TAX DEDUCTED AT SOURCE UNDER ‘GST’

[Mr. M. GOVINDARAJAN]

Date of effect

The provisions of GST came into effect from 01.07.2017.  Section 3 of the Central Goods and Services Tax Act, 2017 (‘Act’ for short) provides that different dates may be appointed for different provisions of this Act and any reference in any such provision to the commencement of this Act shall be construed as a reference to the coming into force of that provision. 

Vide Notification No. 33/2017-Central Tax, dated 15.09.2017,  the Central Government appointed 18.09.2017 as the date on which the provisions of sub-section (1) of section 51 of the said Act shall come into force with respect to persons specified under clauses (a) and (b) of sub-section (1) of section 51 of the said Act and the persons specified below under clause (d) of sub-section (1) of section 51 of the said Act, namely:-

• 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.

However the said Notification indicated that the said persons shall be liable to deduct tax from the payment made or credited to the supplier of taxable goods or services or both with effect from a date to be notified subsequently, on the recommendations of the Council, by the Central Government.

Vide Notification No. 50/2018-Central Tax, dated 13.09.2018 which has been issued in supersession of Notification No.33/2017-Central Tax, dated 15.09.2017, the Central Government appointed the 01.10.2018, as the date on which the provisions of section 51 of the said Act shall come into force             

Who are to deduct tax at source?

Section 51(1) of the Act provides that the following are to deduct tax at source-

• a department or establishment of the Central Government or State Government; or
• local authority; or
•  Governmental agencies; or
• persons asnotified by the Government vide Notification No. 50/2018-Central Tax, dated 13.09.2018-

• 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.

to deduct tax from the payment made or credited to the suppliers of taxable goods or services or both.   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.

Registration

Section 24 provides for compulsory registration under the Act for certain persons.  One among them is the persons who deduct tax under section 51.  Section 24(vi) provides for compulsory registration by the persons who are required to deduct tax under section 51, whether or not separately registered under this Act.

Grant of registration certificate

Rule 12 provides that any person required to deduct shall electronically submit an application, duly signed or verified through electronic verification code, in Form GST REG-07 for the grant of registration through the common portal.  The proper officer may grant registration after due verification and issue a certificate of registration in FORM GST REG-06 within a period of three working days from the date of submission of the application.

Amendment of registration certificate

Rule 19 provides that where there is any change in any of the particulars furnished in the application for registration in  Form GST REG-07,  the registered person shall, within a period of fifteen days of such change, submit an application, duly signed or verified through electronic verification code, electronically in Form GST REG-14, along with the documents relating to such change at the common portal, either directly or through a Facilitation Centre notified by the Commissioner.  If the particulars furnished is correct the proper officer will cause amendment of registration certificate

Where the proper officer is of the opinion that the amendment sought is either not warranted or the documents furnished therewith are incomplete or incorrect, he may, within a period of fifteen working days from the date of the receipt of the application in Form GST REG-14, serve a notice in Form GST REG-03, requiring the registered person to show cause, within a period of seven working days of the service of the said notice, as to why the application submitted shall not be rejected.   The registered person shall furnish a reply to the notice to show cause, in Form GST REG-04, within a period of seven working days from the date of the service of the said notice.    Where the reply furnished is found to be not satisfactory or where no reply is furnished in response to the notice issued within the period prescribed the proper officer shall reject the application submitted under sub-rule (1) and pass an order in Form GST REG -05.

If the proper officer fails to take any action,-

(a) within a period of fifteen working days from the date of submission of the application, or

(b) within a period of seven working days from the date of the receipt of the reply to the notice to show cause,

the certificate of registration shall stand amended to the extent applied for and the amended certificate shall be made available to the registered person on the common portal.

Cancellation of registration certificate

Where, upon an enquiry or pursuant to any other proceeding under the Act, 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 electronically in Form GST REG-08.  The proper officer shall follow the procedure as provided in rule 22 for the cancellation of registration.

Rate of tax

The rate of tax to be deducted by the persons concerned is 1% from the payment made or credited to the suppliers of taxable goods or services or both.

Threshold limit

The tax is to be deducted only if the value of supply under a contract exceeds ₹ 2.50 lakhs.  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.

Due date for payment of tax deducted

The 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, in such manner as may be prescribed.

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.

Penalty

Section 122(1)(v) provides that where a taxable person who  fails to deduct the tax in accordance with the provisions of section 51(1), or deducts an amount which is less than the amount required to be deducted under the said sub-section, or where he fails to pay to the Government under section 51 (2) thereof, the amount deducted as tax, he shall be liable to pay a penalty of ten thousand rupees or an amount equivalent to the tax evaded or the tax not deducted under section 51 or short deducted or deducted but not paid to the Government whichever is higher.

Certificate to the deductee

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 Form GSTR – 7A, which is reproduced as follows-

---

Form GSTR 7A

[See rule 66(3)]

Tax Deduction at Source Certificate

1. TDS Certificate No. –

2. GSTIN of deductor –

3. Name of deductor –

4. GSTIN of deductee–

5. (a) Legal name of the deductee -

    (b) Trade name, if any –

6. Tax period in which tax deducted and accounted for in GSTR-7 –

7. Details of supplies Amount of tax deducted –

Value on which tax deducted	Amount of Tax deducted at source (Rs.)
	Integrated Tax	Central Tax	State /UT Tax
1	2	3	4

 

 

Signature

Name

Designation

Office –

---

The certificate referred to in sub-section (3) of section 51 shall be made available electronically to the deductee on the common portal in FORM GSTR-7A on the basis of the return furnished.

Late fee

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 amount of ₹ 5000/-.

Refund of excess credit

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.

Return to be filed

Section 39(3) required the person who deducted tax at source to file a return.  This section provides that every registered person required to deduct tax at source under the provisions of section 51 shall furnish, in Form GSTR - 7, a return, electronically, for the month in which such deductions have been made within ten days after the end of such month.

 In the return Form GSTR – 7 the following is to be furnished-

• basic details;
• details of tax deducted at source;
• amendments to details of tax deducted at source in respect of any earlier tax period;
• tax deduction at source and paid;
• interest, late fee payable and paid
• refund claimed through electronic credit ledger
• debit entries in electroniccash ledger for TDS/interest payment (to be populated after payment of tax and submissions of return)

The details furnished by the deductor shall be made available electronically to each of the suppliers in Part C of FORM GSTR-2A and FORM-GSTR- 4A on the common portal after the due date of filing of FORM GSTR-7.