TDS under GST – A Complete Guide

As we all know that GST has subsumed various indirect taxes. There were no TDS provisions under Central Excise and Finance Act. But under GST there are some specific provisions regarding TDS. In this article, we are going to discuss the various provisions of TDS under GST. Let’s start with this.

TDS under GST

Under GST, TDS is to be deducted at the rate of one percent on the payments which are made to the supplier. TDS is to be deducted on the supply of goods and services where the value of supply exceeds the value of Rs.2,50,000.

Note: The individual supply may be less than Rs. 2,50,000 but if the contract value is above Rs. 2,50,000 then TDS is to be deducted.

Who is Responsible to Deduct TDS under GST?

The individuals or entities can act as TDS deductors under GST-

  • Establishment or Department of the State or Central Government, or
  • Government Agencies, or
  • Local Authorities, or
  • Individuals or entities notified as tax deductors by State or Central Government on Council’s recommendation

Calculation of value of supply for the purpose of TDS under GST

The tax which is indicated in the invoice shall not be included in value of supply for the purpose of calculation of value of supply for the purpose of deduction of TDS i.e. TDS should not be deducted on the CGST, IGST or SGST part of the invoice.

Payment time limit of TDS under GST

The tax which is deducted at source should be deposited to the government within 10 days of the end of the month in which the tax is deducted.

Government here means Central Government where IGST and CGST is to be deposited and State Government where SGST is to be deposited.

Applicability of TDS deduction under GST

  • If the supplier, place of supply and recipient are in same state, it is called Intra-state supply and TDS must be deducted.
  • If the supplier and place of supply are in different states, IGST will be levied and TDS is to be deducted.
  • If the place of supply and supplier are in one particular state (Punjab) and recipient is in another state (Haryana), it is termed as inter-State supply. In this case, Central Tax, State Tax will be applicable. Process of TDS (Central Tax plus State tax of the Haryana) transferring to electronic cash ledger of the supplier (Central Tax plus State tax of the Punjab) is not so easy. Therefore, in this case TDS deduction will not take place.

TDS implications under GST

The implications under GST can be explained as:

  • The deductor must be registered under section 23.
  • It is mandatory to obtain the TAN as issued by the income tax department.
  • The amount of TDS deducted should reflect in the electronic cash ledger of the supplier.
  • The TDS deducted must be deposited by the 10th of the next month from the month in which the TDS was deducted and the same should be reported in GSTR-7.
  • Short deduction or Non-deduction and non-payment or short payment of TDS is an Offence and interest is to be paid along with the TDS amount or the amount may be determined as per the law.
  • The deductor has to issue a TDS certificate to the supplier within 5 days of deduction of TDS. The certificate must contain the contract value, amount of TDS and rate of amount and the amount of appropriate govt.

Note: The TDS certificate should be in Form GSTR- 7A

  • The TDS certificate if not issued by the deductor within 5 days or there is delay in filling the TDS return, deductor will have to pay 100 rupees fine every day from the expired date for issuance of certificate but max up to Rs. 5,000.

Claim by the deductee

The deductee can claim the benefit of tax deducted through the electronic cash ledger. The amount deducted and which is reported in GSTR-7 will be shown in electronic cash ledger.

TDS Return

In case of unregistered supplier, supplier’s name should be mentioned instead of GSTIN. The Part-C of the Form GSTR- 2A should contain all details of the tax deducted which should be available to all the suppliers. The supplier may include the amount deducted in GSTR-2 form.

Refund of TDS

In case any excess amount is deducted and the same has been paid to the government then refund under section 54 of CGST act can be claimed. But in a case the amount deducted has been credited to electronic cash ledger refund can’t be claimed but can be used for the payment of tax.

About the Author
Arpit Goyal is pursuing CA and & also working as an article assistant in Gurgaon. He has an immense interest in Taxation. He loves to use technology to spread knowledge about taxation & accounts.

Categories GST

4 thoughts on “TDS under GST – A Complete Guide”

  1. Dear Shri Arpit ji

    I have a doubt for applicability of TDS, it is on all bills of material purchased over Rs.2.50 lacs or services. That about we are deducting TDS u/s 194 of the IT Act.

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