TDS provisions under GST

TDS PROVISIONS UNDER GST

TDS under GST Law shall be deducted as per the provisions of section of  51 under CGST Act,2017, section 21 of the UTGST Act,2017 and section 20 of the IGST Act,2017.

Section 51 of CGST Act,2017

Notwithstanding anything to the contrary contained under this act, the government may mandate –

1. A department or establishment of the central Government or state government or
2. Local authority
3. Government agencies
4. Such persons or category of persons as may be notified by the govt on the recommendations of the council.

To deduct tax at the rate of one percent from the payment made or credited to the supplier (deductee)  of taxable goods or services or both if the total taxable value of such supply under a contract exceeds two lakh and fifty thousand rupees.

For the purpose of calculating the deduction, the value of supply shall be taken as the amount excluding the central tax, state tax , integrated tax and cess indicated in the invoice.

The amount deducted under this section shall be paid to the govt by the deductor within ten days from the end of the month in which deduction is made. If the deductor fails to pay, he shall be liable to pay interest in accordance to the provisions under section 50.

The deductee shall claim credit in his electronic cash ledger of tax deducted and reflected in the return of the deductor.

Section 21 of UTGST Act,2017

All provisions of CGST Act,2017 shall mutatis mutandis apply under this act.

Section 20 of IGST Act,2017

All provisions of CGST Act,2017 shall mutatis mutandis apply under this act. Provided that tax shall be deducted at the rate of 2% from the payment made or credited to the supplier. 

When shall Tax not be deducted at source

1.No deduction of tax is required when the location  of supplier and the place of supply is in a state/UT which is different from the state of the registration of the recipient.

For example where location of supplier is in chandigarh and place of supply is in chandigarh and recipient is registered in Delhi. No tax is deducted.

2.No tax is deducted on exempted, nil rated supply of goods or services.

Registration Requirements

Registration is mandatory under section 24(vi). There is no threshold limit for this.

Example for clear understanding

Suppose M/s Shyam Bros have supplied printed material valued at Rs 225000 along with books valued at  Rs 70000 to department of Govt. under a single contract and tax invoice has been raised of Rs 295000 plus tax on it.

In this case although Total invoice value is exceeding Rs 250000 but taxable value is Rs225000 which is less than prescribed limit. Hence tax shall not deductable in this case.

Procedure to Pay tax

 The amount deducted under this section shall be paid to the govt by the deductor within ten days from the end of the month in which deduction is made. The deductor shall file Form GSTR-7 for depositing the tax.

TDS Return shall be filed in Form GSTR-7 electronically on GST portal before 10^th of the month succeeding the month in which deductions is done. As per provisions, no need to file GSTR-7 return for the month on which no deduction has been done.

The deductor shall furnish to the deductee  a TDS certificate in Form GSTR-7A in a prescribed format within five days from crediting the amount do deducted to the govt.

Late Fees, Interest and Penalty

1. If deductor fails to issue certificate in time, he shall be liable to pay late fee of Rs100 per day separately under CGST Act and SGST Act upto maximum of Rs 5000 each under CGST Act and SGST Act.
2. The interest @18% is applicable according to the provisions under section 50 if deductor fails to deposit tax on time. ( i.e. 10^th of next succeeding month )
3. Amount of default shall be determined as per the manner specified in section 73 or 74 of the CGST Act.

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(Disclaimer: This write up is based on the understanding and interpretation of author and the same is not intended to be a professional advice.)