WIRC Bulletin - January 2019

TDS UNDER GST

TDS UNDER GST

 Pratik Sudhir Shah
Mobile : 9819122318 • E-mail : [email protected]

The concept of TDS is a simple concept incorporated under GST with the intent to tap the possible chances of revenue leakage and Prevent Tax Evasion. Under the Scheme the recipient deducts tax at the notified rate from the payment due to the supplier and deposits the tax into the government treasury on behalf of the supplier. When the supplier files return, he can claim credit of the tax paid by the recipient on his behalf. Section 51 of the CGST Act deals with the issue of TDS.

  1. Effective Date
  • Notification No. 33/2017 – Central Tax dated 15.09.2017 was issued by the CBIC to enable registration of tax deductors.

 

  • However, Government suspended the applicability of TDS till 30.09.2018.
  • Now, it has been decided that the TDS provision would be made operative with effect from10.2018.

 Persons Liable to Deduct TDS under GST Law

  • Department or establishment of the Central or State Government, or
  • Local authority, or
  • Governmental agencies, or
  • Entities where 51% Equity or control owned by Govt
  • Registered Societies of Central or State Govt and Local Authority
  • Public sector undertakings

 

III. Rate of TDS to be Deducted under GST Law

  • The maximum rate of TDS is 2% under GST, 1% CGST and 1% SGST or IGST of 2%

 

  1. When TDS Deduction is required to be made in GST?
  • As per Sec 51 of CGST Act TDS shall be deducted where the total value of supply of taxable goods or services or both under a contract, exceeds two lakh and fifty thousand rupees.

 

  • 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.

 

  • 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.
  1. Conditions for and amount of TDS Deduction
  • Total value of taxable supply > Rs.2.5 Lakh under a single contract. This value shall exclude taxes & cess leviable under GST.
  • If the contract is made for both taxable supply and exempted supply, deduction will be made if the total value of taxable supply in the contract > Rs.2.5 Lakh. This value shall exclude taxes & cess leviable under GST.
  • Where the location of the supplier and the place of supply are in the same State/UT, it is an intra-State supply and TDS @ 1% each under CGST Act and SGST/UTGST Act is to be deducted if the deductor is registered in that State or Union territory without legislature
  • Where the location of the supplier is in State A and the place of supply is in State or Union territory without legislature – B, it is an inter-State supply and TDS @ 2% under IGST Act is to be deducted if the deductor is registered in State or Union territory without legislature – B

VI When Tax Deduction is not required to be made under GST?

  • Total value of taxable supply ≤ Rs. 2.5 Lakh under a contract.
  • Contract value > Rs. 2.5 Lakh for both taxable supply and exempted supply, but the value of taxable supply under the said contract ≤ Rs. 2.5 Lakh.
  • Receipt of services which are exempted. For example services 10 exempted under notification No. 12/2017 – Central Tax (Rate) dated 28.06.2017 as amended from time to time.
  • Receipt of goods which are exempted. For example goods exempted under notification No. 2/2017 – Central Tax (Rate) dated 28.06.2017 as amended from time to time.
  • Goods on which GST is not leviable. For example petrol, diesel, petroleum crude, natural gas, aviation turbine fuel (ATF) and alcohol for human consumption.
  • Where a supplier had issued an invoice for any sale of goods in respect of which tax was required to be deducted at source under the VAT Law before 01.07.2017, but where payment for such sale is made on or after 01.07.2017 [Section 142(13) refers].
  • Where the location of the supplier and place of supply is in a State(s)/UT(s) which is different from the State / UT where the deductor is registered.
  • All activities or transactions specified in Schedule III of the CGST/SGST Acts 2017, irrespective of the value.
  • Where the payment relates to a tax invoice that has been issued before 01.10.2018.
  • Where any amount was paid in advance prior to 01.10.2018 and the tax invoice has been issued on or after 01.10.18, to the extent of advance payment made before 01.10.2018.
  • Where the tax is to be paid on reverse charge by the recipient i.e. the deductee.
  • Where the payment is made to an unregistered supplier.
  • Where the payment relates to “Cess” component.

VII. Date of Deduction of TDS

  • On payment to the supplier or credit to the account of supplier. {Section 51(1)}

VIII. Credit of TDS to the Supplier

  • Supplier can utilise TDS deducted by deductor which will be automatically reflected in its Electronic Cash ledgerupon furnishing TDS return by deductor.{Section 51(5)}

Example:

  1. Refund of TDS under GST
  • Refund to Deductor {Section 51(8)}

> Can claim excess or erroneous refund if TDS is not already added to the electronic cash ledger of the supplier.

