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TDS Provision under the GST Act

The provisions relating to tax deduction at source is contained in section 51 of the CGST Act. From 1st of October the TDS provisions would be applicable vide Notification No. 50/2018 – Central Tax dated 13th September, 2018. This article deals with the applicability of TDS Provision under the GST Act

Who are required to deduct TDS Provision under the GST Act:

As per section 51(1) following persons are required to deduct TDS

  1. A department or establishment of the Central or State Government
  2. Local Authority
  3. Governmental agencies
  4. Such persons or category of persons as may be notified. Vide the aforesaid notification the following persons have been notified
  1. Public Sector Undertakings
  2. Society established under Societies Registration Act, 1860 by the Central Government, State Government or Local Authority
  3. An authority or a board or any other body

        i.Set up by an Act of Parliament or State Legislature

        ii. established by any Government

with fifty-one per cent. or more participation by way of equity or control, to carry out any function.

Transactions covered by TDS Provision under the GST Act:

It is to be noted that the TDS is applicable when the total value of supply of taxable goods or services under a single contract exceeds Rs 2,50,000. CGST, SGST, IGST and 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 Tax would be liable to deduction.

For example XYZ Limited supplied certain machinery to ONGC Limited under an contract.

The total value of contract was Rs 2,40,000 plus GST as applicable. Tax is not liable to be deducted in such cases as contract value excluding taxes is below Rs 2,50,000.

Now suppose in the above example the total contract value is Rs 4,80,000 plus taxes and involves supply of two machines at different dates. Taxable value of one machine is Rs 2,49,000 and the other machine is Rs 2,31,000. 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 therefor is below Rs 2,50,000.

If the contract is made for both taxable supply plus exempted supply, deduction will be made if the total value of taxable supply in the contract is more than Rs.2,50,000/- . This value shall exclude taxes & cess leviable under GST.

Examples of supply of goods to Government/Local Authorities/Credit Societies:

Procurement of stationery items, toilet articles, towels, furniture, air-conditioning machines, electrical goods, books and periodicals & medicines, etc.

Examples of supply of services to Government/Local Authorities/Credit Societies:

Procurement of security services, car rental services, generator, rental services, rental services like office building/land taken on rent, maintenance services, rental of machinery, etc.

Examples of Composite Supplies to Government/Local Authorities/Credit Societies:

Works Contract services such as road, bridge, building, development / renovation / repairing / maintenance services involving supplies of both goods and services.

When TDS Provision under the GST Act not applicable:

1. Tax is not liable to be deducted when both

  1.    The location of the supplier and
  2.    And the place of supply

are situated in state or union territory different from a state or union territory in which the recipient is registered. If any of these fall in the state of registration of the recipient Tax is liable to deducted.

For example: Agricultural department of West Bengal registered in West Bengal places an order with an Tamil Nadu based manufacturer for supply of equipment worth Rs 2,58,000 plus taxes at Jalpaiguri, West Bengal. Here Tax is liable to be deducted as place of supply is West Bengal which is the state of registration of the recipient.

Now suppose that in the above example West Bengal agricultural department undertakes a project in Agartala on the behest of the Government of Tripura. It does not register in 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 that is West Bengal. Hence Tax is not liable to be deducted.

2. Where the payment is made to an unregistered supplier.
3. Receipt of services which are exempted.
4. Receipt of goods which are exempted.
5. Goods on which GST is not leviable. For example petrol, diesel, petroleum crude, natural gas, aviation turbine fuel (ATF) and alcohol for human consumption.
6. Total value of taxable supply is less than Rs. 2,50,000/- under a contract.
7. Contract value is greater than Rs. 2,50,000/- for both taxable supply and exempted supply, but the value of taxable supply under the said contract is less than or equial to Rs. 2,50,000/-.
8. All activities or transactions specified in Schedule III of the CGST/SGST Acts 2017, irrespective of the value.
9. Where the payment relates to a tax invoice that has been issued before 01.10.2018.
10. Where any amount was paid in advance prior to 01.10.2018 and the tax invoice has been issued on or after 01.10.18, to the extent of advance payment made before 01.10.2018.
11. Where the tax is to be paid on reverse charge by the recipient i.e. the deductee.

Rate of deduction:

a. Where the location of the supplier and the place of supply are in the same State/UT, it is an intra-State supply and TDS @ 1% each under CGST Act and SGST/UTGST Act is to be deducted if the deductor is registered in that State or Union territory without legislature.

b. Where the location of the supplier is in State A and the place of supply is in State or Union territory without legislature – B, it is an inter-State supply and TDS @ 2% under IGST Act is to be deducted if the deductor is registered in State or Union territory without legislature – B.

c. Where the location of the supplier is in State A and the place of supply is in State or Union territory without legislature B, it is an inter-State supply and TDS @ 2% under IGST Act is to be deducted if the deductor is registered in State A.

d. When advance is paid to a supplier on or after 01.10.2018 to a supplier for supply of taxable goods or services or both.

Timeline for deposit of TDS with the Government and Filing of Returns:

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.

TDS Certificate to be furnished to the  deductee:

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. It is to be noted that TDS certificate will be made available to the deductee on the common portal in FORM GSTR-7A. The deductee will also be able to verify the details of TDS online on in FORM GSTR-2A or 4A as the case maybe.

Manner of claiming credit of TDS by the assessee:  

The deductee will claim the tax deducted and reflected in the return of the deductor in his electronic cash ledger vide his return viz GSTR-3B or GSTR- 4 as the case maybe.   

Non compliance:

Non compliance by the deductor of the provisions aforesaid will make him liable to late fees, and interest as prescribed.

1.Fails to make payment of deducted tax: Both deducted tax and interest to be paid [Sec 50(1) read with Sec 51(6)]

2.Fails to furnish FORM GSTR-7 within due date: Late fee payable (Section 47(1)): Rs. 100/- + Rs. 100/- per day (Maximum Rs. 5000/-) under CGST Act & SGST /UTGST Act separately.

3.Fails to furnish FORM GSTR-7A within due date: Late fee payable [Section 51(4)]: Rs.100/- + Rs.100/- per day (Maximum Rs.5000/-) under CGST Act & SGST/UTGST Act separately.

4. If excess amount deducted: Refund may be claimed by the deductor / dedcutee as the case may be (if excess tax gets credited to the deductee then no refund shall be granted to the deductor).

 



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