proviso To Section 51(1)
Punjab Haryana Tamil Nadu Yes IGST (Interstate Always TDS Applicable)
Punjab Tamil Nadu Haryana Yes IGST (Interstate Always TDS Applicable)

6.1. Supply by one PSU to another – Provisions of TDS do not apply when supply goods or services or both is made by one PSU (Public Sector Undertaking) to another PSU – proviso to Notification No. 50/2018-CT dated 13-9-2018, inserted on 5-11-2018 but with effect from 1-10-2018.

6.2 Specified Authorities under Ministry of Defence – Authorities under Ministry of Defence (other than those specified in Annexure A of Notification) are exempt from TDS compliance under GST – Notification No. 50/2018-CT dated 13-9-2018 amended by Notification No. 57/2018-CT dated 23-10-2018.

6.3 Transactions between Local Authorities / Government Agency / Central / State Government Department / Notified person – TDS provisions do not apply when supply of goods or services or both is between persons specified in clauses (a) to (d) of Notification No. 51(1) of CGST Act – third proviso to Notification No. 50/2018-CT dated 13-9-2018, inserted on 31-12-2018.

6.4 Para 4 of the Standard Operating Procedure (SOP) issued by Law Committee of GST Council clarifies that TDS is not required in following cases:

(a) Activities or transactions specified in Schedule III of the CGST/SGST Acts 2017, irrespective of the value.

(b) Tax is to be paid on reverse charge by the recipient i.e. the deductee.

(c ) Payment is made to an unregistered supplier.

(d) Payment relates to “Cess” [GST Compensation Cess] component

(e) Taxable supply under the said contract ≤ Rs. 2.5 Lakh. Contract value >Rs. 2.5 Lakh for both taxable supply and exempted supply

(f) Goods on which GST is not leviable. For example petrol, diesel, petroleum crude, natural gas, aviation turbine fuel (ATF) and alcohol for human consumption

(g) Receipt of exempted goods or services (goods / services exempted under notification No. 2/2017-Central Tax (Rate) dated 28.06.2017 as amended from time to time.

7. Transitional Provisions : – TDS provisions are applicable w.e.f. 01.10.2018 . Applicability of provisions on transactions prior to this date will be as follows :

7.1 Supply is made before 1-10-2018 but invoice is issued after 1-10-2018, TDS provisions will apply.

7.2 Tax invoice was issued by supplier prior to 1-10-2018 but payment is made after 1-10-2018, TDS provisions do not apply.8. Registration requirements for TDS deductors A person who is liable to deduct TDS has to compulsorily register under Section 24(VI) and there is no basic exemption limit. 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. Thus it can be said having TAN is Mandatory .Legal name to be indicated should be same as Income Tax

8.1 A person liable to deduct tax is required to register as deductor even if he is registered separately as supplier.

8.2 The registration form requires some personal details of DDO or deductor. If the DDO is transferred, details of new DDO should be submitted electronically on GSTN by amending registration details.

8.3 The DDO (Drawing and Disbursement Officer) is supposed to be personally liable to comply with TDS provisions.

8.4 Mobile number and e-mail address is required as OTP is sent on mobile and e-mail for verification.

9. Deductor and Deductee – Person deducting GST TDS will be termed as ‘deductor’. Supplier from whose invoice tax is deducted will be termed as ‘deductee’

10. Payment of TDS to Government under GST Law

TDS shall be paid within 10 days from the end of the month in which tax is deducted. The payment shall be made to the appropriate government which means:

  • The Central Government in case of the IGST and the CGST
  • The State government in case of the SGST

10.1. Mode of Payment : The deductor has to generate challan in the portal at www.gst.gov.in and deposit the tax so deducted through e-payment mode [Net Banking/Debit-Credit card/NEFT-RTGS] or OTC Mode [Cash/Cheque/DD]

11. TDS Returns : Deductor is required to file return electronically to Government. The return is to be filed in prescribed form and manner within ten days after end of each month – section 39(3) of CGST Act.

The prescribed form of return is GSTR-7. Offline tool is available to submit GSTR-7 return.

If there is no transaction in a particular month, the deductor is not required to file return for that month – ratio of section 39(8) of CGST Act.

Time limit for filing return can be extended by Commissioner by issuing notification – section 39(6) of CGST Act.

Extension of time limit for filing GSTR-7 return for March 20 – May 20 – Due to Covid -19 GSTR-7 return for March 20 – May 20 has been extended upto 30.06.2020 – Notification No. 35/20 -CT dated 03.04.2020

12. Late fee for not filing GSTR-7 return within due dateLate fee payable is Rs. 100 per day under CGST Act and Rs. 100 per day under SGST/UTGST Act (Maximum Rs. 5,000 under CGST Act and Rs. 5,000 under SGST/UTGST Act i.e. total Rs. 10,000 per return) separately – (Section 47(1) of CGST and SGST Act).

13 TDS Certificates : TDS certificate in form GSTR-7A to the concerned person within 5 days of depositing the tax to the government. Failure to do so will make the person liable to pay a late fee of Rs. 100 per day up to a maximum of Rs. 5000.

14 Refund of TDS under GST? [ Section 51(8) ] If any excess amount is deducted and paid to the government, a refund can be claimed as this is not the tax amount that the government has a right on.

However, if the deducted amount is already added to the electronic cash ledger of the supplier, the amount so added cannot be got back as a refund by the deductor. Deductee can claim a refund of tax subject to refund provisions of the act. ( Proviso to Section 51(8)

15. Deductee can claim credit of TDS in electronic cash register – The deductee shall claim credit, in his electronic cash ledger, of the tax deducted and reflected in the return of the deductor – section 51(5) of CGST Act.

Thus, deductee can take credit in electronic cash register only when deductor files return and not on the basis of TDS certificate.

Republished with Amendments. Amendments been made by CA Anita Bhadra)

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2 Comments

  1. Paljyosar says:

    What are the consequences and further course of action in the event of failure of deducting TDS under the captioned provision?

    Will merely ignoring the matter that “in an eligible case TDS on GST has not been deducted” create any problem later?

  2. Ashok Kumar says:

    Whether the rate contract will be treated as 1 Contract where we place multiple order through rate contract whose value(Individual Orders) is less than 2.5 lakhs ?
    And Whether TDS on GST to be deducted on the above scenario ?

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