TDS under GST effective from 1st October 2018 – All you need to know

TDS under GST effective from 1st October 2018. Under the GST regime we have the basic 3 kinds of taxes. CGST, SGST/UTGST and IGST. In addition Certain categories of registered persons are required to deduct taxes and deposit it with the government. Let’s try to understand TDS related procedures under GST.

Governing provisions of TDS under GST effective from 1st October

Applicability

Notification No. 50/2018 – Central Tax dated September 13, 2018

Section 51 of the CGST Act, 2017 (i.e. Tax deduction at source) applicable from 1st October 2018.

Who is required to deduct TDS?

Following persons are required to deduct TDS:

  • (a) a department or establishment of the Central Government or State Government; or
  • (b) local authority; or
  • (c) Governmental agencies; or
  • (d) such persons or category of persons as may be notified by the Government.

Persons notified under Section 51(1)(d):

(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 51% or more equity or control by the government.

(b) Society established by the Central Government or the State Government or a Local Authority under the Societies Registration Act, 1860.

(c) public sector undertakings

When to deduct TDS?

Section 51(1)

  • Payments made or Credited
  • to the supplier of taxable goods or services or both
  • where the total value of such supply, under an individual contract, exceeds Rs. 2,50,000.

No deduction of Tax is required when

The location of supplier and Different from the State or UT of the registration of the recipient.
Place of supply

At what Rate TDS to be deducted?

Section 51(1)

TDS is to be deducted

  • at the rate of 2 percent
  • on payments made / credited
  • to the supplier of taxable goods and/or services
  •  1% for CGST+ 1% for SGST/UTGST
  • or
  • 2% for IGST

On which Value TDS to be deducted?

Explanation to Section 51(1)

The value of supply is to be taken as the amount excluding the tax and cess indicated on the invoice.

This means TDS shall not be deducted on the CGST, SGST/UTGST or IGST component of invoice.

Example:

  • Supplier A makes a taxable supply worth Rs. 3,00,000 to B.
  • The rate of GST is 18%.

When B pays A,

He/She will pay Rs. 2,94,000 (worth of Supply) + Rs 54,000 (GST) to A and Rs. 6,000 (RS. 3,00,000*2%) as TDS to the government.

So it can be said that TDS is not deducted on the tax element (GST) of a transaction.

Is registration compulsory?

  • A person who is liable to deduct TDS has to compulsorily register (whether or not separately registered)
  • There is no threshold limit for this.

How to apply for Registration?

Form: GST REG-07

Applicants not having PAN can apply on the basis of existing TAN issued under the Income Tax Act.

TAN – Tax Deduction and Collection Account Number

When should the TDS be paid?

Section 51(2)

Within 10 days from the end of the month in which tax is deducted.

How and when to file the TDS return?

  • File TDS return in form GSTR-7 within 10 days from the end of the month.
  • When GSTIN of the unregistered supplier is not available, their name can be mentioned.
  • The robustness of the system reflects these filled-in details in the electronic ledger of the supplier.

When and how to the issue of TDS certificate?

Section 51(4)

The deductor shall furnish to the deductee a certificate

  • in Form GSTR-7A (made electronically available), – Rule 66(3) of CGST Rules.
  • within 5 days of crediting the amount so deducted to Government.

How can the deductee (Supplier) can claim TDS?

The details of TDS furnished by the deductor shall be made available to the deductee in Part C of Form GSTR-2A/4A electronically through the common portal and the said deductee may include the same in Form GSTR-2 – Rule 60(6) of CGST Rules

The deductee can claim credit in his electronic cash ledger of this tax deducted and use it for payments of other taxes. – Section 51(5)

Is it possible to get refund of TDS under GST?

If any excess amount is deducted and paid to the government, a refund can be claimed.

If the deducted amount is already added to the electronic cash ledger of the supplier, the amount so added cannot be get back as a refund by the deductor. Deductee can claim a refund of tax subject to refund provisions of section 54 the act.

Is there any Interest / Late fee for non-compliance?

Non-payment of TDS within time

Interest at 18% per annum from the day succeeding the day on which such tax was due to be paid. – Section 51(6) read with Section 50(1)

Failure to furnish TDS Certificate

Section 51(4) – Late fee of INR 100/- per day from the day after the expiry of five days period until the failure is rectified, subject to a maximum amount of INR 5,000/-

[i.e. INR 200/- per day subject to maximum of INR 10,000/- for CGST + SGST/UTGST]

Summary of Notification and Act – TDS

Particulars Provisions
Effective date 1.10.2018
Applicability Currently on Govt. and Public sector undertakings
Rate 2% (CGST+SGST/UTGST or IGST)
Point of deduction Payments made or Credited to the supplier of taxable goods or services or both where the total value of such supply, under an individual contract, exceeds Rs. 2,50,000.
Not applicable The location of supplier and Place of supply different from place of registration of recipient.
Valuation Value excluding GST and Cess in the Invoice
Registration Compulsory in GST REG-07
Time limit for payment Within 10 days from the end of the month in which tax is deducted.
Return GSTR-7
Time limit for Return Within 10 days from the end of the month in which tax is deducted.
Issue of certificate within 5 days of crediting the amount so deducted to Government in form GSTR-7A
(electronically)
Interest of Late Fee
  • Interest @ 18% p.a. for non payment
  • Late fee Rs 200/- per day subject to maximum of Rs. 10,000/-

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