All About TDS Deduction under GST
Basics : Tax Deduction at Source (“TDS”) generally means a certain registered person making payment or crediting to the supplier’s account for supply of taxable goods or services or both is required to deduct GST at source if the contract value without taxes exceeds the threshold limit. It is a statutory compliance which needs to be fulfilled by that person, as prescribed in the Act from time to time. It is a time bound process under which a person, called deductor, making payment or giving credit deducts GST at a fixed rate and deposits it with GST department, through filing of GST return. The deductee can take credit of deduction at source in his Electronic Cash Ledger and the same can be used for payment of tax at the time of filing GST return as per the prescribed procedure.
Who will Deduct the TDS :
- a department or establishment of the Central Government or State Government; or
- local authority; or
- Governmental agencies; or
- such persons or category of persons as may be notified by the Government on the recommendations of the Council,
Circumstances in which TDS Deduction is Required : where the total value of such supply, under a contract, exceeds two lakh and fifty thousand rupees. Provided that no deduction shall be made if the location of the supplier and the place of supply is in a State or Union territory which is different from the State or as the case may be, Union territory of registration of the recipient.
Applicable Rate : 1% under each head of CGST and SGST.
Weather Tax is deductible on Exempted supply of Goods or Services or both : No, Tax shall not be deductible on Exempted and Nil rated supply of goods and services.
Whether Registration is mandatory for the Tax deductor : Yes, there is no threshold limit for this. Registration is mandatory under section 24(vi). The registration can be obtained on the basis of TAN issued under the Income Tax Act, 1961, for deductors who does not have PAN.
Whether separate registration is required as Tax deductor to a person who is already registered as a supplier : Yes, deductor is required to get a separate registration as TDS deductor by using his PAN/TAN.
When Tax should be deposited : Tax shall be deposited within 10 days after the end of the month in which deduction was made.
How Tax should be deposited : Deductor shall file Form GSTR – 7 for depositing the Tax.
What are the provisions relating to the issue of TDS certificates under the GST law : TDS certificate in Form GSTR-7A to the concerned person within 5 days of depositing the tax to the government.
How deductee (Supplier) will get the benefit of TDS : Deductee will login to GST portal and accept the TDS reflecting there. After acceptance, TDS will automatically reflect in his Electronic Cash Ledger.
How Refund can be taken : Refund arising on account of excess or erroneous deduction, subject to the provisions of Section 54. Such refund may be claimed either by the deductor or the deductee, but not both. Further, deductor cannot claim refund once the amount deducted has been credited to the electronic cash ledger of the deductee.
Any Late Fee or Interest applicability : Where deductor Fails to issue certificate in time, shall be liable to pay Late fee of `100 per day up to a maximum of `5,000 under the CGST and SGST Act separately. Where deductor Fails to deposit TDS in time, he shall be liable to pay Interest @ 18% for the delay period, as per provisions of Section 50(1) of CGST Act, 2017.
Whether a Public Sector Undertaking (PSU) shall deduct TDS on payment or credit made for a supply to another PSU : No (Notification No.61/2018 CT dated 05.11.2018)
Note: It means Govt. departments/ establishments/ Agencies/ Societies/ Authorities / Board / Local Authority covered in the definition (shown at Sr. No. 1 of this table) shall deduct GST at source on payment made or credited for taxable supply to other Govt. Department. Only PSU to PSU supplies are exempted.
Relevant Notifications :
- Notification No. 50/2018 – Central Tax Dated 13-09-2018
- Notification No. 57/2018 – Central Tax Dated 23-10-2018
- Notification No. 61/2018 – Central Tax Dated 05-11-2018
