TAX DEDUCTED AT SOURCE UNDER GST LAWS

[Mr. M. GOVINDARAJAN]

Mandate

Section 51 of the Act provides the procedure to deduct tax at source.  Section 51(1) provides that notwithstanding anything to the contrary contained in this Act, the Government may mandate-

1. a department or establishment of the Central Government or State Government; or
2. local authority; or
3. Governmental agencies; or
4. such persons or category of persons as may be notified by the Government on the recommendations of the Council,

to deduct tax at the rate of 1% from the payment 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.2,50,000/-.

Section 51 came into effect from 01.10.2018 with respect to the persons specified under clauses (a) (b) and (c) and to the persons specified below under section 51(1) (d).

No deduction

No deduction shall be made if the location of the supplier and the place of supply is in a State or Union territory which is different from the State or as the case may be, Union territory of registration of the recipient.

Value

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.

Payment of deducted tax

Section 51(2) provides that the amount deducted as tax under this section shall be paid to the Government by the deductor within 10 days after the end of the month in which such deduction is made, in such manner as may be prescribed.

Failure to pay tax

Section 51(6) provides that if any deductor fails to pay to the Government the amount deducted as tax under sub-section (1), he shall pay interest in accordance with the provisions of section 50(1), in addition to the amount of tax deducted.   The determination of the amount in default under this section shall be made in the manner specified in section 73 or section 74.

Issue of certificate to the deductee

Section 51(3) provides that the deductor shall furnish to the deductee a certificate mentioning therein the contract value, rate of deduction, amount deducted, amount paid to the Government and such other particulars in such manner as may be prescribed.

Late fee

Section 51(4) provides that if any deductor fails to furnish to the deductee the certificate, after deducting the tax at source, within five days of crediting the amount so deducted to the Government, the deductor shall pay, by way of a late fee, a sum of Rs.100/- per day from the day after the expiry of such five days period until the failure is rectified, subject to a maximum amount of Rs.5,000/-.

Section 51(4) was omitted by Finance Act, 2020 with effect from 01.01.2021.

Credit by deductee

Section 51(5) provides that the deductee shall claim credit, in his electronic cash ledger, of the tax deducted and reflected in the return of the deductor furnished under section 39(3), in such manner as may be prescribed.

Refund

Section 51(8) provides that the refund to the deductor or the deductee arising on account of excess or erroneous deduction shall be dealt with in accordance with the provisions of section 54.    No refund to the deductor shall be granted, if the amount deducted has been credited to the electronic cash ledger of the deductee.

Effective date

Vide Notification No. 33/2017 - Central Tax, dated 15.09.2017, the Central Government appointed 18.09.2017 as effective date for the provisions of section 51.  Later it was supersessed by Notification No. 51/2018 - Central Tax, dated 13.09.2018 in which  the Central Government appointed 01.10.2018 as effective date for the provisions of Section 51.

Specified persons

By virtue of the powers given in section 51(1)(d) of the Act, the Central Government specified the following, (vide Notification No. 33/2017 - Central Tax, dated 15.09.2017 as amended vide Notification No. 50/2018 - Central Tax, dated 15.09.2017)   for which the provisions of TDS are applicable-

• An authority or a board or any other body, -

• set up by an Act of Parliament or a State Legislature; or
• established by any Government,

with 51% 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;
• Public Sector Undertakings;
• With respect to persons specified under section 51(1)(a),  nothing in this notification shall apply to the authorities under the Ministry of Defence, other than the authorities specified in the Annexure-A and their offices, with effect from the 01.10.2018;
• Nothing in this notification shall apply to the supply of goods or services or both from a public sector undertaking to another public sector undertaking, whether or not a distinct person, with effect from the 01.10.2018.
• Nothing in this notification shall apply to the supply of goods or services or both which takes place between one person to another person specified under clauses (a), (b), (c) and (d) of sub-section (1) of section 51 of the said Act.

Advance Ruling on TDS

Applicable to specified person

The TDS provisions will be applicable only to the specified persons as discussed above.

Co-operative Society

IN RE: M/S. TAMIL NADU COOP SILK PRODUCERS FEDERATION LTD. - 2019 (12) TMI 49 - AUTHORITY FOR ADVANCE RULING, TAMILNADU, the applicant is a Co-operative Apex Body controlled by the Tamil Nadu Co-Operatives Societies Act, 1983.  The applicant sought an Advance Ruling as to whether TDS provisions under GST Act is applicable to the Co-operative Society since it is registered under Tamil Nadu Co-operative Societies Act, 1975 and not under Society Registration Act, 1860.

