Provisions related to TDS/TCS in GST Regime

Provisions related to TDS TCS in GST Regime

In order to make GST simpler and to ensure smooth transition of GST roll out, many of the GST provisions were differed to later dates. Provisions related to TDS/TCS were also kept in abeyance till June 30. Later on it was further differed till 30 September 2018. Finally these provisions are applicable from 1st October 2018. In this article we shall focus on the frequently asked questions related to TDS/TCS under GST.

Who is liable to deduct TDS under GST?

Following type of persons are liable to deduct TDS under GST:

  • A department or an establishment of the Central Government, State Government or Local authority;
  • Governmental agencies;
  • An authority or a board or any other body which has been set up by Parliament or a State Legislature or by a government, with 51% equity ( control) owned by the government;
  • A society established by the Central or any State Government or a Local Authority and the society is registered under the Societies Registration Act, 1860;
  • Public sector undertakings;
  • Such persons or category of persons as may be notified by the Government.

When does TDS need to be deducted?

  • TDS needs to be deducted on payments made to the supplier of taxable goods and/or services, where the total value of such supply, under an individual contract exceeds the defined threshold limit.

What is the threshold limit for deduction of TDS?

  • TDS needs to be deducted where the total value of supply under an individual contract exceeds Rupees two lakh fifty thousand (Rs. 2,50,000).
  • No deduction of Tax is required when the location of supplier and place of supply is different from the State of the registration of the recipient.

What is the rate of TDS?

  • TDS must be deducted at the rate of 2% on the total value of supply.

Registration for TDS deductors:

  • A person who is liable to deduct TDS has to compulsorily register and there is no threshold limit for this.
  • The registration under GST can be obtained without PAN and by using the existing Tax Deduction and Collection Account Number (TAN) issued under the Income Tax Act. Thus it can be said having TAN is mandatory.

When and to whom should the TDS be paid?

TDS shall be paid within 10 days from the end of the month in which tax is deducted. The payment shall be made to the appropriate government which means: 

  • The Central Government in case of the IGST and the CGST.
  • The State government in case of the SGST.

How will the Value of supply on which TDS shall be deducted be considered?

  • The value of supply on which TDS is to be deducted shall be the basic value of the invoice excluding GST charged on such invoice.
  • Hence no TDS shall be deducted on the amount of CGST, SGST or IGST charged in the invoice.

Filing TDS Return:

  • The person deducting tax is required to file a TDS return in form GSTR-7 within 10 days from the end of the month.
  • When GSTIN of the unregistered supplier is not available, their name can be mentioned. The system reflects these filled-in details in the electronic ledger of the supplier.

Issue of TDS certificates under the GST law:

  • As in Income Tax Law, here also the person deducting tax has to issue the TDS certificate in form GSTR-7A to the concerned person within 5 days of depositing the tax to the government.
  • Failure to do so will make the person liable to pay a late fee of Rs. 100 per day up to a maximum of Rs. 5000.

Refund of TDS:

  • If any excess amount is deducted and paid to the government, a refund can be claimed as this is not the tax amount that the government has a right on.
  • However, if the deducted amount is already added to the electronic cash ledger of the supplier, such amount cannot be refunded.
  • Deductee can claim a refund of tax subject to refund provisions of the act.

Who is liable to collect TCS under GST?

  • Provisions of TCS applies to E-Commerce companies.
  • E-commerce companies will now be required to collect up to 1 per cent TCS while making any payment to suppliers under the Goods and Services Tax (GST).
  • States too can levy up to 1 per cent TCS under State GST (SGST) law.

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