ICAI released Handbook on TDS Provisions under GST

The Institute of Chartered Accountants of India (ICAI) has released Handbook on TDS Provisions under GST.

Goods and Services Tax (GST) celebrated a remarkable six-year journey in India on July 1st, 2023. The Institute of Chartered Accountants of India (ICAI) through its GST and Indirect Taxes Committee of the played a key role in the implementation of GST in India by providing valuable technical inputs to the Government and always working to enhance GST knowledge sharing.

The Committee has revised its publication “Handbook on TDS Provisions under GST” to incorporate the recent amendments, notifications and circulars issued by the Government. The Handbook provides a clear and lucid explanation of the different aspects concerning tax deduction at source (TDS) and has been written in clear and easy to understandable language. Relevant topics such as When TDS is to be deducted, rate of TDS, who will deduct TDS, persons who are exempted from the liability to deduct TDS, return filing provisions, have been duly covered.

Tax Deduction at Source (“TDS”) means that a certain registered person making payment or crediting to the supplier’s account for supply of taxable goods or services or both is required to deduct GST at source if the contract value without taxes exceeds the threshold limit. It is a statutory compliance which needs to be fulfilled by that person, as prescribed in the Act from time to time. It is a time bound process under which a person, called deductor, making payment or giving credit deducts GST at a fixed rate and deposits it with GST department while filing GST return. The deductee can take credit of deduction at source in his Electronic Cash Ledger and the same can be used for payment of tax at the time of filing GST return as per the prescribed procedure.

TDS under GST Law shall be deducted as per the provision of Section 51 of the Central Goods and Services Tax Act, 2017 (hereafter referred to as ‘CGST Act’ or ‘the Act’), Section 21 of the Union Territory Goods and Services Tax Act, 2017 (hereafter referred to as ‘UTGST Act’) and Section 20 of the Integrated Goods and Services Tax Act, 2017 (hereafter referred to as ‘IGST Act’) read with Rule 66 of the Central Goods and Services Tax Rules, 2017 (hereafter referred to as ‘CGST Rules’ or ‘the Rules’) .

Effective Date of TDS implementation

TDS provisions came into force from October 01, 2018 vide Notification No. 50/ 2018 – Central Tax dated 13.09.2018. This notification also specifies persons or category of persons liable to deduct tax.

Analysis of TDS provisions

1. Who is liable to deduct tax at source (Persons covered)?

(a) A department or an establishment of the Central Government or State Government; or

(b) Local authority; or

(c) Governmental agencies; or

(d) Such persons or category of persons as may be notified by the Government on the recommendation of the council,

(Such persons or category of persons are notified vide Notification No. 33/2017-Central Tax dated 15.09.2017 which is superseded by Notification No. 50/2018 – Central Tax dated 13.09.2018 and these are as follows:

(a) 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 51% or more participation by way of equity or control, to carry out any function;

(b) Society established by the Central Government or the State Government or a Local Authority under the Societies Registration Act, 1860 (21 of 1860);

(c) Public sector undertakings.

2. When shall Tax be deducted at source?

When the total value of taxable goods or services or both, under a contract, exceeds ` 2,50,000 (excluding central tax, State tax, UT tax and IGST and cess indicated in the invoice).

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