The Authority for Advance Ruling observed that the applicant was established by the Government of Tamil Nadu as a Co-operative Society registered as Apex Society under the Tamil Nadu Co-operative Societies Act, 1983 but the equity ownership at present or in the past never beyond 51%, nor is under the control of the Government as the management do not have any voting rights as stipulated in its bye-laws and by the Tamil Nadu Co-Operative Societies Act, 1983. 

The Authority for Advance Ruling ruled that the applicant is not a person or a category of person stipulated under Notification No. 33/2017 - Central Tax, dated 15.09.2017 as amended vide Notification No. 50/2018- Central Tax, dated 15.09.2017.

IN RE: M/S. JAIPUR ZILA DUGDH UTPADAK SAHAKARI SANGH LTD.- 2019 (7) TMI 817 - AUTHORITY FOR ADVANCE RULING, RAJASTHAN, the applicant is a co-operative society registered under Rajasthan Co-operative Societies Act, 1965 and currently governed by Rajasthan State Co-operative Society Act, 2001. 

The Authority for Advance Ruling found that the applicant is neither established under Societies Registration Act, 1860 nor established/constituted by any Government.  The Authority for Advance Ruling ruled that the applicant does not fall under any category of section 51 of the CGST Act and not liable to deduct tax at source.

IN RE: M/S. KARNATAKA CO-OPERATIVE MILK PRODUCERS FEDERATION LIMITED (FORMERLY KNOWN AS KMF,) - 2019 (10) TMI 569 - AUTHORITY FOR ADVANCE RULING, KARNATAKA the applicant is a registered society under Co-operative Society Act, 1959 and is engaged in processing of milk and milk products wherein its district co-operative unions are shareholders of the organization.   The applicant sought for an Advance Ruling whether their society is liable to deduct TDS under section 51 of the CGST Act on the payments made to the suppliers. 

The Authority for Advance Ruling observed that the Government is not holding any share in the society but 4 of its 19 directors are nominated by the State Government and one by National Diary Development Board.  The applicant is not a department or establishment of the Central Government/State Government/Local Authority.  The applicant has neither been set up by an Act of Parliament nor State Legislature, not established by any Government with 51% or more participation by way of equity or control, to carry out any function, not established by the Central Government or State Government or Local Authority.  Further the applicant is not tasked with any responsibility by the State Government and directors nominated only to safeguard funds of the applicant society. 

The Authority for Advance Ruling ruled that the applicant is not liable to deduct TDS from payment to the suppliers.

IN RE: RAJASTHAN RAJYA SAHAKARI KRIYA VIKRAYA SANGH LTD. - 2019 (4) TMI 1497 - AUTHORITY FOR ADVANCE RULING, RAJASTHAN the applicant is a co-operative society registered under the Rajasthan Co-operative Societies Act, 1953.  The applicant deals in trading in various items and providing services as commission agent to other registered taxable persons.  The applicant carries its business activities of providing services to agriculturist for buying their agriculture produce and selling those produces in the open market.  The applicant also helps to the National Agriculture Co-operative Marketing Federation of India Limited’ (NAFED) for procuring agriculture produce from farmers and supply them as per their instructions. 

The applicant sought for advance rulings on the following questions-

• Whether the applicant being a co-operative society registered under the Rajasthan State Co-operative Society Act, 1953 now consolidated in the Rajasthan Co-operative Societies Act, 2001 is liable to deduct tax at source from payment to or credit of kray vikray, sahakari Samiti/RAJFED under Notification No. 50/2018-Central Tax (Rate), dated 13.09.2018 for their services of procurement of oilseeds and pulses for the applicant to be supplied by the applicant to its principal NAFED?
• Whether the applicant being a co-operative society registered under the Rajasthan State Co-operative Society Act, 1953 now consolidated in the Rajasthan Co-operative Societies Act, 2001 is liable to deduct tax at source from payment to or credit of RAJFED under Notification No. 50/2018 - Central Tax (Rate), dated 13.09.2018 for their services of procurement of gunny bags, transportation, insurance and services of surveyors for the applicant to be supplied by the applicant to its principal NAFED itself?

The Authority for Advance Ruling ruled that the applicant is a co-operative society and not a department or local authority or governmental agency.  Therefore the applicant is not liable to deduct tax at source from payment to or credit of kray vikray, Sahakari Samiti/RAJFED and for their services of procurement of gunny bags, transportation, insurance and services of surveyors to be supplied by the applicant to its principal NAFED itself.

