TDS PROVISIONS UNDER GST, TDS RATE IN GST, PERSONS NOTIFIED TO DEDUCT TDS

Introduction:-

TDS stands for Tax Deduction at Source (TDS). Tax Deduction at Source (TDS) is a system, initially introduced by the Income Tax Department. It is one of the modes/methods to collect tax, under which, certainpercentage of amount is deducted by a recipient at the timeof making payment to the supplier. It is similar to “pay as you earn” scheme also known as withholding tax, in manyother countries. It facilitates sharing of responsibility of tax collection between thedeductor and the tax administration. It also ensures regular inflow of cash resourcesto the Government. It acts as a powerful instrument to prevent tax evasion and expands the tax net, as it provides for the creation of an audit trail.

Who are the persons notified to deduct TDS

Section 51 of CGST Act provides for deduction of tax at source in certaincircumstances. This Section specifically lists out the deductors who are mandatedby the Central Government to deduct tax at source, the rate of tax deduction andthe procedure for remittance of the tax deducted.

The following persons have been notified under clause (d) of sub-section (1) of section 51 of the CGST Act by the Central Government:-

(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.

Note: It has been clarified vide Circular No. 76/50/2018 GST dated 31.12.2018 that the rider of 51% or more participation by way of equity or control is applicable to both the items (i) and (ii). Thus, the provisions of section 51 of the CGST Act are applicable only to such authority or a board or any other body set up by an Act of parliament or a State legislature or established by any Government in which 51% or more participation byway of equity or control is with the Government.

(b) society established by the Central Government or the State Government or a Local Authority under the Societies Registration Act, 1860

(c) public sector undertakings

TDS PROVISIONS UNDER GST, TDS RATE IN GST, PERSONS NOTIFIED TO DEDUCT TDS

Who are the categories of persons not liable to deduct TDS

Tax is not liable to be deducted at source in the following cases:-

(i) When goods and/or services are supplied from a public sector undertaking (PSU) to another PSU, whether or not a distinct person [Notification No. 61/2018 CT dated 05.11.2018]

(ii) When supply of goods and/or services takes place between one person to another person specified in clauses (a), (b), (c) and (d) of section 51(1) of the CGST Act. [Notification No. 73/2018 CT dated 31.12.2018]

Who are the deductees for the purpose of TDS

The deductees are the suppliers whose total value of supply of taxable goods and/or services under a contract exceeds ₹2,50,000 exclusive of tax & cess as per the invoice.

What is the Standard Rate of deduction of TDS

The tax would be deducted @ 1% of the payment made to the supplier (the deductee) of taxable goods and/or services, where the total value of such supply, under a contract, exceeds ₹2,50,000 (excluding the amount of Central tax, State tax, Union Territory tax, Integrated tax and cess indicated in theinvoice). Thus, individual supplies may be less than ₹2,50,000/-, but if total value of supply under a contract is more than ₹2,50,000/-, TDS will have to be deducted at the rate of 1% on net value of taxable supplies.

The deductors have to deduct tax at the rate of 1% from the payment made or credited to the supplier of taxable goods and/or services.

In which cases, tax is not required to be deducted

The Proviso to Section 51(1) lays down that when the location of the supplier and the place of supply is in a State/ Union territory which is different from the State/ Union territory of registration of the recipient, there will be no TDS.
The above statement can be explained in the following situations:

(a) Supplier, place of supply and recipient are in the same state: It would be intra-State supply and TDS (Central plus State tax) shall be deducted. It would be possible for the supplier (i.e. the deductee) to take
credit of TDS in his electronic cash ledger.

(b) Supplier as well as the place of supply are in different states: In such cases, Integrated tax would be levied. TDS to be deducted would be TDS (Integrated tax) and it would be possible for the supplier (i.e. the deductee) to take credit of TDS in his electronic cash ledger.

(c) Supplier as well as the place of supply are in State A and the recipient is located in State B: The supply would be intra-State supply and Central tax and State tax would be levied. In such case, transfer of TDS (Central tax + State tax of State B) to the cash ledger of the supplier (Central tax + State tax of State A) would be difficult. So, in such cases, TDS would not be deducted.Thus, when both the supplier as well as the place of supply are different from that of the recipient, no tax deduction at source would be made.

What is the Value of Supply for the purpose of TDS

The amount indicated in the invoice excluding the Central tax, State tax, Union territory tax, Integrated tax and cess element, is the value of supply.

What is the time limit within which TDS is to be deposited with the Government

The amount of tax deducted at source should be deposited to the Government account by deductor by 10th of the succeeding month.

Who is required to issue TDS Certificate

A TDS certificate is required to be issued by deductor (the person who is deducting tax) in prescribed form to the deductee (the supplier from whose payment TDS is deducted).

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