FAQ on TDS under GST: Section 51 of the CGST Act provides for deduction of tax at the rate of 1% by certain specified category of persons where the value of a supply of goods or services under a contract exceeds Rs. 2,50,000. The provisions of Section 51 are made applicable with effect from 18.09.2017 by vide notification number 33/2017 CT dated 15.09.2017.
FAQ on TDS
This article aims at understanding the relevant provisions of Section 51 read with notification number 33/2017 CT in the form of FAQs.
TDS stands for Tax Deducted at Source (TDS). All Governments, Government undertakings, Local Authorities and other notified entities making contractual payments in excess of INR 2.5 Lakhs to suppliers need to register as a TDS under GST. In the GST regime, while making such a payment in excess of INR 2.5 Lakhs, the concerned Governments, Government undertakings, Local Authorities and other notified entities needs to deduct 1% under CGST Act and 1% under SGST Act; In case of inter-state transactions, 2% (under IGST Act) of the total payable amount and remit it into the appropriate GST account. Credit of such GST payments will be given to the suppliers.
1. To whom TDS provisions are applicable?
| Where the supplier of goods or services is ..(1) | Where the recipient of goods or services is…(2) |
| Any person when supplies taxable goods or services to the persons specified in Column (2) | Authority or Board established:
Society established:
Public Sector Undertakings |
2. When does the liability to TDS shall attract?
The recipient of goods or services as prescribed in column (2) of Table above, shall deduct tax when he makes the payment to the supplier of taxable goods or services or both where the total value of such supply under “a contract” exceeds Rs. 2,50,000.
Analysis:
- there should be a taxable supply;
- supply should of goods or services or both;
- supplier can be any person;
- recipient shall be a person as specified in column (2) of Table above;
- the work order or purchase order value towards which the payment is being made should exceed Rs. 250,000.
3. Whether TDS provisions applicable for both Intra State as well as Inter State Supplies?
Proviso to Section 51 (1) states that NO deduction of tax shall be made if the location of the supplier and place of supply are in two different states.
Analysis:
- TDS is not required to be made in respect of interstate supplies where IGST is chargeable.
- Therefore supplies in the course of Interstate trade, Exports, SEZ where the goods are cleared with payment of tax shall not attract TDS provisions.
4. What is the value on which TDS shall be made by the specified recipients of goods or services or both?
As per the Explanation to Section 51 (1) – the value on which TDS shall be made by the recipient shall be the value excluding the CGST, SGST or UTGST
Therefore the TDS shall be made on a value excluding GST amount as indicated in the invoice or other document.
5. What is the point of time at which the TDS shall be made?
At the time of making payment to the vendor or credit of his account in the assessee books.
6. Within what time the TDS so deducted shall be deposited with the Government?
The amount of TDS so deducted shall be deposited within 10 days after the end of the month in which TDS so made.
7. Is the deductor under an obligation to issue any documentary evidence to the deductee evidencing proof of payment of TDS with the Government?
Yes, The deductor shall give a TDS Certificate with the following details:
- Contract value;
- Rate of deduction;
- Amount deducted;
- Amount paid to the Government.
8. Is there any time limit within which TDS certificate shall be given to the deductee by the deductor?
Yes, TDS certificate shall be given to the deductee within 5 days of making the payment to the Government. If fail to do so, the deductor shall be liable to pay penalty at the rate of Rs. 100 per day of default starting from the day of expiry of said 5 days. However maximum penalty shall be Rs. 5000.
9. Is a person required to deduct tax at source under section 51 required to obtain separate registration in addition to his regular registration as a supplier of goods or services?
Yes, he is required to take additional registration as Tax Deductor by filing Form GST REG 07 and RC will be issued in Form GST REG 06.
10. Is there any requirement that the deductor shall file a return with the Government?
Yes, every tax deductor shall file a return in Form GSTR 7 by 10th of every month along with payment of TDS to the Government.
11. How the deductee will claim credit of TDS made by deductor?
Once GSTR 7 has been filed by the deductor the details of tax deduction will be auto populated in Part C of GSTR 2A of the deductee and accordingly he can set off this amount against his output tax liability.
To summarize it will be an additional compliance for certain category of taxable dealers as discussed above warranting filing of TDS Return, Generation of TDS Certificate, Deduction of GST, remittance to the department etc.
The provisions will be effective from a date to be notified by the Government.
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