The provisions related to tax deduction at source is contained in Section 51 of the CGST Act, which were not made effective till date from the inception i.e. 1st July, 2017. However, from 1st of October, 2018 the TDS provisions would be applicable vide Notification No. 50/2018-Central Tax dated 13.09.2018. This Note deals with the applicability of TDS under GST Law.
Who are required to deduct TDS
As per section 51(1) of the CGST Act, following persons are required to deduct TDS:
- A department or establishment of the Central or State Government
- Local Authority
- Governmental agencies
- Public Sector Undertakings
- Society established under Societies Registration Act,1860 by the Central Government, State Government or Local Authority
- An authority or a board or any other body setup by an Act of parliament or State Legislature/established by any Government with fifty-one percent or more participation by way of equity or control, to carry out any function.
Transactions covered by TDS provisions
TDS is applicable when the total value of supply of taxable goods or services under the contract exceeds Rs 2,50,000/-. The CGST/SGST/IGST/Cess levied under GST has to be excluded for the purpose of determining total value. It is to be noted that the invoice value might be less than Rs 2,50,000/- but if the contract under which the invoice is issued exceeds Rs 2,50,000/-, it would be liable for deduction. Further, the notified entities are required to collect TDS @ 2 percent, 1% both under the CGST & SGST Act.
For example,ABC ltd. supplied certain machineries to XYZ under an contract, with contractual value say Rs 4,70,000/- plus GST. This contract involves supply of two machines at different dates. Taxable value of one machine is Rs 2,48,000/- and the other machine is Rs 2,22,000/-. In this case TDS provisions would apply as contract value exceeds Rs 2,50,000 even though the individual taxable event of supplying individual machines and raising invoices therefore is below Rs 2,50,000/-
Non-applicability of TDS Provisions
Tax is not liable to be deducted when both the location of the supplier and the place of supply are situated in a state or union territory different from a state or union territory in which the recipient is registered. If any of the two falls in the state of registration of recipient, tax is liable to be deducted.
For example, XYZ, being person liable to deduct TDS is registered in West Bengal places an order with manufacturer based in Tamil Nadu for supply of equipments at Tripura. Here, the location of the supplier is Tamil Nadu and place of supply is Tripura which are both different from the state of registration of the recipient which is West Bengal. In this case, Tax is not liable to be deducted.
Timeline for deposit of TDS with the Government and Filing of Return
The payment of amount deducted is required to be made within 10 days from the end of the month in which Tax is deducted from the supplier and GSTR-7 is also required to be filed within the same time frame. Hence, the GST deducted in the month of October has to shown in the GSTR-7 by 10th of the succeeding month i.e. by 10th November.
Furnishing of TDS Certificate
The deductor is required to furnish a certificate to the deductee within five days of crediting the amount of tax deducted to the account of the Government. The TDS certificate must contain the contract value, rate of deduction, amount of deduction, amount paid to the Government and other prescribed particulars. Further, it is to be noted that TDS certificate will be made available to the deductee on the common portal in Form-GSTR 7A. The details furnished by the deductor shall be made available electronically in GSTR-2A. However, no specific filed has been given in GSTR-3B for claiming the credit related to TDS.
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