We know that TDS is applicable under Income Tax Act 1961 (i.e Direct Tax).

However under VAT Act (Value Added Tax Act) also, the concept of TDS was there in some of the states and it was required to be deducted by State Govt, Central Govt or a company owned, financed or controlled by state Govt or Central govt. (E.g Sec 40 of Bihar VAT Act 2005, Sec 44 of Jharkhand VAT Act 2005 etc).

Many a time vendor use to charge tax from customer. However the same is not deposited with Govt Ex-chequer. In order to counter such kind of situation TDS provisions under indirect tax (like GST or VAT) has been brought which helps to detect such kind of frauds on the part of vendor.

Section 51 CGST (Central Goods and Services Tax) Act 2017, provides that

  • A department or establishment of Central Govt or State Govt, or local authority or Govt Agencies or other specified persons are required to deduct
  • TDS @ 2% (IGST 2%, or CGST 1% + SGST 1%)
  • from the payment made or credited to supplier,
  • for supply of taxable goods or services or both
  • where the total value of such supply under a contract is > Rs 2.50 lacs.

Notification No 33/2017 dated 15.09.2017 was brought which specified other persons who are required to deduct TDS u/s 51.

However the above notification No 33/2017 dated 15.09.2017 has been superseded by recent notification No 50/2018 dated 13.09.2018, which provides that TDS provisions u/s 51 will be applicable w.e.f 01.10.2018 and provides other specified persons as below:

(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 (PSUs).

Below is the summary of TDS under GST Act:

S.N Heading Particulars
1 Section 51 of CGST Act 2017
2 Person responsible for TDS a) A department or establishment of Central Govt or State Govt, or local authority or Govt Agencies
b) 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
c) Society established by the Central Government or the State Government or a Local Authority under the Societies Registration Act, 1860
d) public sector undertakings (PSUs)
3 Nature of payment * Payment for supply of taxable goods or services or both, where total value of supply under a contract is > Rs 2.50 Lacs
4 Type of Payee Any payee
5 Time / Point of deduction at the time of payment made or credited to the supplier
6 Rate of TDS 2% (IGST 2%, or CGST 1% + SGST 1%)
7 Amount on which TDS applicable Base amount of bill (i.e bill value before CGST, SGST, UTGST, IGST or cess)
8 When no TDS applicable ** 1) Total value of supply under a contract is <= Rs 2.50 lacs or
2) Location and place of supply of supplier is different from the place of registration of recipient.
9 Due date of Payment of TDS 10th of the succeeding month.
10 Return filing due date 10th of the succeeding month in form GSTR-7
11 GST TDS Certificate In form GSTR-7A to vendor within 5 days of crediting the amount to the Government. Late fees of Rs 100 per day (maximum Rs 5,000).
12 GST Registration Mandatory for all person liable to deduct TDS. There will be TAN based registration.
13 GST TDS Credit TDS amount will be reflected in ECL (Electronic Cash Ledger) of supplier which can be used for payment of GST.
14 GST TDS Refund Both the deductor / deductee can claim excess or erroneous TDS deduction. However if TDS is reflected in ECL (Electronic Cash Ledger) then only deductee can claim refund.

*If total contract value is > Rs 2.50 lacs, then for each peacemeal payment or credit (even if such amount is < Rs 2.50 Lacs), TDS compliance u/s 51 need to be made.

** Sec 51 provides that no TDS is applicable when location and place of supply of supplier is different from the place of registration of recipient. This can be explained with help of below table (Place of supply has to be determined as per sec 10 of CGST Act):

S.N Location of Supplier Place of Supply State of reg of recipient Type of Supply TDS applicable Rate of TDS
1 Kolkata Kolkata Kolkata Intra State Yes CGST 1% + SGST 1%
2 Kolkata Kolkata Mumbai Inter state No Not Applicable
3 Kolkata Bihar Bihar Inter state Yes IGST @ 2%

Existing provision of section 51 of CGST Act 2017 is reproduced below:

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.––

(1) 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.

(2) The amount deducted as tax under this section shall be paid to the Government 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.

(3) 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.

(4) 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.

(5) The deductee shall claim credit, in his electronic cash ledger, of the tax deducted and reflected in the return of the deductor furnished under sub-section (3) of section 39, in such manner as may be prescribed.

(6) If any deductor fails to pay to the Government the amount deducted as tax under sub-section (1), he shall pay interest in accordance with the provisions of sub-section (1) of section 50, in addition to the amount of tax deducted.

(7) The determination of the amount in default under this section shall be made in the manner specified in section 73 or section 74.

(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.

Hope users will find this article useful.

Click here to know how to save TDS from using Form 15G

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Tags : CA Srikant Agarwal (30) goods and services tax (6045) GST (5646) TDS (1099)

2 responses to “TDS (Tax Deduction at Source) u/s 51 of CGST Act 2017 for Govt Enterprises”

  1. shashank agrawal says:

    is tds on gst applicable for real estate industry

  2. RAVIPRAKASH says:

    SEC. 51 NOT APPLICABLE FOR INTERSTATE TRANSACTIONS. HENCE TABLE 6 -Rate of TDS 2% (IGST 2%,AS MENTIONED ABOVE NOT APPLCABLE.

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