Tax deducted at source (TDS) under GST is given under section 51 of the CGST Act. It provides the provisions related to deduction of TDS by government departments while making the payment for receipt of supply of taxable goods or services or both from the supplier.
In
the following we have explained the concept of TDS under GST and how to
deduct TDS on GST bill with example:
What is the concept of TDS under GST?
Government
brings the concept of TDS under GST to track their various business
transactions and generate revenue. This is a way to keep check on supply of
goods, services or both and collect tax.
Who is liable to deduct TDS under GST?
Following
are the government departments who are liable to deduct TDS under GST:
- A department or an establishment of 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.
As per the notification dated
13-09-2018 following also need to deduct TDS under GST:
- Authority or a board or any other body which is setup by parliament or a state legislature or by a government with 51% equity owned by the government
- Society established by the central or state government or a local authority and that society is registered under societies registration act, 1860.
- Public Sector Undertaking.
- Any registered person receiving supplies of metal scrap from other registered person.
Also Read:
When to deduct TDS under GST?
The
list of government department mentioned above is required to deduct TDS at the
rate of 2% (i.e. 1% for CGST and 1% of SGST in case of intra state and for
interstate 2% for IGST) when making the payment for the receipt of supply of
goods or services or both from the supplier.
The
threshold limit for deducting TDS is Rs. 2,50,000 i.e. if the contract value is
more than Rs. 2,50,000 (excluding GST and cess) then TDS need to be deducted.
Example:
If
the government department gives a contact for constructing a bridge to Mr. A
then in this case Mr. A is a supplier and the government is a recipient of
supply then the government department is liable to deduct TDS while making the
payment for the receipt of supply.
Point to be noted:
- For checking the threshold limit of Rs. 2,50,000 one must take the total contract value (not individual invoices).
- No TDS, if location of supplier and place of supply is in a state/union territory which is different from state/union territory of the recipient. Example:
- If Location of Supplier or PoS (place of supply) or both are in State A & recipient is located in State B – No TDS.
- If Location of supplier or PoS or both and recipient are in the same state – TDS is required.
- No TDS when any goods and / or services are supplied among persons who are liable to deduct TDS as mentioned above. Example: If one PSU supply goods to another PSU or any society registered under Societies registration Act etc, then there is no requirement of TDS.
- Total value of supply for calculation threshold limit shall exclude central tax, state tax, union territory tax, integrated tax and cess.
- No TDS if Goods or services are exempted.
- No TDS if transaction covered under schedule III.
- No TDS if payment is made to unregistered person.
- No TDS where Tax is paid under RCM by recipient.
Also Read:
Whether deductors need to be registered in GST for deducting TDS?
Those
who are liable to deduct TDS under GST have to compulsorily take registration
under GST. He can take registration without a PAN, by using TAN. TAN is
mandatory required.
How to take credit of TDS under GST?
Deductor of TDS is required to issue a TDS certificate (GSTR 7A) to deductee within 5 days of deposit of TDS to the government. It contains information regarding total contract value, total amount deducted, rate of TDS and amount paid to appropriate government.
Then
on the basis of TDS certificate deductee can take the credit of this. TDS
deducted by the Government department (deductor) will reflect in the electronic
cash ledger of the deductee hence, the deductee can claim credit of TDS.
If
the deductor fails to issue TDS certificate within the time limit then he is
liable for penalty of late fees Rs.100/- per day starting from the expiry of 5
days (time limit), but maximum late fee will be Rs.5000/-.
If deductor fails to pay TDS to government then he shall be liable to pay interest at the rate 18% p.a. as per section 50(1) read with rule 88B.
What is the due date of depositing TDS to the Government?
TDS
under GST should be deposited to an appropriate government account within 10
days after the end of the month in which TDS deducted.
Example:
TDS
deducted in September month needs to be deposited till 10th Oct from the end of
September month.
If
TDS does not deposit within time limit then he is liable to pay interest for
the period starting from due date till final date of deposit of TDS.
Important Points:
- TDS to be deposited to appropriate government means:
- For IGST and CGST => Central Government
- For SGST => State Government
- TDS to be deducted for supply of taxable goods or services or both means the goods or services which supplied must be taxable.
- TDS certificate form is GSTR- 7A
- TDS to be calculated on value of supply excluding taxes (like. CGST, SGST, IGST or Cess)
- If excess TDS is deducted then you can claim for refund, but no refund granted of the amount deducted has been credited to the e-cash ledger of the deductee.
Also Read:
Conclusion
Section 51 of CGST Tax deducted at source (TDS) provides the provisions related to deduction of TDS by government departments @2% on Inter state and @1% each for CGST and SGST on Intra state while making the payment for receipt of supply of taxable goods or services or both from the supplier.
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