Article explains Relevant provisions of TDS in GST and effective dates, When tax deduction is required to be made in GST, Conditions for & amount of deduction, When tax deduction is not required to be made in GST, Illustrations of various situations requiring deduction of tax, Valuation of supply for deduction of TDS and applicable rates with illustrations, Rate of deduction of tax under GST, Persons liable to deduct tax under GST Law, Registration of deductor of tax in GST, Payment of TDS under GST (provisions and procedure), TDS return under GST, TDS return submission procedure, Time limit for filing the TDS Returns under GST , Benefit of TDS to deductee and TDS certificate, Late fee, interest and penalty related to TDS under GST and Frequently asked questions (FAQs) on TDS under GST.
- 1. Introduction:
- 2. Relevant provisions of TDS in GST and effective date:
- 3. When tax deduction is required to be made in GST:
- 4. When tax deduction is not required to be made under GST:
The concept of Tax Deduction at Source (TDS) was there in the erstwhile VAT Laws. GST Law also mandates Tax Deduction at Source (TDS) vide Section 51 of the CGST/SGST Act 2017, Section 20 of the IGST Act, 2017 and Section 21 of the UTGST Act, 2017. GST Council in its 28th meeting held on 21.07.2018 recommended the introduction of TDS from 01.10.2018.
Following would be the deductors of tax in GST under section 51 of the CGST Act, 2017 read with notification No. 33/2017-Central Tax dated 15.09.2017:
(a) a department or establishment of the Central Government or State Government; or
(b) local authority; or
(c) Governmental agencies; or
(d) an authority or a board or any other body,-
(i) set up by an Act of Parliament or a State Legislature; or
(ii) established by any Government,
with fifty-one per cent. or more participation by way of equity or control, to carry out any function; or
(e) a society established by the Central Government or the State Government or a Local Authority under the Societies Registration Act, 1860 (21 of1860); or
(f) public sector undertakings.
The procedures of TDS along with related legal provisions are discussed herein below for the understanding of the stakeholders including the Drawing and Disbursement Officers (DDOs) who are required to deduct tax in accordance with the provisions of the GST Laws.
2. Relevant provisions of TDS in GST and effective date:
2.1 Provisions of Law:
GST Laws provide for tax deduction at source (TDS) by the specified category of persons (herein after referred to as ‘the deductor’) from the payment made or credited to the supplier of taxable goods or services or both (herein after referred to as ‘the deductee’) at a prescribed rate.
Notification No. 33/2017 – Central Tax dated 15.09.2017 was issued by the CBIC to enable registration of tax deductors. However, Government suspended the applicability of TDS till 30.09.2018. Now, it has been decided that the TDS provision would be made operative with effect from 01.10.2018. Notification No. 50/2018-Central Tax dated 13.09.2018 has already been issued in this regard by CBIC. Similar notifications have been issued by respective State Governments.
⇒ Supply in GST covers both supply of goods as well as supply of services by vendors/suppliers to the Government Departments, local authorities and other recipients as listed in para 1 (a) to (f) above.
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:
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.
⇒ There may be supplies which are composite in nature i.e. taxable supplies of goods and services or both which are naturally bundled and supplied in conjunction with each other in the ordinary course of business [Section 2(30) refers].
Works Contract services such as road, bridge, building development / renovation / repairing / maintenance services involving supplies of both goods and services.
⇒ Taxable Supply means supply of goods or services or both which is leviable to tax under GST [Section 2(108) refers]
⇒ Exempt supply means supply of any goods or services or both which attracts nil rate of tax or which may be wholly exempt from tax under section 11 of the CGST / SGST Acts or under section 6 of the IGST Act, and includes non-taxable supply. [Section 2(47) refers]
Tax is required to be deducted from the payment made / credited to a supplier, if the total value of supply under a contract in respect of supply of taxable goods or services or both, exceeds Rs. 2,50,000/- (Rupees two lakh and fifty thousand).
This value shall exclude the taxes leviable under GST (i.e. ‘Central tax’, ‘State tax’, ‘UT tax’, ‘Integrated tax’ & Cess).
3.1 Conditions for & amount of deduction:
⇒ Tax deduction is required if all the following conditions are satisfied ‑
a. Total value of taxable supply > Rs.2.5 Lakh under a single contract. This value shall exclude taxes & cess leviable under GST.
b. If the contract is made for both taxable supply and exempted supply, deduction will be made if the total value of taxable supply in the contract > Rs.2.5 Lakh. This value shall exclude taxes & cess leviable under GST.
c. 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.
d. 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.
e. 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.
f. 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.
Tax deduction is not required in following situations:
a) Total value of taxable supply 5 2.5 Lakh under a contract.
b) Contract value > Rs. 2.5 Lakh for both taxable supply and exempted supply, but the value of taxable supply under the said contract 5 2.5 Lakh.
c) Receipt of services which are exempted. For example services exempted under notification No. 12/2017 – Central Tax (Rate) dated 28.06.2017 as amended from time to time.
d) Receipt of goods which are exempted. For example goods exempted under notification No. 2/2017 – Central Tax (Rate) dated 28.06.2017 as amended from time to time.
e) Goods on which GST is not leviable. For example petrol, diesel, petroleum crude, natural gas, aviation turbine fuel (ATF) and alcohol for human consumption.
f) Where a supplier had issued an invoice for any sale of goods in respect of which tax was required to be deducted at source under the VAT Law before 01.07.2017, but where payment for such sale is made on or after 01.07.2017 [Section 142(13) refers].
g) Where the location of the supplier and place of supply is in a State(s)/UT(s) which is different from the State / UT where the deductor is registered.
h) All activities or transactions specified in Schedule III of the CGST/SGST Acts 2017, irrespective of the value.
i) Where the payment relates to a tax invoice that has been issued before 01.10.2018.
j) 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.
k) Where the tax is to be paid on reverse charge by the recipient i.e. the deductee.
l) Where the payment is made to an unregistered supplier.
m) Where the payment relates to “Cess” component.