ALL ABOUT TDS UNDER GST ACT,2017

[Yogesh Narang]

In this Article I am going to discuss the law relating to Tax Deduction at Source (TDS) under GST Act, 2017. The concept of TDS is not new for us as the same was already applied or complied under Income Tax Act, 1961. In this article I will share or discuss the following concepts of TDS under GST Act, 2017:

• Introduction and need of TDS
• Provisions/relevant sections relates to TDS under GST Act, 2017
• Notifications issued under GST Act, 2017
• Registration as Tax Deductor under GST Act, 2017
• Who are liable to get registration as Tax Deductor and to deduct TDS under GST Act, 2017
• Rate of TDS
• TDS Return
• TDS Certificate
• Refund of excess/erroneous TDS under GST

INTRODUCTION AND NEED OF TDS:

That as stated above the concept of TDS was firstly introduced in Income Tax Act, 1961 so, this is not a new concept and it was also applicable under VAT Act, 2005 and it is carry forward in GST Act, 2017 also. TDS is basically a part of tax it can also be called or termed as Advance tax, deducted and deposited by receiver of goods or services or both. It is deducted by certain/specified person at certain/specified rates as prescribed by the government through notification issued from time to time. The requirement of TDS is to track the income of taxable person or to track the trail of transaction between the specified category of person as notified by the Government from time to time. GST council in its 28^th meeting held on 21.07.2018, recommended to introduce or apply TDS under GST from 01.10.2018.

PROVISIONS/RELEVANT SECTIONS RELATING TO TDS UNDER GST Act, 2017:

GST law mandates Tax Deduction at Source (TDS) vide Section 51 of CGST/SGST Act, 2017 which deals with TDS and the relevant provisions are reproduced herein below:

Section 51 of CGST Act, 2017:  the relevant provision of this section given under the Act is reproduced herein below:

51. (1) Notwithstanding anything to the contrary contained in this Act, the Government may mandate,– (a) a department or establishment of the Central Government or State Government; or

(b) local authority; or

 (c) Governmental agencies; or

 (d) such persons or category of persons as may be notified by the Government on the recommendations of the Council, (hereafter in this section referred to as “the deductor”), to deduct tax at the rate of one per cent. from the payment made or credited to the supplier (hereafter in this section referred to as “the deductee”) of taxable goods or services or both, where the total value of such supply, under a contract, exceeds two lakh and fifty thousand rupees:

Provided 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 be, Union territory of registration of the recipient.

 Explanation.––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.

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

(3) 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.

(4) 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 one hundred rupees per day from the day after the expiry of such five days period until the failure is rectified, subject to a maximum amount of five thousand rupees.

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

(6) 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 sub-section (1) of section 50, in addition to the amount of tax deducted.

(7) The determination of the amount in default under this section shall be made in the manner specified in section 73 or section 74.

(8) 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: Provided that no refund to the deductor shall be granted, if the amount deducted has been credited to the electronic cash ledger of the deductee.

RELEVANT NOTIFICATIONS ISSUED UNDER GST Act, 2017 REGARDING TDS:

Notification no. 33/2017 Central Tax, Dated 15.09.2017

Notification no. 50/2018 Central Tax, dated 13.09.2018

Notification no. 57/2018 Central Tax, dated 23.10.2018

Notification no. 61/2018 Central Tax, dated 05.11.2018

Notification no. 73/2018 Central Tax, dated 31.12.2018

REGISTRATION AS TAX DEDUCTOR UNDER GST Act, 2017:

• That the existing deductors of STDS/TCS under VAT Act did not automatically migrated to GST.
• That no threshhold limit is provided or prescribed by the GST Act, 2017 to get registration as Tax Deductor.
• Section 24(vi) of the CGST Act, 2017 provides for compulsory liability for registration for the deductors of TDS.
• A deductor in GST will be required to get registered and obtain a GSTIN [Goods & Services Tax Identification Number] as a TDS deductor even if he is separately registered as a supplier.
• That there is no need of PAN to get registration as Tax Deductor, the person can apply for registration through TAN issued by Income Tax Department.

