TDS means tax deducted at the source, and it’s the system through which certain tax percentage is deducted straight from the income. All government agencies both state and local level are mandated to deduct GST TDS. TDS helps to curb tax evasion issues.
In this article, we would explain the GST TDS concept as stated under GST law.
The CGST Act, 2017, Section 51 comprise of the provisions of TDS under GST. Based on the regulations, the following are those tasked with the responsibility to deduct tax at source under GST;
- A unit of the Central or State Government;
- Governmental agencies;
- Local authority;
- Individual or group appointed by the Government on the Council’s recommendations.
Based on the available rights to the Government (refer to the 4th point above), the Government has tasked the following category of person with the duty to deduct tax at source, vide notification no. 33/2017 dated 18.09.2017:
- A body or board set up by Parliament or a State Legislature with 51% equity owned by the government;
- An established society by the Government either Central, State or Local is registered under the Societies Registration Act, 1860;
- Public Sector Activities.
TDS Rate under GST
The rate of TDS under GST is 2%. This means that the person assigned needs to deduct the 2% tax at source from the payment made for goods and services supplied.
Registering for GST is mandatory for anyone eligible to pay TDS according to the provisions of section 51 of CGST Act, 2017. Threshold exemption limit does not apply to such persons.
PAN is no compulsory for those liable for TDS deductions which are registering for GST. However, one can obtain GST registration based on an existing Tax Account Number (TAN).
Liability to Deduct TDS under GST
TDS on GST will be deducted when total supply value exceeds INR 2, 50,000. For GST TDS purpose, the supplied value shall exclude that the (central, state, union territory, integrated tax) and cess amount as shown in the invoice.
GST TDS – Non-Applicable Transactions
When the supplier’s location and the place of supply are within a State or Union Territory, which separate from the State, or Union Territory of the recipient’s registration, for such situation no TDS would be deducted. To summarize, when the supplier and supply location are different from that of the recipients, no TDS would be made.
GST TDS Payment
The person responsible for enforcing the TDS is required to deposit the deducted amount to the Government coffers by the 10th day of the following month after deduction. The TDS payment should be remitted to the respective Government, i.e., IGST and CGST go into Central Government account while SGST is deposited to State Government.
GST TDS Certificate
The deductor will issue a TDS certificate in FORM GSTR-7A to the taxpayer within five days after remitting the deducted amount to the Government. If the deductor fails to issue the certificate within the stipulated time, such persons will be held responsible and compelled to pay a late fee of INR 100 daily from the expiry date of 5th till the date the certificate is finally issued. The maximum late penalty is INR 5,000.
GST TDS Credit
TDS deducted and deposited to the Government shall appear in the supplier’s electronic cash ledger. The deductee would be able to make use of such funds for tax payment any other
GST Return Filing
The person deducting TDS should file for GST return in FORM GSTR-7 within a ten-day period from the month end.
GST TDS Refund
If TDS is deemed to be erroneously deducted or deducted more than the authorized amount, then, the supplier or deductee can file for a refund of such erroneous TDS. However, such erroneous fund has been credited to the deductee electronic cash ledger then there won’t be any refund made.