Introduction:
Tax Deducted at Source (TDS) is a crucial aspect of the Goods and Services Tax (GST) framework, falling under the purview of Indirect Tax. In this article, we delve into the provisions of TDS as per Section 51 of the GST Act, shedding light on key aspects such as applicability, rates, persons liable to deduct TDS, and the procedural intricacies involved.
Applicability of TDS under GST (Section 51):
TDS under GST becomes applicable when the total value of taxable supply (excluding taxes and cess leviable under GST) under a single contract exceeds Rs.2.5 lakh. It’s important to note that the determination of value is done on a total contract basis, not invoice-wise.
Notable Points:
- Contract-wise Evaluation: The assessment is contract-wise, not single invoice-wise. For instance, if a supplier enters into a Rs.45 lakh contract with a local authority for a statewide polio campaign, TDS is deducted for the entire contract, irrespective of invoice values.
- Separate Registration: Deductors need to obtain separate registration for TDS under GST.
- TDS Rate: The prescribed TDS rate is 2% (1% + 1%).
Persons Liable to Deduct TDS under GST:
Persons liable to deduct TDS under GST are outlined in Section 51(1), encompassing various entities:
1. Central/State Government, department, or establishment (Section 51(1)(a))
2. Local Authority (Section 51(1)(b))
3. Governmental agencies (Section 51(1)(c))
4. Notified persons/category of persons (Section 51(1)(d))
(a) Authorities, Boards, or bodies set up by an act of Parliament/legislature.
(b) Societies registered by the Central/State Government/Local Authority.
(c) Public Sector Undertakings.
Important Note:
- TDS is not required if the supply is among the specified persons mentioned above.
- The Defence Ministry is exempt from TDS obligations.
Procedure for Deducting TDS:
1. Timing of TDS Deduction: TDS is to be deducted at the earlier of the date of payment or the date of credit.
2. Depositing TDS with the Government: The deductor must deposit the TDS with the Government through Challan.
3. Filing GSTR-7 (TDS Return): Deductors are required to file GSTR-7 (TDS Return) by the 10th of the next month, and this information is made available to the deductee.
4. Issuing GSTR-7A (TDS Certificate): Within 5 days of depositing TDS with the government, the deductor must issue GSTR-7A (TDS Certificate) to the deductee.
5. Default Consequences: In case of default, TDS, along with interest, must be paid. Failure to comply may lead to recovery proceedings under Section 73/74.
No TDS in Certain Cases:
No TDS is required in the following cases:
1. NIL-rated/Exempted/Non-taxable Supply or transactions paid under Reverse Charge Mechanism (RCM).
2. Tax invoices issued before 01/10/2018.
3. When the supplier and place of supply differ from the location of the recipient.
4. Payments made to an unregistered supplier.
Conclusion: Understanding the nuances of TDS under GST is vital for businesses and entities involved in transactions covered by the GST framework. Adhering to the specified procedures ensures compliance with TDS regulations, avoiding potential penalties and legal consequences.
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