TDS Under GST
Introduction : It is important to understand that what are the provision for deduction of TDS under GST Law. Basically, this article will describe what are the condition which will trigger the levy of TDS/TCS, what will be the rate of deduction, whether there is any exemption (which is provided to specific types of transaction) and how return is required to be furnished along with various due dates.
Relevant provision for applicability of TDS:
Applicability : According to section 51 of CGST Act, 2017; following entities are required to deduct TDS
Registration Threshold Limit : Every person requiring to deduct TDS has to compulsorily obtain registration without any Threshold Limit; It is not mandatory for assessee obtaining registration or while applying for registration to quote his PAN (Permanent Account Number) he can use his TAN (Tax deduction and collection Account Number obtained as per Income Tax Act, 1961). However, government has prescribed the limit of Rs. 2,50,000/- as threshold limit per assessee i.e. TDS will be deducted only case where contract amount exceeds Rs. 2,50,000/-; once the limit is exceeded then TDS is required to be deducted on full amount. It must be noted that supply must be Taxable Supply and the limit prescribed above shall be seen excluding GST.
Illustration : Mr. J has received payment of Rs. 2,60,000/- in respect of contract entered by him with one of the public sector undertaking. Mr. J is of opinion that TDS is not be deducted as the amount of contract is exceeding Rs. 2,50,000/- but that amount is inclusive of GST. (Taxable value supplied is Rs. 2,20,000/-).
Determine liability of PSU to deduct TDS?
In the given case opinion expressed by Mr. J is correct as Public sector undertaking is not required to deduct TDS as contract amount excluding GST is not exceeding Rs. 2,50,000/-.
What if in the given case Value of Supply is exceeding Rs. 2,70,000/- whether in that case PSU is required to deduct TDS?
In that case PSU will be required to deduct TDS at the rate of 1% CGST and 1% SGST and in case if IGST is levied then at the rate of 2%. Further TDS will be deducted on entire contract amount i.e. on Rs. 2,70,000/-.
What if in the given case Value of Supply is exceeding Rs. 2,70,000/- but such supply is exempted vide notification by government. Whether in that case PSU is required to deduct TDS.
In that case PSU is not required to deduct TDS as value of Taxable supply in the contract shall be exceeding Rs. 2,50,000/-
What if the amount of Taxable supply is exactly Rs.2,50,000/-?
It has been stated that value of Taxable supply shall be exceeding Rs. 2,50,000/- i.e if the amount is exactly Rs. 2,50,000/- it will not attract the levy of TDS.
Exemption from Deduction of TDS : In case where place of supply and location of supplier are different from location of recipient then in that case no deduction of TDS will be required.
Illustration : Mr. R has supplied machinery to local authority of Gujarat. Mr. R is situated in Madhya Pradesh and the machinery is to be delivered Madhya-Pradesh itself at one of the locations specified by local authority of Gujarat. The value of contract is exceeding Rs. 2,50,000/-.
What will be TDS consequence in such case?
In that case place of supply of goods as per section 10 of IGST Act, 2017 will be Madhya Pradesh and Location of supplier is also Madhya Pradesh. However, Location of Recipient in that case will be Gujarat. For determining the levy of TDS, it is necessary to identify Place of supply, Location of Supplier, and Location of Recipient and in case where place of supply and location of supplier are different from location of recipient then in that case no deduction of TDS will be required. The same exemption will be applicable to this transaction and no deduction of TDS will be deducted.
What if in the given case machinery is supplied to Gujarat?
In that case Place of Supply will be Gujarat and Location of Recipient is also Gujarat; Further, Location of supplier will be Madhya Pradesh; Therefore, this transaction will not fall in the above exemption and Therefore it will require deduction TDS at the rate of 2% as transaction will be treated as Inter-State supply.
Due-Date of payment and Returns/Certificate of deduction:
- The amount of tax deducted in name of TDS is required to be deposited with Government within 10 days after the end of month in which such deduction was made. Delay in deposit will attract interest at the rate of 18% p.a. from due date of payment till actual date of payment of tax to the account of government.
- Due-Date for furnishing GSTR-7 is required to be furnished on or before 10th day of succeeding month from the month in which TDS was required to deducted. Delay in furnishing the return will attract the penalty of Rs. 100/- per day/per act the maximum late fee will be restricted to Rs.5,000/-.
- TDS deductor is required to issue certificate to deductee within 5 days of deposit of tax Government account. Otherwise he will be liable to pay late fee of Rs. 100/- per day for the period starting from the expiry of 5 days period until it is issued to deductee. However, the maximum late fee will be restricted to Rs.5,000/-.
- TDS amount deducted is required to be paid in cash i.e. it cannot be paid using Input tax credit; further it will be shown in cash ledger of deductee. In case any excess payment is made by the assessee he can apply for refund.