Tax Deducted at Source (TDS) is one of the ways to collect tax based on certain percentages on the amount payable by the receiver on goods/services. The collected tax is revenue for the government. The concept of Tax Deduction at Source (TDS) was there in the erstwhile VAT Laws. GST Law also mandates Tax Deduction at Source (TDS) vide Section 51 of the CGST/SGST Act 2017, Section 20 of the IGST Act, 2017 and Section 21 of the UTGST Act, 2017. GST Council in its 28th meeting held on 21.07.2018 recommended the introduction of TDS from 01.10.2018.
1. A department or an establishment of the Central Government or State Government; or Local authority; or
2. Governmental agencies; or Such persons or category of persons as may be notified by the Government.
As per the latest Notification dated 13th September 2018, the following entities also need to deduct TDS-
1. An authority or a board or any other body which has been set up by Parliament or a State Legislature or by a government, with 51% equity ( control) owned by the government.
2. 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.
3. Public sector undertakings.
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 a single contract, exceeds two lakh fifty thousand rupees. No deduction of Tax is required when the location of supplier and place of supply is different from the State of the registration of the recipient.
A person who is liable to deduct TDS has to compulsorily register and there is no threshold limit for this. 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.
TDS and return in Form GSTR-7 shall be done within 10 days after the end of the month in which deduction was made.
Furnish system generated TDS certificate in Form GSTR-7A to the deductee 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.
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.