TDS Deduction at Source under Goods and Services Tax:-
Special Note:- TDS under GST is different from TDS under Income Tax.
Basic Intro.- Section 51 of CGST Act, 2017 deals with the provisions of TDS under GST. In 28th meeting of GST Council, introduction of TDS has been recommended from 01.10.2018
What is TDS under GST?
Mechanism to collect tax from suppliers/vendors through buyers where the total value of taxable supply under a single contract (excluding GST) exceeds Rs. 2.5 Lakh.
Here, the deductor is to deduct tax at source from payment made to the suppliers of taxable goods or services or both.
Example– Mr. Raj, a DDO of XYZ office of the Government buys stationeries for his office from supplier Mr. Vinod for Rs. 3.5 Lakh under a contract.
When Mr. Raj pays to Mr. Vinod , he is require to deduct tax.
Which Persons are liable to deduct tax under GST?
- A department or establishment of the Central Government or State Government; or
- Governmental agencies; or
- local authority; or
- An authority or a board or any other body (1) set up by an Act of Parliament, or a State Legislature; or (ii) established by any Government having 51% or more participation by way of equity or control.
- Public Sector Undertakings;
- Society established by the Central/ State Government or a Local Authority under the Societies Registration Act,1860;
Rate of TDS Under GST:–
There are 4 types of taxes–
Integrated Tax (IGST), Central Tax (CGST) and State Tax (SGST) / Union territory Tax (UTGST).
Rate of TDS is @ 2% [i.e. 1% each on CGST & SGST/UTGST] in case of Intra-State supply and @ 2% on IGST in case of Inter-State supply on the amount paid/credited.
No TDS:-When the location of the supplier and the place of supply is in a State/ Union territory which is different from the State/ UT of registration of the recipient.
| Situation | Location of Supplier | Place of Supply | Registration of Recipient | Applicability of TDS under Sec.51 | Rate of TDS |
|---|---|---|---|---|---|
| 1 | Haryana | Haryana | Haryana | Yes | 1% +1% = 2% |
| 2 | Haryana | Haryana | U.P | No | – |
| 3 | Haryana | U.P | U.P | Yes | 2% |
| 4 | Ladakh | Ladakh | Ladakh | Yes | 1% +1% = 2% |
| 5 | Ladakh | Ladakh | Lakshadweep | No | – |
| 6 | Ladakh | Lakshadweep | Lakshadweep | Yes | 1% +1% = 2% |
Is Registration is required for TDS Deductor ?
Yes, TDS deductor has to get registration and get GSTIN [Goods & Services Tax Identification Number].
What is the Time limit for filing the TDS Returns under GST?
FORM GSTR-7 for a particular month has to be filed online and due date is the 10th of the month succeeding to the month in which such deductions is made.
When TDS under GST is applicable ?
Tax is required to be deducted from payment made/credited to supplier if the total value of taxable supply under a contract exceeds Rs. 2,50,000/- (Rupees two lakh and fifty thousand).
Note:-Value of supply exclude the taxes leviable under GST (i.e. Central tax, State tax, UT tax, Integrated tax and Cess).
Example– If Mr. Raj a DDO of XYZ office of the Government wants to buy stationeries for his office from supplier Mr. Vinod. So, here, Mr. Raj is required to deduct tax at the time of making payment or crediting payment to Mr. Vinod.
Note:-Here, Value of taxable supply under a contract exceeds Rs 2.5 lakh (threshold limit).
Special Note:- tax is required to be deducted when payment is made after the effective date i.e. 01.10.2018 and date of contract does not matter.
Situation 1. Mr. Raj and Mr. Vinod enter into a contract of Rs. 2.4 Lakh (taxable supply) and payment of Rs. 1.4 Lakh has been made by Mr. Raj on 18.11.2021. Now, on 25.11.2021, contract value is revised from Rs. 2.4 Lakh to 5.4 Lakh. On which amount, tax should be deducted?
TDS shall have to be deducted on 5.4 Lakh (full value) while making remaining payment of Rs. 4 Lakh. Here, Rs. 10800/- would be deducted at the time of remaining payment of Rs. 4 Lakh.
Late fees, Interest and penalty:-
- if fails to furnish the GSTR-7 by due date, late fees of Rs. 100/- per day under CGST & SGST/UTGST Act, separately subject to maximum Rs. 5000/- each under under CGST Act & SGST/UTGST Act.
Advice for readers- for detailed study please refer any book of Indirect Tax Laws.