The Central Government hereby, vide notification no. 50/2018 and 51/2018 — Central Tax, appoints the 1st day of October, 2018, as the date on which the provisions of section 51 and 52 of CGST Act (Provisions related to TDS and TCS) Shall come into force with respect to persons specified under respective sections.

Tax Deducted at Source (Sec — 51 of CGST Act, 2017)

a) The Government may mandate following persons (“deductor”) to deduct tax @ 1% at time of payment or credit to the supplier (“deductee”) in respect of supply of goods or services or both, where the total value of supply under a contract exceeds Rs. 2.5 lakhs (excluding taxes and cess in invoice).

i. a deptt. or establishment of CG or SG; or

ii. local authority

iii. Governmental agencies

iv. Other notified persons, if any

Provided that no deduction shall be made if the location of the supplier and the place of supply (POS) is in a state or union territory which is different from state or union territory of recipient. Thus, when both the supplier as well as the place of supply is different from that of the recipient, no tax deduction at source will be made.

E.g — (i) supplier, POS, and recipient are in the same state (Intra Supply) — TDS (CGST + SGST) to be deducted and it would be easy for supplier to take TDS credit

(ii) Supplier as well as POS are in different states (Inter State) —TDS(IGST) to be dedcuted and it would be possible for Supplier to take credit of TDS easily

(iii) Supplier and POS are in State 1 however recipient is in State 2 (Intra Supply) — CGST and SGST would be levied, difficult to take credit of TDS by Supplier thus, TDS not applicable.

As per Sec -20 of IGST Act, the deductor shall deduct tax @ 2% from the payment made or credited to the supplier and value of supply shall include all duties and taxes.

b) The amount deducted shall be paid to the Govt. by the deductor within ten days after the end of the month in which such deduction is made, in such manner as may be prescribed.

c) The deductor shall furnish to the deductee a certificate mentioning therein the contract value, rate of deduction, amount deducted, amount paid to the Government and such other particulars in such manner as may be prescribed.

d) If any deductor fails to furnish to the deductee the certificate, after deducting the tax at source, within five days of crediting the amount so deducted to the Government, the deductor shall pay, by way of a late fee, a sum of one hundred rupees per day from the day after the expiry of such five days period until the failure is rectified, subject to a maximum amount of five thousand rupees.

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

f) Deductor fails to pay to the Government the amount deducted as tax he shall pay interest in accordance with the provisions of sub-section (1) of section 50, in addition to the amount of tax

g) 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.

h) A deductor has to compulsorily register under sec- 24 of the CGST/SGST Act’s without any threshold limit. The deductor can register under GST without requiring PAN. He can obtain registration by using his TAN issued under the Income Tax Act, 1961.

i) The deductor is also required to file TDS return in Form GSTR – 7 within 10 days from the end of the month. If the supplier is unregistered, name of the supplier rather than GST IN shall be mentioned in the return.

j) The details filed in Form 7 by deductor shall be made available to the supplier in GSTR – 2A through common portal. The amount deducted by the deductor gets reflected in the GSTR – 2 of the supplier (deductee).

Message: I will post article on TCS Provisions shortly in continuation after some days so please provide your valuable inputs and suggestions so that I can improve for future articles.

Author: CA Sohil Rana- Please feel free to reach at [email protected] for queries and suggestions.

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October 2021