  • Refund To Deductee {Section 51(8)}

Refund application of excess balance in Electronic Cash Ledger shall be filed.

  • Time Limit for Refund

(Section 54 (1) + Explanation 2 to Section 54)

 

Online application shall be filed with 2 Years from the date of payment of Tax/TDS.

  1. Time Limit for payment of TDS
  • The amount deducted to be paid & return GSTR 7 to be filed by 10th of the following month.
  • Details of deduction shall be made available electronically to each of the supplier [Means at GSTIN level] In Part C of R. 2A or R. 4A and On the common portal.
  • Deductee shall claim Credit in Electronic Cash ledger [Sec 51(5)].
  1. What is Due Date for TDS Certificate
  • TDS certificate to be furnished to the deductee by 15th of the next month as per Rule 66(3)
  • GST TDS Certificate shall be made available to the deductee, electronically on common portal in R 7A

XII. Interest, Penalty, Fees under GST TDS

  • Late fee of Rs 100/- under CGST (Similar under SGST), maximum Rs 5000/-
  • If failed to furnish TDS certificate as per Rule 66(3)
  • It means, late fees cannot be levied if GST TDS Certificate is not been issued due to portal or other issue.
  • For non-payment of GST TDS by 10th to attract 18% PA interest.

 

XIII. Situations / Contracts on which we are required / not required to deduct TDS

Situations / Contracts Deduction Required Remarks
Finance Department is making a payment of Rs.3 Lakh to a supplier of ‘printing & stationery Yes Where the total contract value of taxable supply is more than Rs.2.5 Lakh deduction is mandatory
Education Department is making payment of Rs.5 Lakh to a supplier of ‘printed books and printed or illustrated post cards’ where payment for books is Rs.2 Lakh and Rs.3 Lakh is for other printed or illustrated post cards Yes, deduction is required in respect of payment of Rs. 3 Lakh only i.e. for payment in respect of taxable supply. Books are exempted goods; no deduction is required in respect of supply of books. However, payment involving ‘printed or illustrated post cards’ is for supply of taxable goods and value of such supply is > Rs.2.5 Lakh; so deduction is required
Health Department executed a contract with a local supplier to supply “medical grade oxygen” of Rs.2.6 Lakh (including GST) and is making full payment No Total value of supply as per the contract is Rs.2.6 Lakh (including GST). Tax rate is 12%. So, taxable value of supply (excluding GST) stands at Rs.2.6L x 100/112 = Rs.2.32 L < Rs.2.5 Lakh Hence, deduction is not required.
Municipal Corporation of Kolkata purchases a heavy generator from a supplier in Delhi. Now, it is making payment of Rs.5 Lakh and IGST @18% on Rs.5 Lakh for such purchase. Yes, deduction is required @2% Deduction is required in case of inter-State supply and if the value of taxable supply under a contract exceeds Rs.2.5 Lakh.
Fisheries Department is making a payment of Rs.10 Lakh to a contractor for supplying labour for digging a pond for the purpose of Fisheries. No This supply of service is exempt in terms of Sl. No. 3 of notification No.12/2017 – Central Tax (Rate) dated 28.06.2017 and hence deduction is not required
Municipality is making payment of Rs.5 Lakh to a supplier in respect of cleaning of drains where the value of supply of goods is not more than 25% of the value of composite supply. No This supply of service is exempt in terms of Sl. No. 3A of notification No.12/2017 – Central Tax (Rate) dated 28.06.2017 as amended by notification no. 2/2018- Central Tax (Rate) dated 25.01.2018 and hence deduction is not required.
Government school is making a payment of Rs.3 Lakh to a supplier for supply of cooked food as mid-day meal under a scheme sponsored by Central/State Government. No This supply of service is exempt in terms of Sl. No. 66 of notification No. 12/2017 – Central Tax (Rate) dated 28.06.2017 as amended and hence deduction is not required
     

 

Conclusion

  • The Government aims to plug every gap that could have led to evasion of tax and so have remained the intention when provisions of TDS were rolled out. However keeping a provision like TDS limited only to a certain categories of assesses and that too only to the government departments or its bodies raises everybody eyebrows. Considering the fact that No TDS Implication is attracted on Exempt Supplies or on procurements from Un-Registered Dealers, it is not known how many irregularities arising will attract the attention of the Government.

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