Examples of various situations requiring deduction of TDS under GST

Examples of various situations requiring deduction of TDS under GST, Illustrations of various situations requiring deduction of tax. 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.

Examples of various situations requiring deduction of TDS under GST

Situations / Contracts Deduction required YES / NO Remarks
Finance Department is making a payment of Rs.3 Lakh to a supplier of ‘printing & stationery’. Yes Where the total contract value of taxable supply is more than Rs.2.5 Lakh deduction is mandatory
Education Department is making payment of Rs.5 Lakh to a supplier of ‘printed books and printed or illustrated post cards’ where payment for books is Rs.2 Lakh and Rs.3 Lakh is for other printed or illustrated post cards Yes, deduction is required in respect of payment of Rs. 3 Lakh only i.e. for payment in respect of taxable supply. Books are exempted goods; no deduction is required in respect of supply of books.

However, payment involving ‘printed or illustrated post cards’ is for supply of taxable goods and value of such supply is > Rs.2.5 Lakh; so deduction is required.

Finance Department, is making payment of Rs.1.5 Lakh to a supplier of ‘car rental service’. See Remarks Deduction is mandatory in case the total value of taxable supply under the contract > Rs.2.5 Lakh irrespective of the amount paid.

However, if the total value of supply under a contract is < Rs.2.5 Lakh, deduction is not required

Health Department executed a contract with a local supplier to supply “medical grade oxygen” of Rs.2.6 Lakh (including GST) and is making full payment. No Total value of supply as per the contract is Rs.2.6 Lakh (including GST). Tax rate is 12%.

So, taxable value of supply (excluding GST) stands at Rs.2.6L x 100/112 = Rs.2.32 L < Rs.2.5 Lakh Hence, deduction is not required.

Municipal Corporation of Kolkata purchases a heavy generator from a supplier in Delhi. Now, it is making payment of Rs.5 Lakh and IGST @18% on Rs.5 Lakh for such purchase. Yes, deduction is required @2% Deduction is required in case of inter-State supply and if the value of taxable supply under a contract exceeds Rs.2.5 Lakh.
Fisheries Department is making a payment of Rs.10 Lakh to a contractor for supplying labour for digging a pond for the purpose of Fisheries. No This supply of service is exempt in terms of Sl. No. 3 of notification No.12/2017 – Central Tax (Rate) dated 28.06.2017 and hence deduction is not required.
Municipality is making payment of Rs.5 Lakh to a supplier in respect of cleaning of drains where the value of supply of goods is not more than 25% of the value of composite supply No This supply of service is exempt in terms of Sl. No. 3A of notification No.12/2017 – Central Tax (Rate) dated 28.06.2017 as amended by notification no. 2/2018- Central Tax (Rate) dated 25.01.2018 and hence deduction is not required.
Government school is making a payment of Rs.3 Lakh to a supplier for supply of cooked food as mid-day meal under a scheme sponsored by Central/State Government. No This supply of service is exempt in terms of Sl. No. 66 of notification No. 12/2017 – Central Tax (Rate) dated 28.06.2017 as amended and hence deduction is not required.
Health Department is making payment of Rs.10 Lakh to a supplier for supply of Hearing Aids. No This supply of goods is exempt in terms of Sl. No.142 of notification No. 2/2017 – Central Tax (Rate) dated 28.06.2017 as amended and hence deduction is not required.

Conditions for & amount of deduction:

Tax deduction is required if all the following conditions are satisfied

a. Total value of taxable supply > Rs.2.5 Lakh under a single contract. This value shall exclude taxes & cess leviable under GST.

b. If the contract is made for both taxable supply and exempted supply, deduction will be made if the total value of taxable supply in the contract > Rs.2.5 Lakh. This value shall exclude taxes & cess leviable under GST.

c. Where the location of the supplier and the place of supply are in the same State/UT, it is an intra-State supply and TDS @ 1% each under CGST Act and SGST/UTGST Act is to be deducted if the deductor is registered in that State or Union territory without legislature.

d. Where the location of the supplier is in State A and the place of supply is in State or Union territory without legislature – B, it is an inter-State supply and TDS @ 2% under IGST Act is to be deducted if the deductor is registered in State or Union territory without legislature – B.

e. Where the location of the supplier is in State A and the place of supply is in State or Union territory without legislature B, it is an inter-State supply and TDS @ 2% under IGST Act is to be deducted if the deductor is registered in State A. f. When advance is paid to a supplier on or after 01.10.2018 to a supplier for supply of taxable goods or services or both.

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