TDS Under GST, Tax Deduction at Source under GST Regime
TDS Under GST : TDS is required to be deducted at the rate of 1 percent on payments made or credited to the supplier of taxable goods and/or services, where the total value of such supply, under an individual contract, exceeds two lakh fifty thousand rupees. GST, expected to be rolled out with effect from 1st July 2017 would subsume various Indirect Tax laws levied presently. It would enhance the tax base and would be compliance and self-monitoring tax law based on processes. The statutory compliances contained in the statute include, obtaining registration under the GST law by the existing assessees as well as new assessees, periodic payments of taxes and furnishing various statements/returns by all the registered taxable persons.
We know about TDS under Income Tax 1961 and the relevant penalties thereon. However, in Central Excise Act 1944, Finance Act 1994 there are no concept of TDS. Sales Tax law (Value Added Tax) of the State Governments has the provision of TDSin respect of works contract only.Here, the contractee is required to deduct WC-TDS at the time of making payment to the contractor and issue necessary certificates thereon. The rates of TDS are different from state to state, in some of the states it is 8%.
TDS Under GST
Three GST Bills have passed and became the law of the land. Section 51 of CGST Act makes provision with respect to deduction of tax at source by certain persons. Here, we are summarizing the relevant provisions of TDS in the form of FAQ and also highlighted the mechanism to minimize the risk of non-compliances there on in the business.
This provision is meant for Government and Government undertakings and other notified entities making contractual payments in excess of Rs. 10 Lakhs to suppliers. While making such payment, the concerned Government / authority shall deduct 2% of the total payable amount and remit it into the appropriate GST account.
Any amount shown as TDS will be reflected in the electronic cash ledger of the concerned supplier. He can utilize this amount towards discharging his liability towards tax, interest fees and any other amount.
TDS Deductor will account for such TDS in the following ways:
- Such deductors needs to get compulsorily registered.
- They need to remit such TDS collected by the 10th day of the month succeeding the month in which TDS was collected and reported in GSTR 7.
- The amount deposited as TDS will be reflected in the electronic cash ledger of the supplier.
- They need to issue certificate of such TDS to the deductee within 5 days of deducting TDS failing which fees of Rs. 100 per day subject to maximum of Rs. 5000/- will be payable by such deductor.
1. Who are liable to deduct TDS?
The following persons are required to deduct TDS
- (a) A department or establishment of State Government or Central Government
- (b) Local Authority
- (c) Governmental Agencies
- (d) Such persons or category of persons as may be notified by the Government on recommendation of council.
The following class of persons under clause (d) of section 51(1) of the CGST Act, 2017 has been notified vide notification No. 33/2017 – Central Tax dated 15.09.2017 :-
(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 percent or more participation by way of equity or control, to carry out any function;
(b) society established by the Central/ State Government or a Local Authority under the Societies Registration Act,1860
(c) public sector undertakings
2. Whether TDS is applicable only on goods or services also?
TDS is applicable on taxable supply of goods or services or both.
3. Rate of TDS?
There are 4 types of taxes in GST – Integrated Tax (IGST), Central Tax (CGST) and State Tax (SGST) / Union territory Tax (UTGST). The deduction in case of intra-State supply (supply within a State) will be CGST & SGST (in case of Union territory without legislature, it will be CGST & UTGST), and the deduction in case of inter-State supply (supply from one State to another) will be IGST.
Rate of such deduction is @ 2% [i.e. 1% each on CGST & SGST/UTGST component] on the amount paid/credited in respect of intra-State supply & @ 2% [as IGST] on the amount paid/credited in respect of inter-State supply
4. When to Deduct TDS?
Tax is required to be deducted from the payment made / credited to a supplier, if the total value of supply under a contract in respect of supply of taxable goods or services or both, exceeds Rs. 2,50,000/- (Rupees two lakh and fifty thousand).
This value shall exclude the taxes leviable under GST (i.e. ‘Central tax’, ‘State tax’, ‘UT tax’, ‘Integrated tax’ & Cess).
5. Is there any basic exemption for non deduction of TDS?
TDS will not be applicable where the total value of supply under a contract does not exceed Rs. 250,000/-.The value is excluding CGST, SGST, UGST, IGST and Cess Indicated in invoice.
6. Time Limit for deposition of TDS?
The deductor shall deposit TDS within 10 days after the end of the month in which deduction is made. TDS shall be paid within 10 days from the end of the month in which tax is deducted.
7. Time Limit for furnishing of Return?
As per the provision of section 39(3) Return of TDS will be filed within 10 days after the end of the month in which deduction is made. As per draft rule 7 (1), Return of is to be filed in FORM GSTR 7 through common portal either directly or from a facilitation centre notified by the commissioner.
8. Requirement of registration of the deductor?
As per the provision of section 24(vi), persons who are required to deduct TDS under section 51 shall take registration whether such persons are separately registered under the GST Act or not.
9. Is there any interest for delay deposition of TDS amount?
Interest shall be payable as per provision of section 50 and such rate shall not exceed at the rate of 18%.
10. Time limit for furnishing certificate of TDS?
Within 5 Days from the date of deposition of TDS before the Government exchequer.
11. Penalty for delay issuance of TDS Certificate?
Rs. 100/- per day till the failure is rectified but subject to maximum late fee of Rs. 5,000/-
12. What is the quantum of penalty for failure of deduction of TDS or short deduction of TDS or failure to pay TDS to the Government?
There shall be levied a penalty of Rs. 10,000/- or an amount equivalent to tax not deducted or tax shortly deducted or collected/ shortly collected but not deposit to the Government , whichever is higher.
13. Whether the provision of section 73 or 74 is applicable for recovery of tax?
Yes, provision of section 73 or 74 is applicable and the same procedure (e.g. issuance of show cause notice, serving a statement of calculation of tax, interest and penalty etc) will be followed for recovery of TDS.
Control of TDS Compliance:
1. Deductor has to ensure that the TDS has been deducted @2% on every receipt of taxable supply of goods or services or both.
2. State wise TDS GL Code or One GL code with sub code for every state has to be created in their ERP environment. A summary of such GL Code is given below:
|S.No||GL NAME||State||GL Code|
|1||GST TDS PAYABLE – WEST BENGAL||WEST BENGAL||130111|
|2||GST TDS PAYABLE – BIHAR||BIHAR||130112|
|3||GST TDS PAYABLE – MAHARASHTRA||MAHARASHTRA||130113|
|4||GST TDS PAYABLE -KARNATAKA||KARNATAKA||130114|
3. On and before 10th of every month the deductor shall reconcile its taxable receipts and the amount of TDS payable as shown in GL.
4. Deductor shall at the end of every quarter make internal audit of compliance including payment thereon.
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