Tax Deducted at Source (TDS) under Goods and Service Tax (GST):

We know about TDS under Income Tax 1961 and the relevant penalties thereon. However, in Central Excise Act 1944, Finance Act 1994 there is no concept of TDS. Only Sales Tax law (Value Added Tax) of the State Governments has the provision relating to TDS in respect of works contract.The rates of TDS are different from state to state, in some of the states it is as high as 8%.
Tax Deduction at Source (TDS) is a system, which was initially introduced by the Income Tax Department. It is one of the modes/methods to collect tax, under which, certain percentage of amount is deducted by a recipient at the time of making payment to the supplier. It is a source of regular revenue for Government. It facilitates sharing of responsibility of tax collection between the deductor and the tax administration. 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 liable to deduct TDS under GST regime
Section 51 of the CGST Act, 2017 prescribes the authority and procedure for Tax Deduction at Source.The Government may order the following persons (the deductor) to deduct tax at source:

(a) A department or anestablishment of the Central Government or State Government, or

(b)Local authority, or

(c) Governmental agencies, or

(d) Persons or category of persons as may be notified, by the Central or a State Government on the recommendations of the GST Council.

Is Registration as TDS deductors under GST regime mandatory

Yes, Each TDS deductor has to mandatorily register without any threshold limit. The deductor has a privilege of obtaining registration under GST without requiring PAN. He can obtain registration using his Tax Deduction and Collection Account Number (TAN) issued under the Income Tax Act, 1961.

Under what conditions TDS is not deducted TDS under GST regime
Basic exemption limit for TDS under GST regime is Rs. 2.5 lakhs for total value of supply under a contract. For the purpose of the above total value of supply, taxes like CSGT, SGST, UGST, IGST and cessindicated in the invoice should not be considered.

(Note :Individual supplies may be less than Rs. 2,50,000/-, but if contract value is more than Rs. 2,50,000/-, TDS will have to be deducted.)

TDS is not to be deducted if the location of supplier and place of supply both are same but it is different from that of the recipient.

[eg. Location of Supplier as well as the place of supply are State A and the location of recipient is State B. The supply would be considered as intra-State supply and Central tax and State tax would be levied. In such cases, 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 TDS would not be deducted.]

What is the rate of TDS under GST regime

The tax would be deducted at a uniform rate of 1% from the payments made or credited to the supplier of taxable goods or services or both, where the total value of such supply, under a contract, exceeds Rs. 2.5 lakhs(excluding the amount of Central tax, State tax, Union Territory tax, Integrated tax and cess indicated in the invoice).

When TDS is to be deducted under GST regime

As per section 51(1) of GST Act,2017,TDS will be deducted at the time of making payment to the supplier. UnlikeIncome Tax Act where the TDS is suppose to be deducted either at the time of making the payment or credited to account whichever is earlier.

What is the due date of depositing the TDS under GST regime

The amount of TDS deducted should be deposited by the deductor within 10 days from the end of the month. Above TDS should be deposited either to Central Govt. or State Govt. depending upon the type of transactioninvolved.The deductor would be liable to pay interest if the tax deducted is not deposited within the prescribed time limit.

What is the time limit to furnish the return under GST regime
As per the provision of section 39(3) Return of TDS is to be filed bythe deductor in Form GSTR-7 within 10 days after the end of the month in which deduction is made.
The details of TDS are furnished by the deductor in FORM GSTR-7 which should be made available to each of the suppliers in Part C of FORM GSTR-2A electronically through the Common Portal. Thesaid supplier may include the same in FORM GSTR-2. The amounts deducted by the deductor will be reflected in the GSTR-2 of the supplier (deductee). The supplier can take this amount as input credit in his electronic cash register and use the same for payment of tax or any other liability.
It can filed either on GSTN common portal or from thefacilitation centre notified by the commissioner.
If the supplier is unregistered, name of the supplier should be used rather than GSTIN shall be mentioned in the return.

What information/contents is required for TDS Certificate under GST regime

As per GST Law, the deductor shall, in the manner prescribed, furnish to the deductee a certificate mentioning therein the contract value, rate of deduction, amount deducted, amount paid to the appropriate Government and such particulars as may be prescribed in this behalf.

A TDS certificate is required to be issued by deductor (the person who is deducting tax) in Form GSTR-7A to the deductee (the supplier from whose payment TDS is deducted), within 5 days of crediting the amount to the Government, failing which the deductor would be liable to pay a late fee of Rs. 100/- per day from the expiry of the 5th day till the certificate is issued. This late fee would not be more than Rs. 5000/-. For the purpose of deduction of tax specified above, the value of supply shall be taken as the amount excluding the Central tax, State tax, Union territory tax, Integrated tax and cess indicated in the invoice.

Tax Deducted at Source (TDS) under Goods and Service Tax (GST)

What are the consequences of not complying with TDS provisions under GST regime

List of other points relating to TDS under GST regime
A TDS deductor has to compulsorily register without any threshold limit. The deductor has a privilege of obtaining registration under GST without requiring PAN. He can obtain registration using his Tax Deduction and Collection Account Number (TAN) issued under the Income Tax Act, 1961. But obtaining TAN issued under income tax actis Mandatory.
Deductor has obtained registration u/s 23 of GST Act, 2017. (Relaxation in requirement of the registration for certain deductors).
The amount deposited as TDS will be reflected in the electronic cash ledger of the supplier. The deductee can claim the credit, in his electronic cash ledger, of the tax deducted and reflected in the return of the deductor filed under sub-section (5) of section 27, in the manner prescribed.
No tax deduction is required where thelocation of supplier and place of supply is different from the State of the registration of the recipient.
Deductors need to remit such TDS collected by the 10th day of the month succeeding the month in which TDS was collected.
Deductors need to issue TDS certificate to the deductee within 5 days of deducting TDSmentioning therein the contract value, rate of deduction, amount deducted, the amount paid to the appropriate Government and such particulars as may be prescribed.
Non-deduction / short deduction / non-payment or short payment of TDS is on offence under the act for which a minimum penalty of Rs 10000/- is prescribed under the act.
As per provisions of section 38 of GST Act, the refund to the deductor or the deductee, as the case may be, arising on account of excess or erroneous deduction shall be granted if the amount deducted has been credited to the electronic cash ledger of the deductee.
Compiled by CA Ankita Khetan