TDS Provisions under GST Regime- A quick Look

You all are aware w.e.f. 1/10/2018 Govt has announced implementation of most awaited section 51 of GST Act, 2017 related to TDS under GST and it’s provisions, rules etc. A Quick View of Provisions of TDS under GST regime is as under:

WHAT NOTIFICATION SAYS: (Notification No. 50/2018 – Central Tax, New Delhi, the 13th September, 2018)

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 under clauses (a), (b) and (c) of sub-section (1) of section 51 of the said Act and the persons specified below under clause (d) of sub-section (1) of section 51 of the said Act, namely:-

(a) 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 per cent. 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);

(c) public sector undertakings.

Important To Note:

The Notification is silent on the name of Deductor as referred in 51(d)- such persons or category of persons as may be notified by the Government on the recommendations of the Council;

WHAT ACT SAYS U/S 51:

51. (1) Notwithstanding anything to the contrary contained in this Act, the Government may mandate,––

(a) a department or 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,

(hereafter in this section referred to as “the deductor”), to deduct tax at the rate of one per cent. from the payment made or credited to the supplier (hereafter in this section referred to as “the deductee”) of taxable goods or services or both, where the total value of such supply, under a contract, exceeds two lakh and fifty thousand rupees:

Provided 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.

Explanation.––For the purpose of deduction of tax specified above, the value of supply shall be taken as the amount excluding the central tax, State tax, Union territory tax, integrated tax and cess indicated in the invoice.

SUMMING & QUICK LOOK ON IMPLEMENTATION OF NOTIFICATION AND ACT

• Effective date is 1/10/2018
• Applicable to Recipients of Services or Goods- Any Authority, Establishment, Society of Central or State, Public Sector undertaking.
• Other recipients like Limited Companies (other than Public Sector Undertakings), Firm, Individuals etc are yet to notify.
• 2% (1% CGST + 1% SGST) is rate of deduction if you are supplier then ready for shelling out 2% from your collection although it is adjustable in your liability if your supply value is more than Rs.2.50 lacs.
• Within 10 days from the month of deduction (following month) TDS has to be deposited and of course in your GSTR 3B due on 20^th will have credit of TDS, if deductor has deposited on time.
• Within 5 days from the payment of TDS to the Govt a TDS certificate has to be issued to deductee, if not issued then late fee @Rs.100/- per day shall be levied max Rs.5000/-.
• If fails to deduct TDS then interest shall be charged as per section 50(1).
• As per section 51(8) 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 section 54: 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.
• No TDS is to be deducted if Location of Supplier & Place of Supply are in different state of Recipient registration {(proviso section 51(1)}.
• Example:
• Here it is to be understood by an example- if Supplier is in Noida (UP) and recipient placed order from Delhi for his customer at Noida (UP) here place of supply is Noida and supplier is also at Noida then of course as per IGST Law this supply will be treated as “Inter State Supply” because unnecessary movement of Goods are only avoided otherwise it is Inter State Sale,  but what happen with TDS provision, let us examine – Supplier is at Noida, Place of Supply is also Noida but Order placed from Delhi so deemed place of Supply is Delhi, in my opinion in case of IGST the proviso of TDS shall not be applicable because supplier & recipient are in two different states. (Refer section 10(1)(b) IGST Act, 2017)
• Likewise proviso of section 52 applicable to every ELECTRONIC COMMERCE OPERATORS but excluding agent.

Read about deduction under section 80TTA here