Understanding on TDS under GST

TDS under GST is applicable since 1^st October 2018. As per GST Law- Certain categories of registered persons will be require to deduct taxes while making payment to suppliers. Sec 51 of CGST Act deals with TDS on GST.

Applicability

• If the contract value is more than Rs 2.50 Lakhs, the following class of persons who are registered under GST Law are required to deduct TDS on GST

1. A Department of Establishment of the Central Government or State Government.

2. Local Authority

3. Government Agencies

4. Such persons or Category of persons notified by Government.

The following category of persons have been notified by the Govt on which the provisions of TDS on GST would be applicable

• An authority or board or any other body with 51% or more participation by way of equity or control

1. Set up by an Act of Parliament or a State Legislature; or

2. Established by any Govt.,

• Society established by the Central Govt. or State Govt. or a Local Authority under the Society Regulation Act 1860
• Public Sector Undertakings

The above persons “As per provisions of section 24(vi) (Who are required to deduct TDS under Section 51, Shall take registration in the Form GST REG-07

 Registration

•  A person who is liable to deduct TDS has to compulsorily register under Section 24(vi) and there is no basic exemption limit.
• Registration under GST can be obtained without PAN and by using the existing tax deduction and collection account number (TAN) issued by Income Tax Act.
• A person liable to deduct tax is required to register as a deductor even if he is registered separately as supplier.

Applicability and Rate

• TDS on GST is to be deducted @ rate of 2% on payment made to supplier of taxable Goods or Services, where the total value of such supply or services under individual contract in excess of Rs 2.50 lakhs.

Example 1: MS Harsha M had entered in two contracts with public Sector Undertaking 1) for GST Advisory Rs 2.20 Lakhs 2) for Income tax advisory Rs 2.00 Lakhs.

In the above example-The total value of service provided is Rs 4.2 lakhs, which is more than Rs 2.50 Lakhs, However the provision of TDS on GST would not applicable as the value of each contract is less than Rs 2.50 Lakhs.

Example 2: MS Harsha M, enters in to a single contract to provide services worth Rs 3.50 lakhs, He receives advance of Rs 1.50 Lakhs on 1^st October 2019 and balance Rs 2 Lakhs on 1^st May 2020.

In this example the provision of TDS on GST will be applicable as the contract value is more than Rs 2.50 lakhs for a single contract.

Location of Supplier and Place of supply

•  First provision of Section 51(1) with respect to non-applicability of TDS- Where location of supplier and place of supply both are in same state but place of recipient of supply is another state, No TDS shall be deductible

TDS on GST applicability on different situations is shown in below table

Sl No:	Location of Supply	Place of Supply	Nature of GST	Place of Recipient	TDS applicability	% TDS
1	Mumbai	Mumbai	CGST & SGST	Mumbai	Yes	2%                (1%+1%)
2	Mumbai	MP	IGST	Mumbai	Yes	2%
3	Mumbai	MP	IGST	Gujarat	Yes	2%
4	Mumbai	Mumbai	CGST & SGST	Gujarat	No	_

Deposit of TDS on GST

•  The amount of TDS deducted should be deposited with Government by the deductor by the 10^th of next month. In FORM GSTR 7, through the online portal gst.gov.in.
• Late filing of GSTR-7 results in a late fee of Rs 100 per day under CGST and Rs 100/- under SGST, hence, a total of Rs 200/- per day is levied. Maximum penalty cap is Rs 5000/= under CGST and Rs 5000/- under SGST.
• Apart from Late fee- Interest @ 18% PA, applicable from next day of the due date of filing of return to the day of making actual payment.
• Any excess or erroneous amount deductible and paid to the Government shall be dealt for refund under section 54. However if the deduction amount is already credited to the Electronic Cash Ledger of the Supplier, the same shall not be refunded.

As per Circular No. 166/22/2021-GST

The amount deducted/collected as TDS/TCS by TDS/ TCS deductors under the provisions of section 51 /52 of the CGST Act, as the case may be, and credited to electronic cash ledger of the registered person, is equivalent to cash deposited in electronic cash ledger. It is not mandatory for the registered person to utilise the TDS/TCS amount credited to his electronic cash ledger only for the purpose for discharging tax liability. The registered person is at full liberty to discharge his tax liability in respect of the supplies made by him during a tax period, either through debit in electronic credit ledger or through debit in electronic cash ledger, as per his choice and availability of balance in the said ledgers. Any amount, which remains unutilized in electronic cash ledger, after discharge of tax dues and other dues payable under CGST Act and rules made there under, can be refunded to the registered person as excess balance in electronic cash ledger in accordance with the proviso to sub-section (1) of section 54, read with sub-section (6) of section 49 of CGST Act.

TDS Certificate

•  TDS certificate would also to be issued by the deductor in GSTR 7A to the deductee, within 5 days of depositing the TDS with the Government.

Non- Compliance of the above will attract late of Rs 100/- per day subject to maximum of Rs 5000/-

 Tax deduction is not required in following situations:

a) Total value of taxable supply ≤ Rs. 2.5 Lakh under a contract.

b) Contract value > Rs. 2.5 Lakh for both taxable supply and exempted supply, but the value of taxable supply under the said contract ≤ Rs. 2.5 Lakh.

c) Receipt of services which are exempted. For example services exempted under notification No. 12/2017 – Central Tax (Rate) dated 28.06.2017 as amended from time to time.

d) Receipt of goods which are exempted. For example goods exempted under notification No. 2/2017 – Central Tax (Rate) dated 28.06.2017 as amended from time to time.

e) Goods on which GST is not leviable. For example petrol, diesel, petroleum crude, natural gas, aviation turbine fuel (ATF) and alcohol for human consumption.

f) Where a supplier had issued an invoice for any sale of goods in respect of which tax was required to be deducted at source under the VAT Law before 01.07.2017, but where payment for such sale is made on or after 01.07.2017 [Section 142(13) refers].

g) Where the location of the supplier and place of supply is in a State(s)/UT(s) which is different from the State / UT where the deductor is registered.

h) All activities or transactions specified in Schedule III of the CGST/SGST Acts 2017, irrespective of the value

i) Where the payment relates to a tax invoice that has been issued before 01.10.2018.

j) Where any amount was paid in advance prior to 01.10.2018 and the tax invoice has been issued on or after 01.10.18, to the extent of advance payment made before 01.10.201

k) Where the tax is to be paid on reverse charge by the recipient i.e. the deductee.

l) Where the payment is made to an unregistered supplier.

m) Where the payment relates to “Cess” component.