TAX DEDUCTED AT SOURCE UNDER ‘GST’ REGIME

[Mr. M. GOVINDARAJAN]

Who are liable to deduct tax at source?

Section 51 of the Central Goods and Services Tax Act, 2017 (‘Act’ for short) provides the procedure to deduct tax at source.  Section 51(1) provides who are liable to deduct tax at source. Section 51(1) provide that notwithstanding anything to the contrary contained in this Act, the Central Government may mandate-

• a department or establishment of the Central Government or State Government; or
• local authority; or
• Governmental agencies; or
• 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 ₹ 2,50,000/-.

According to this section the required persons need not deduct tax at source if the total value of supply is less than ₹ 2,50,000/-.  Further we may expect many more persons liable to this section as the Central Government is given power under this section to notify such persons or category of persons on the recommendations of the Council.

The proviso to this section provides that 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, Union territory of registration of the recipient. 

Registration

Any person required to deduct tax in accordance with the provisions of Section 51 shall electronically submit an application, duly signed, in Form GST REG – 07 for grant of registration through the Common Portal, either directly or from a Facilitation Centre notified by the Commissioner.  The proper officer may grant registration after due verification and issue a certificate of registration in Form GST REG – 06 within three working days from the due date of submission of application. 

Value of supply

The explanation to Section 51(1) provides that 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.

Time limit to pay

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

Payment of tax

The deductor is to maintain electronic cash ledger and electronic liability register.    The electronic cash ledger shall be maintained in Form GST PMT – 05 for the deductor to pay tax, interest, penalty, late fee or any other amount on the Common Portal for crediting the amount deposited.  The deductor shall generate a challan in Form GST PMT – 06 on the Common Portal entering the details of the amount to be deposited by him towards tax, interest, penalty, fees or any other amount.  The deposit shall be made through any of the following modes-

• Internet banking through authorized banks;
• Credit card or Debit card through the authorized bank;
• National Electronic Fund Transfer (NeFT) or Real Time Gross Settlement (RTGS) from any bank;
• Over the Counter payment (OTC) through authorized banks for deposits up to ₹ 10,000/- per challan per tax period, by cash, cheque or demand draft.

The challan in Form GST PMT – 06 generated at the Common Portal shall be valid for a period of 15 days.

Where the payment is made by way of NeFT or RTGS mode from any bank, the mandate form shall be generated along with the challan on the Common Portal and the same shall be submitted to the bank from where the payment is made.  The mandate form shall be valid for a period of 15 days from the date of generation of challan.

On successful credit of the amount to the concerned government account maintained in the authorized bank, a Challan Identification Number (CIN) will be generated by the collecting bank and the same shall be indicated in the challan.   On receipt of CIN from the authorized bank, the said amount shall be credited to the electronic cash ledger of the person on whose behalf the deposit has been made and the Common Portal shall available a receipt to this effect.  

Where the bank account of the person concerned, or the person making the deposit on his behalf but no Challan Identification Number is generated or generated but not communicated to the Common Portal the said person may represent electronically in Form GST PMT – 07 through the Common Portal to the Bank or electronic gateway through which the deposit was initiated.

The amount deducted thus shall be paid by debiting the electronic cash ledger and crediting the electronic liability register.

TDS certificate

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.  The certificate shall be made available electronically to the deductee on the Common Portal in Form GSTR – 7A on the basis of return furnished the deductor.

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 ₹ 100/- per day from the day after the expiry of such five days period until the failure is rectified, subject to a maximum of ₹ 5,000/-.

Return

Section 39(3) provides that every registered person required to deduct tax at source under the provisions of section 51 shall furnish a return in Form GSTR – 07 electronically through the Common Portal either directly or from a Facilitation Centre notified by the Commissioner.  The details furnished by the deductor shall be made available electronically to each of the suppliers in Part C of Form GSTR – 2A on the Common Portal after the due date (10 days from the end of the month) of filing of Form GSTR – 07.

Payment of interest

Section 51(6) provides that if any deductor fails to pay to the Government the amount deducted as tax, 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 shall be made in the manner specified in section 73 or section 74.

Refund

Section 51(8) provides that the refund to the deductor or the deductee arising on account of excess or erroneous deduction shall be filed under Section 54.  The refund shall be claimed by filing an application in Form GST RFD – 01 electronically through the Common Portal.  The application shall be accompany by the required documentary evidences, as applicable to establish that the refund is due to the applicant.  

An acknowledgement in Form GST RFD – 02 shall be made available to the applicant through the Common Portal electronically, clearly indicating the date of filing of the claim of refund.  Where any deficiencies are noticed the proper officer shall communicate the deficiencies to the application in Form GST RFD – 03 through the Common Portal electronically, requiring him to file a refund application after rectification of such deficiencies.

The proper officer, after scrutiny of the claim and the evidence submitted in support thereof and on being prima facie satisfied that the amount claimed as refund is due to the applicant shall make an order in Form GST RFD – 04 sanctioning the amount of refund due to the said applicant on a provisional basis within a period not exceeding 7 days from the date of acknowledgment.  The proper officer shall issue a payment advice in Form GST RFD – 05 for the amount sanctioned and the same shall be electronically credited to any of the bank accounts of the applicant mentioned in his registration particulars and as specified in the application for refund.

Where upon examination of the application, the proper officer is satisfied that a refund is due and payable to the applicant, he shall make an order in Form GST RFD – 06, sanctioning the amount of refund to which the applicant is entitled, mentioning the amount, if any, refunded to him on a provisional basis, amount adjusted against any outstanding demand under the Act or under any existing law and the balance amount refundable.

If the refund is delayed because of the reasons not on the part of the applicant, the interest shall be electronically credited to any of the bank accounts of the applicant mentioned in his registration particulars and as specified in the application for refund.

Cancellation of registration

Where the proper officer is satisfied that a person to whom a certificate of registration in Form GST REG 06 has been issued is no longer liable to deduct tax at source under section 51 the said officer may cancel the registration and such cancellation shall be communicated to the said person in Form GST REG – 08.

Discussions to this article

[Rohit Bhasin]

Respected Sir,

Can you explain following proviso with help of Example : "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, Union territory of registration of the recipient. "?

As it is very confusing.