Joint Venture Company

IN RE: WEBFIL LTD. - 2019 (1) TMI 486 - AUTHORITY FOR ADVANCE RULING, WEST BENGAL, the applicant is a joint venture company formed by Government of West Bengal undertaking and Central Government undertaking.  Neither the Central Government nor the State Government is having any direct equity participation.  The Government companies together hold 62.29% of paid up share capital and majority of directors in Board.  The Central and State Governments, acting through Government companies, are in position to indirectly control the management or policy decisions of the applicant.    The Authority for Advance Ruling ruled that the applicant is liable to deduct tax at source under section 51(1) of the GST Act.

Exempt supply

If the supply is exempted, then no TDS will be applicable.

IN RE: M/S. SINGH TRANSPORT AGENCY - 2019 (10) TMI 1139 - AUTHORITY FOR ADVANCE RULING, WEST BENGAL, the applicant is providing the conservancy/solid waste management service to the Conservancy Department of the Howrah Municipal Corporation.  The said corporation is deducting TDS while paying consideration for the above supply.The applicant sought an advance ruling on whether the notifications regarding TDS are applicable in this case. 

The Authority for Advance Ruling observed that the TDS notifications brought into force section 51 of the Act specifying the persons under section 51(1) (d) of the Act and have mandated and laid down the mechanism for deduction of TDS.  These notifications, therefore, are applicable only if TDS is deductible on the applicant’s supply under section 51(1) of the Act.  Section 51(1) of the Act provides that the Government may mandate inter alia  a local authority to deduct TDS while making payment to a supplier of taxable goods or services or both. 

The Authority for Advance ruling ruled that as the applicant is making an exempt supply the provisions of section 51(1) and for that matter, the TDS Notifications do not apply to the supply of the applicant.

IN RE: MUNICIPAL CORPORATION PRATAPGARH - 2019 (4) TMI 1400 - AUTHORITY FOR ADVANCE RULING, RAJASTHAN, the applicant is receiving various services from various contractors for cleaning of road, garden, toilets and waste collection.  As most of the services received are under Article 243W of the Constitution of India but these are on rate basis. The applicant is not able to clarify whether the above named services received are on rate basis and whether they are taxable or exempted. 

The Authority for Advance Ruling observed that the services received by the applicant are not only pure services but also involves supply of goods.  The activities entrusted to the Municipality are under Article 243W of the Constitution of India list under 12^th Schedule. 

The Authority for Advance Ruling ruled that the activities undertaken by the applicant in which if there is only pure services then it will attract NIL rate of tax.  Therefore the provisions of TDS will not be applicable to the applicant. 

IN RE: INDRAJIT SINGH, CARRYING ON BUSINESS UNDER THE TRADE NAME M/S. MARUTI ENTERPRISE - 2019 (6) TMI 486 - AUTHORITY FOR ADVANCE RULING, WEST BENGAL, the applicant is providing conservancy/solid water management service to the Conservancy Department of the Howrah Municipal Corporation.  The Howrah Municipal Corporation is deducting tax at source while paying consideration for the above supply in terms of Notification No. 50/2018 - Central Tax (Rate), dated 13.09.2018.  The applicant sought for an advance ruling whether the notification regarding TDS are applicable in this case. 

The Authority for Advance Ruling ruled that the supply is being exempted supply, Section 51 of the CGST Act and Notification No. 50/2018 - Central Tax (Rate), dated 13.09.2018 do not apply to the applicant.

IN RE: M/S. DOLPHIN TECHNO WASTE MANAGEMENT PRIVATE LIMITED - 2020 (3) TMI 445 - AUTHORITY FOR ADVANCE RULING, WEST BENGAL, the applicant is stated to be providing solid waste management service to the Conservancy Department of the Howrah Municipal Corporation (HMC) and sewer cleansing service to the Sewerage and Drainage Department of HMC.  The HMC is deducting TDS while paying consideration for the above supply in terms of Notification No. 50/2018 - Central Tax (Rate), dated 13.09.2018 (corresponding State Notification No. 1344 – FT, dated 13.09.2018) and State Government Order No. 6284 - F(Y), dated 28.09.2018.  The Applicant sought an advance ruling on whether the notifications regarding TDS are applicable in his case.

The Authority for Advance Ruling observed that the TDS Notifications came into force section 51 of the GST Act, specifying the persons under section 51 (1)(d) of the Act and have mandated and laid down the mechanism for deduction of TDS. These notifications, therefore, are applicable only if TDS is deductible on the applicant’s supply under section 51 of the GST Act. Section 51(1) of the Act provides that the Government may mandate inter alia a local authority to deduct TDS while making payment to a supplier of taxable goods or services or both.

The Authority for Advance Ruling ruled that a the Applicant is making an exempt supply to HMC the provisions of section 51 and, for that matter, the TDS Notifications do not apply to his supply.

