TAX DEDUCTION AT SOURCE UNDER GST

[Dr. Sanjiv Agarwal]

Section 51 of the CGST Act is relevant in respect of tax deduction at source provisions under GST.

Tax deducted at source as provided in section 51of the GST Act is a mechanism to track the transaction of supply of goods and/or services by making the recipient of such supply to deduct a small percentage of amount to be paid to the supplier of such goods and/or services and deposit the same with the government. The supplier of such cases takes into account the amount so deducted and makes the balance payment of tax to the government.

When tax would be deducted at source

As per section 51 of the GST Act, the tax at source is required to be made, where the total value of supply under a contract exceeds INR 2.5 lakhs. It is important to note that the value has to be considered excluding the tax thereon.

Deduction by whom

The deductors of tax at source can be one or more of the following:

(a)   Department of Central or State Government.

(b)   An establishment of the central or state Government.

(c)   Governmental agencies.

(d)   Local authority.

(e)   Such category of persons as may be notified by Central or State Governments on the recommendation of GST Council.

Rate of TDS

According to section 51(1) of the GST Act, tax @ 1% would be required to be deducted and deposited from the payments made or credited to the supplier of taxable goods and services as may be notified by the Central or State Governments on the recommendation of GST Council.

Deposit of TDS

The amount of tax deducted would be required to be deposited to the credit of appropriate Government(Central Government for CGST and IGST, State Government for SGST) account within a period of 10 days after the end of month in which such deduction was made.

Credit of TDS

The deductee (taxable person from whose payments tax has been deducted) will take the credit of TDS deducted from his payments on the basis of certificate to be issued by deductor.

The deductee will claim the credit in his electronic cash ledger, the claim of which will be matched with the return of the deductor filed for the said period.

TDS Certificate

The certificate is required to be issued by deductor to deductee within 5 days of deposit of tax by deductor to the respective Government account.

The certificate to be issued by deductor will have information of:

(a)   Contract value

(b)   Rate of deduction

(c)   Amount deducted

(d)   Amount paid to the appropriate govt

(e)   Such other particulars as may be prescribed

In case deductor fails to issue the certificate within time limit of 5 days of deposit of tax, he shall be liable to pay by way of late fee of INR 100/- per day for the period starting from the expiry of 5 days period until it is issued to deductee. However, the maximum late fee will be restricted to INR 5,000/-.

Delay in deposit of TDS

The TDS is required to be deposited within 10 days of following month. In case deductor fails to deposit the amount of tax deducted by this date, he will be liable to pay besides such tax to be deposited, an interest at the rate to be prescribed for the period starting from the due date of deposit till the final date of deposit of amount.

Refund of TDS

For any excess or erroneous deposit of TDS, refund can be sought by deductor or deductee under the relevant provisions of GST law.  However, In case the amount of TDS deducted and deposited has been credited to the electronics cash ledger of deductee, no refund will be allowed to deductor.

Deferment of TDS provisions

The applicability of TDS provisions has been deferred for implementation till 31^st March, 2018.