Tax Deducted at Source (TDS) under GST
Tax Deducted at Source (TDS) is one of the ways to collect tax based on certain percentages on the amount payable by the receiver on goods/services. The collected tax is a revenue for the government. The provision pertaining to TDS under GST is given under Section 51 of the CGST Act to be read with CGST Rule 66.
Section 51 of the CGST Act, 2017 contains the provisions of TDS under GST. As per the said provisions, the following list of persons are liable to deduct TDS under GST: –
- A department or establishment of the Central Government or State Government,
- Local authority,
- Governmental agencies,
- Such a person or category of persons as may be notified by the Government on the recommendations of the Council.
The Government introduces the following additional category of the person liable to deduct tax at source, via notification no. 33/2017 dated 18.09.2017:
- An authority or a board or any other body which has been set up by Parliament or a State Legislature by a government, with 51% equity (control) owned by the government;
- A society established by the Central or any State Government or a Local Authority and the society is registered under the Societies Registration Act, 1860;
- Public Sector Undertakings.
TDS Rate under GST
1% TDS is required to be deducted under both the CGST and the SGST Act and therefore the total TDS to be deducted is 2% from the payment made to the supplier of taxable products or services if the value of the supply exceeds Rs. 2.5 Lakhs under the contract. The terms of the TDS on GST shall apply from 1st October 2018. For the purpose of determining the value of the contract, the following shall be excluded-
- GST Integrated
- GST Central
- GST Union Territory
- GST State
No deduction of Tax is required when the location of supplier and place of supply is different from the State of the registration of the recipient.
If any excess amount is deducted and paid to the government, a refund can be claimed as this is not the tax amount that the government has a right on. However, if the deducted amount is already added to the electronic cash ledger of the supplier, the amount so added cannot be got back as a refund by the deductor. Deductee can claim a refund of tax subject to refund provisions of the act.
Liability of Return Filing
The person deducting TDS is liable to file GST return in FORM GSTR-7 within a period of 10 days from the end of the month.
Issue of TDS certificate
Similar to the Income Tax Law, the person deducting tax under GST has to issue the TDS certificate in form GSTR-7A to the concerned person within 5 days of depositing the tax to the government. The GST portal will automatically make GSTR-7A available to the deductee on the basis of the GSTR-7 filed.
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