Solid Waste Management

IN RE: M/S. MAHENDRA ROY - 2019 (9) TMI 1048 - AUTHORITY FOR ADVANCE RULING, WEST BENGAL, the applicant is providing conservancy/solid waste management service to the Conservancy Department of the Howrah Municipality.  The Howrah Municipality is deducting TDS while paying consideration for the services it received from the applicant.  The applicant sought for an advance ruling as to whether the above supply is exempted in terms of Sl. No. 3 or 3A of the Notification No. 12/2017 - Central Tax (Rate), dated 28.06.2017 as amended from time to time.  If exemption is applicable the applicant wants ruling on whether the provisions regarding TDS are applicable in their case. 

The Authority for Advance Ruling ruled that as the applicant is making an exempt supply the provisions of section 51 and for that matter, Notification No.50/2018 – Central Tax (Rate), dated 13.09.2018 to the extent they mandate and deal with the mechanism of TDS, do not apply to this case.

IN RE: M/S. DIPAK KANTI MAZUMDER DYNAMIC ENGINEERS - 2020 (3) TMI 412 - AUTHORITY FOR ADVANCE RULING, WEST BENGAL, the applicant is providing conservancy/solid waste management service to the Howrah Municipal Corporation (HMC).  The applicant sought an advance ruling on whether the above supply is exempted in terms of Sl. No. 3 or 3A of Notification No. 12/2017 - Central Tax (Rate), dated 28.06.2017 and if so, whether the notifications regarding TDS are applicable in his case.

The Authority for Advance Ruling ruled that the supply of the applicant is exempted one.  The Authority for Advance Ruling observed that the TDS Notifications bring into force section 51 of the GST Act, specifying the persons under section 51 (1)(d) of the Act and have mandated and laid down the mechanism for deduction of TDS. These notifications, therefore, are applicable only if TDS is deductible on the applicant's supply under section 51 of the GST Act. Section 51(1) of the Act provides that the Government may mandate inter alia a local authority to deduct TDS while making payment to a supplier of taxable goods or services or both.   The Authority for Advance Ruling ruled that as the applicant is making an exempt supply to HMC the provisions of section 51 and, for that matter, the TDS Notifications do not apply to his supply.

Tirupati Municipal Corporation

IN RE: M/S. ZIGMA GLOBAL ENVIRON SOLUTIONS PRIVATE LIMITED - 2020 (7) TMI 448 - AUTHORITY FOR ADVANCE RULING, ANDHRA PRADESH the applicant is the service provider of Municipal Solid Waste (MSW) Management solutions.  The solutions involve in segregation, treatment, recycling of Municipal Solid Waste (MSW) and thus clearing MSW landfills.   The services provided by the applicant are mandated under the solid waste management Rules 2016 and Central Pollution Control Board Guidelines for Disposal of Legacy Waste, February, 2019.

Tirupati Smart City Corporation, Tirupati Municipal Corporation (TMC), which is incorporated on 21.10.2016 as per G.O.Ms.No.258, Government of A.P has invited tenders for ‘Solid Waste Management Project - Remediation of Existing MSW Dumpsite at Ramapuram through Bio-Mining Process under implementation of the Smart City Mission in Tirupati’ and the applicant was awarded with the project.  The project would involve Design, Erection, Operation and Maintenance of the Bio-mining plant with an ultimate intention to reclaim the existing solid waste dumpsite in the said process in a scientific manner at Ramapuram dumpsite in TMC area.  The applicant sought for advance rulings on whether the Governmental Authority is liable to deduct TDS as per the provisions of section for the services rendered as state in the application?

The Authority for Advance Ruling ruled that the question for TDS does not arise as the services provided by the applicant are from exempted from the levy of GST.

Catering services to Educational Institutions

IN RE: M/S. MAHALAKSHMI MAHILA SANGHA - 2020 (5) TMI 602 - AUTHORITY FOR ADVANCE RULINGS, KARNATAKA, the applicant is   engaged in the provision of catering services to educational institutions  sponsored by State/ Central/ Union territory which is exempted services under Sl.No.66 of the Notification No.12/2017 - Central Tax (Rate), dated 28.06.2017.   The applicant sought for advance ruling on whether TDS is applicable in respect of their services.

The Authority for Advance Ruling observed that the applicant has to prepare the food in the school premises and supply it to the students of the school for a monthly consideration. The students to whom the service is provided are from the Primary School category. Hence the service is a catering service provided to an educational institution which is a primary school and hence is covered under the Entry No.66 of Notification No.12/2017 - Central Tax (Rate), dated 28.06.2017 as amended from time to time and is exempted from the payment of GST.

The Authority for Advance Ruling ruled that since the applicant is supplying exempt services, the said provisions are not applicable to the payments made to him by the educational institutions.