Guide on TDS in GST Act
1. Introduction:-
The concept of TDS on GST was initially introduced in the Income Tax Act and has now been introduced in GST as well. The purpose of introduction of TDS on GST is only to enable the govt to have a trail of transactions and to monitor and verify the compliance.It acts as a powerful instrument to prevent tax evasion and expands the tax net, as it provides for the creation of an audit trail.
Just like in the Income Tax Act, the person deducting the TDS is required to deposit the TDS with the Govt and issue Form 16 and Form 16A, similarly under GST Act as well, the person deducting the TDS would be required to deposit the same with the Govt by the 10th of the next month and issue Form GSTR 7A to the person whose TDS has been deducted.
2. Who is liable to deduct TDS under GST
As per Section 51 of the CGST Act, 2017
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A department or an establishment of the Central Government or State Government; or
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Local authority; or
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Governmental agencies; or
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Such persons or category of persons as may be notified by the Government.
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An authority or a board or any other body which has been set up by Parliament or a State Legislature or by a government, with 51% equity ( control) owned by the government.
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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.
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Public sector undertakings.
No TDS to be deducted if the payment is made by a person who is not mentioned in the above mentioned list.
3. When to deduct TDS under GST
TDS on GST is only required to be deducted where the payment made or credited to the supplier is done by the above mentioned category of persons.
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TDS is to be deducted at the rate of 2 percent (CGST-1%, SGST-1%) on payments made to the supplier of taxable goods and/or services, and
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where the total value of such supply, under an individual contract, exceeds Rs. 2.5 lakhs.
There are certain exceptions to this and in the following cases, TDS would not be deducted even if the payment is made by the above mentioned persons:-
a. Contract Value does not exceed Rs. 2.5 Lakhs
If the Contract Value does not exceed Rs. 2.5 Lakhs, no TDS is required to be deducted. But one important note that while determining the applicability of TDS on GST – it is the individual contract value which would be considered irrespective of the total no. of contracts.
b. Location of Recipient is different from Location of Supplier and Place of Supply
TDS on GST would not be applicable if the Location of Recipient is different from the Location of Supplier and the Place of Supply (Both).
Ex- 1:- Gujarat Govt. enters into a contract worth Rs. 3 Lakhs with Hotel Taj – Maharashtra to rent space for the purpose of conducting an event in their hotel.
Ans :- The provisions of TDS would not apply in this case irrespective of the contract value as the Place of Supply and Location of Supplier is different from the Location of Recipient.
Place of Supply – Maharashtra.
Location of Supplier – Maharashtra.
Location of Recipient – Gujarat.
Eg 2:- A vendor registered in Gujarat provides services to the Maharashtra Govt worth Rs. 4 Lakhs.
Ans:- The provisions of TDS will apply in this case.
Place of Supply – Maharashtra
Location of Supplier – Gujarat
Location of Recipient – Maharashtra
Therefore, while determining the applicability of TDS on GST, it is very important to determine the place of supply.
4. GST TDS deduct on which value :-
TDS has to be deducted only on invoice value excluding all taxes.
5. Registration for deducting TDS under GST
A person who is liable to deduct TDS– Compulsory Registration, No threshold limit, TAN (TDS) is mandatory but not PAN.
6. Deposit of GST TDS, TDS Froms & TDS certificate
TDS to be deposited within 10th of next month in Form- GSTR-7 and issue TDS certificate in GSTR-7A within 5 days of depositing of TDS.
7. Benefit of GST TDS
TDS will an automatic reflection in the electronic ledger of the deductee (supplier) once the deductor files his/her returns. The deductee can claim credit in his electronic cash ledger of this tax deducted and use it for payments of other taxes.
8. Penal Provision
9. Conclusions
The concept of TDS under GST is a fairly new concept and has initially been implemented only on a small no. of assesses at a flat rate of 2%.