Typically, TDS is deducted on certain specified incomes as per the Income-tax Act. There are, however, scenarios wherein service providers or goods suppliers shall also have deductions made from the money paid to them, as per GST act. This is known as TDS under GST regime and has been made applicable for all suppliers of goods or providers of services for goods or services provided to certain categories of persons.
What is TDS under GST regime?
TDS stands for Tax Deducted at Source. It is a concept introduced under the Income-tax Act, 1961, which has been adopted by GST law. Therefore, certain recipients of goods or services, are required to deduct TDS from the payments made to suppliers of such goods or services, at a specified rate. As a supplier of goods or services, you must know about the TDS provisions, in order to ensure that your proper payments are being made and that TDS is being deducted at the correct amount.
Who is required to deduct TDS under GST?
Only certain categories of people are required to deduct TDS under GST. These are:
- An establishment or department of the Central Government or State Government, or
- Local authority, or
- Government agencies, or
- Such persons or category of persons, as may be notified by the Government.
As per notification no. 50/2018 – Central Tax dated 13 September 2018, the categories of persons notified by the government are:
- 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 percent or more participation by way of equity or control, to carry out any function;
- Society established by the Central Government or the State Government or a Local Authority under the Societies Registration Act, 1860 (21 of 1860);
- Public sector undertakings.
The categories of persons mentioned above, shall deduct TDS from payments made to suppliers of goods or services, whenever the payment to be made for such goods or services, exceeds the threshold amount.
What is the threshold amount for goods or services above which TDS under GST will be deducted by such persons?
Such persons shall deduct TDS, for all goods suppliers or service providers, when the payment to be made against goods or services received exceeds Rs. 2,50,000.
At what rate is such TDS required to be deducted?
TDS is required to be deducted at a rate of 2%. For goods or services supplied intra-state, the TDS shall be deposited at the rate of 1% under CGST and SGST respectively and for inter-state supplies, 2% shall be deposited under IGST.
How is the value at which TDS is required to be deducted calculated?
The taxable value of goods or services supplied, excluding GST component, shall be taken to be the value from which TDS is required to be deducted.
For example, if A supplies services worth Rs. 3,00,000 to B, a government agency, on which 18% GST is chargeable, the total amount payable shall be Rs. 3,54,000 (including GST). The TDS shall be deducted at 2% from Rs. 3,00,000. That is, the amount deducted shall be Rs. 6,000. The total payment made shall be Rs. 3,00,000 + 54,000 – 6,000 = Rs. 3,48,000.
Are there any exceptions from deduction of such TDS under GST?
Yes. There are:
- As explained above, whenever the value of supplies is below Rs. 2,50,000;
- When the place of supply is different from the location of recipient of goods/ services. For example, when services for catering from a supplier in Haryana, are actually provided in Haryana, for a recipient in Delhi, the place of Supply shall be Haryana (the actual place where the services are performed in this case). Since the recipient of services is located in Delhi and the place of supply is Haryana, TDS shall not be deducted.
Which return is required to be filed by the person deducting TDS under GST?
There are several GST returns, which are required to be filed in different scenarios. For filing TDS returns under GST, GSTR-7 has to be filed before the 10th of the month in which deduction is required to be made. That is, for deduction made in April, GSTR-7 must be filed before 10th May.
A certificate, similar to TDS certificate issued by deductor must be issued to the provider of goods/ services, from whose payments deduction has been made, in form GSTR-7A. This has to be done by the person deducting TDS within 5 days of depositing the TDS under GST with the government.
Delays in issue of GSTR-7A shall entail late fee of Rs. 100/day upto a maximum of Rs. 5,000.
How can I verify that my TDS under GST has been deducted?
One, is through the GSTR-7A issued by the deductor.
And two, in the GSTR-2A form, which appears on the online portal https://www.gst.gov.in. Credit for the same can be utilised while filing for GSTR-2.
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