All about TDS under GST

All about TDS under GST

CA Shravagi Jain
6 min read

When TDS is required to be deducted under GST?

The tax would be deducted @1% under CGST Act, 2017 of the payment made to the supplier of taxable goods and/or services where the total value of such supply, under a contract exceeds 2,50,000 rupees (excluding the amount of CGST, SGST, IGST/UTGST indicated in the invoice). Thus, individual supplies may be less than 2,50,000 but if total value of supplies under a contract is more than 2,50,000, TDS has to be deducted.

The Deductors have to deduct TDS @1% from the payment made to the supplier under CGST act,2017.

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Deductors of tax at source

TDS provisions under GST empower the central government to make it mandatory for the following persons(recipients) to deduct tax at source from payments made to the suppliers of taxable goods and services.

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Detailed list of Government departments or establishments has been specified under Notification 57/2018 CT dated 23.10.2018.

The following persons have been notified by central government so far are as follows-

  1. An authority or a board or any other body –
  • Set up by an act of parliament or a state legislature or
  • Established by any government

With 51% or more participation by way of equity or control

  1. Society established by Central Government or the state government or a local authority under society registration act,1860.
  2. Public sector undertaking

Categories of persons not liable to deduct TDS

Tax is not liable to be deducted at source in the following cases-

  1. When goods and services are supplied from a public sector undertaking (PSU) to another PSU
  2. When supply of goods and services takes place between one person to another person specified in section 51 (1) clause (a) to (d)

Deductees

The deductees are the suppliers whose total value of supply of taxable goods and services under a contract exceeds 2,50,000 exclusive of tax and cess as per the invoice.

Registration requirement

Any person required to deduct tax shall electronically submit a registration application in prescribed form through the common portal. The proper officer shall, after due verification, grant registration within 3 working days from the date of the application. If the proper officer is satisfied that a person is no longer liable to deduct tax at source, then the said officer may cancel the said registration, by following proper procedure laid down in the rules.

When TDS is not liable to be deducted

When the location of supplier and place of supply is in a state which is different from the state of registration of recipient, there will be no TDS. This can be explained as follows-

  1. Supplier, place of supply and recipient are in the same state.
    It would be intra state supply and TDS shall be deducted as it would be possible for the supplier to take credit in his electronic cash ledger.
  2. Supplier as well as the place of supply are in different states.
    In such cases, IGST would be levied. TDS to be deducted would be TDS of IGST and it would be possible for the supplier to take credit of TDS in his electronic credit ledger.
  3. Supplier as well as the place of supply are in state A and recipient is located in state B.
    The supply would be intra state supply and central tax and state tax would be levied. In such case, transfer of TDS (CGST +SGST of state B) to the cash ledger of the supplier (CGST+SGST of state A) would be difficult. So, in such cases, TDS would not be deducted.

Thus, when both the supplier as well as the place of supply are different from that of the recipient, no tax deduction at source would be made.

Location of supplierPlace of supplyRegistration of recipientTDS u/s 51
State AState AState AYes
State AState AState BNo
State AState BState BYes
UT 1UT 1UT 1Yes
UT 1UT 1UT 2Yes
UT 1UT 1UT 2No

Deposit of TDS with the government

The amount of tax deducted at source should be deposited to the government account by Deductors till 10th of the next month in which deduction is made.

TDS certificate

A TDS certificate is required to be issued by deductor in prescribed form to the deductee.

The content of the form GSTR 7A (TDS certificate) is as follows-

  1. TDS certificate number
  2. GSTIN of deductor
  3. Name of deductor
  4. GSTIN of deductee
  5. Legal name /trade name of deductee
  6. Tax period in which tax deducted
  7. Details of supplies
  8. Amount of tax deducted

Non deposit of amount by the deductor

If the deductor does not deposit the amount deducted as TDS to the government within the prescribed time limit, he is liable to pay interest in addition to the amount of tax deducted.

Reflection of amount of TDS

The amount of tax deducted is reflected in

  • Electronic cash ledger of deductee
  • Return filed by deductor

This enables the Government to cross check whether the amount deducted by the deductor is correct and that there is no mis match between the amount reflected in the electronic cash ledger and amount shown in the return filed by deductor.

Refund of excess/erroneous deduction

The deductor or the deductee can claim refund of excess deduction or erroneous deduction. The provisions relating to refund in section 54 will apply in such cases. However, if the deducted amount is already credited to the electronic cash ledger of the supplier, the same shall not be refunded.

Important section/rules/notification

SectionTopic
Section 51 of CGST actTax deduction at source
Notification 57/2018 CT dated 23.10.2018Detailed list of government departments
Notification no 61/2018 and 73/2018Categories of persons not liable to deduct tax
Section 50Interest on delayed payment
Section 54Refund



CA Shravagi Jain

About CA Shravagi Jain

CA Shravagi Jain has completed her CA in 2021. She is engaged in writing articles and also teaching CA students.