Know all about TDS Provisions under GST

Introduction

The concept of deducting tax at source was initially introduced under the Income Tax Act, 1961. It is also incorporated under the GST law. It has been proven advantageous to the government as it restricts the evasion of tax and it ensures a steady source of revenue for the government. Section 51 of the CGST Act, 2017 prescribes the procedure for ‘Tax Deduction at Source’ (TDS) under the GST regime. Let us learn the same in detail.

What is TDS?

TDS is one of the mechanisms by way of which the government collects taxes. TDS is a certain percentage on the amount payable by the receiver on the supply of goods or services. The recipient is the person who will pay to the supplier the value of the supply along with GST. He will deduct the tax at source for certain cases. Therefore, under TDS provisions,

1. Recipient = Deductor
2. Supplier = Deductee

Who is required to deduct tax at source?

The Government may order the following persons to deduct tax at source:

1. department or establishment of the Central Government or State Government
2. local authority
3. Governmental agencies
4. such persons or category of persons as may be notified by the Government on the recommendations of the Council.
5. An authority, board or any other body which has been set up by Parliament or a State Legislature or by a government, with 51% equity or control owned by the government.
6. A society established by the Central or any State Government or a Local Authority and the society is registered under the Societies Registration Act, 1860.
7. Public sector undertakings

What is the amount of TDS?

1. The tax would be deducted @1% of the payment made to the supplier (deductee) of taxable goods or services or both
2. 1% to be deducted is under both the CGST and SGST Act. Therefore the total amount to be deducted will be @ 2%
3. In case of interstate supply, IGST will be applicable and tax will be deducted @2%

Are all supplies within the purview of TDS provisions?

1. TDS provisions will only be applicable where the total value of supply, under a contract, exceeds Rs 2,50,000 (excluding the amount of central tax, State tax, Union territory tax, integrated tax and cess indicated in the invoice).
2. Thus, individual supplies may be less than Rs. 2, 50,000/-, but if contract value is more than Rs. 2, 50,000/-, TDS will have to be deducted.

In what situations will tax not be deducted at source?

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. This can be explained in the following situations.

Location of Supplier	Location of Recipient	Place of Supply	Type of Supply	Is tax to be deducted at source
Maharashtra	Maharashtra	Maharashtra	Intra state supply	Yes
Maharashtra	not relevant	Gujarat	Inter-state supply	Yes
Maharashtra	Gujarat	Maharashtra	Intra state supply	No

What are the registration provisions under TDS?

1. A TDS deductor has to get mandatory registration.
2. Benefit of threshold limit of Rs 20 lakhs (Rs 10 lakhs in special category states) is not available
3. Deductor can obtain registration using his Tax Deduction and Collection Account Number (TAN) issued under the Income Tax Act, 1961. (requirement of PAN for registration is not applicable)

What is the time limit within which TDS is to be deposited with the government?

1. The amount of TDS should be deposited with the Government by the deductor by 10th of the succeeding month.
2. The deductor would be liable to pay interest if the tax deducted is not deposited within the prescribed time limit.

Is the deductor required to provide any certificate/document to the deductee?

1. A TDS certificate is required to be issued by deductor in Form GSTR-7A to the deductee, within 5 days of crediting the amount to the Government
2. If such certificate is not issued then the deductor would be liable to pay a late fee of Rs. 100 per day from the expiry of the 5th day till the certificate is issued.
3. This late fee cannot exceed Rs. 5000.

What is the value of supply to be considered while deducting tax at source?

1. Value of supply for TDS shall be taken as the amount excluding the central tax, State tax, Union territory tax, integrated tax and cess indicated in the invoice.
2. For instance, suppose a supplier makes a supply worth Rs. 100,000 and the GST @ 18% is charged. The recipient, while making the payment of Rs. 100,000 to the supplier, shall deduct 2% (Rs. 2000) as TDS. The value for TDS purpose shall not include 18% GST. The TDS so deposited in the government account shall be reflected in the electronic cash ledger of the supplier (deductee) who would be able to use the same for payment of tax or any other amount.

Are any GST returns required to be filed as per the TDS provisions?

1. The deductor is required to file a return in Form GSTR-7 within 10 days from the end of the month.
2. If the supplier is unregistered, name of the supplier (instead of GSTIN) shall be mentioned in the return.
3. The details of tax deducted at source furnished by the deductor in FORM GSTR-7 shall be made available to each of the suppliers in Part C of FORM GSTR-2A electronically through the Common Portal.

What are the consequences of not complying with TDS provisions?

Situation	Consequence
TDS not deducted	Interest to be paid along with the TDS amount, else the amount shall be determined and recovered as per law
TDS certificate not issued or delayed beyond the prescribed period of five days	Late fee of Rs. 100 per day subject to a maximum of Rs. 5000
TDS deducted but not paid to the government or paid later than 10th of the succeeding month	Interest to be paid along with the TDS amount, else the amount shall be determined and recovered as per law
Late filing of TDS returns	Late fee of Rs 100 for every day during which such failure continues subject to a maximum amount of Rs 5000

Is the benefit of refund available under TDS provisions?

1. Any excess or erroneous amount deducted and paid to the government account shall be dealt for refund under section 54 of the CGST Act, 2017.
2. However, if the deducted amount is already credited to the electronic cash ledger of the supplier, the same shall not be refunded.

Thus, by incorporating such regulations in the form of TDS, the government has widened the tax collection base which in turn ensures a stable source of revenue for the government.