WHO ARE LIABLE TO GET REGISTRATION AS TAX DEDUCTOR AND TO DEDUCT TDS UNDER GST ACT, 2017:

(a) a department or establishment of the Central Government or State Government; or

(b) local authority; or

(c) Governmental agencies; or

(d) such persons or category of persons as may be notified by the Government on the recommendations of the Council,

The Government through Notification no. 50/2018 Central Tax, dated 13.09.2018 notified the following entities and required them to deduct TDS as per GST Act:

(a) an authority or a board or any other body, ‑

(i) set up by an Act of Parliament or a State Legislature; or

(ii) established by any Government,

with fifty-one per cent. or more participation by way of equity or control, to carry out any function;

(b) Society established by the Central Government or the State Government or a Local Authority under the Societies Registration Act, 1860 (21 of 1860);

(c) public sector undertakings.

WHO ARE NOT LIABLE TO DEDUCT TDS UNDER GST ACT, 2017:

Tax is not liable to be deducted at source in the following cases-

• When Goods/Services are supplied from a Public sector undertaking to another Public sector undertaking, whether or not a distinct person.
• When supply of goods and/or services takes place between one person to another person specified in clauses a,b,c & d of Sec.51 (1) of CGST Act.
• However, 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. This can be explained in the following situations.

a) Supplier, place of supply and recipient are in the same state. It would be intra-state supply and TDS (Central plus State tax) shall be deducted. It would be possible for the supplier (i.e. the deductee) to take credit of TDS in his electronic cash ledger.

b) Supplier as well as place of supply are in different states. In such cases, integrated tax would be levied. TDS to be deducted would be TDS (Integrated tax) and it would be possible for the supplier (i.e. the deductee) to take credit of TDS in his electronic cash ledger.

c) Supplier as well as place of supply are in State A and recipient is located in State B. The supply would be intra-State supply and Central tax and State tax would be levied. In such case, transfer of TDS (Central tax + State tax State B) to the cash ledger of the supplier (Central tax + State tax of State A) would be difficult. So in such cases, TDS would not be deducted. Thus, when both the supplier as well as place of supply are different from that of recipient, no tax deduction at source would be made.

RATE OF TDS UNDER GST:

• There are 4 types of taxes in GST – Integrated Tax (IGST), Central Tax (CGST) and State Tax (SGST) / Union territory Tax (UTGST).
• The deduction in case of intra-State supply (supply within a State) will be CGST & SGST (in case of Union territory without legislature, it will be CGST & UTGST), and the deduction in case of inter-State supply (supply from one State to another) will be IGST.
• Rate of deduction of tax is @ 2% [i.e. 1% each on CGST & SGST/UTGST component] on the amount paid/credited in respect of intra-State supply & @ 2% [as IGST] on the amount paid/credited in respect of inter-State supply.

TDS RETURN :

• That the TDS deductor is required to collect taxes, deposit the taxes in Govt. Treasury and also file return as prescribed under the GST law.
• That TDS deductor is required to file return online at GST portal by filling up Form GSTR-7.
• That TDS deductor is required to deposit tax and file return electronically before the 10^th day of suceeding month from the end of the month in which tax has been deducted to avoid interest and late fees as prescribed in GST law.
• If the deductor fails to deposit tax or make short payment of tax it will attract interest under GST Act.
• If the deductor is fail to file return or file late return then it will attract GST late fee of ₹ 100/- of CGST and ₹ 100/- of SGST/UTGST, which can be charged subject to maximum amount of ₹ 5000/- of SGST/UTGST and ₹ 5000/- of CGST.

TDS CERTIFICATE:

• That as per GST Act, 2017 the deductee is required to issue a TDS certificate to the deductee supplier.
• That the deductor is requierd to issue TDS certificate generating electronically at GST portal in FORM GSTR-7A, within 5 days from the date of filing of return in Form GSTR-7.
• If the deductor fails to issue TDs certificate as required under law within prescribed time it will attract late fee of ₹ 100/- of CGST and ₹ 100/- of SGST/UTGST, which can be charged subject to maximum amount of ₹ 5000/- of SGST/UTGST and ₹ 5000/- of CGST.

REFUND OF EXCESS/ERRONEOUS TDS UNDER GST:

• That provision of section 54 of CGST Act, 2017 is deals with refund of excess or erroneous TDS deducted or deposited by deductor under GST Act.
• If the amount deducted by deductor is already reflected in the electronic cash ledger of deductee then no refund can be claimed by deductor under the law.