TDS @ 2% is required to be deducted on payment made to the supplier of taxable goods or services of both where the value of such supply under a contract exceeds Rs. 2.5 Lakhs. Thus, the individual supplies may be less than 2.5 Lakhs but if the contract value is more than Rs. 2.5 Lakhs – TDS @ 2% would be required to be deducted.
For the purpose of the computation of the contract value, the following shall be excluded
- Central GST
- State GST
- Union Territory GST
- Integrated GST
It is important to note that these provisions have not yet been implemented and would be implemented in future from date as notified by the Govt. The date for implementation of provisions of GST has not yet been announced by the Govt.
Is TDS on GST 1% or 2%?
1% TDS is required to be deducted under both the CGST and the SGST Act and therefore the total TDS to be deducted is 2%. In case of an inter-state transaction, IGST would be levied and 2% TDS would be levied in this case as well.
For example: Suppose a supplier makes a intra-supply i.e. supply within the same state worth Rs. 10,00,000 to a recipient and CGST @ 9% and SGST @9% is required to be paid. The recipient while making the payment of Rs. 1,000 to the supplier shall deduct 1% TDS under the CGST Act and 1% TDS under the SGST Act and therefore the total TDS Deducted would be 2% which in the above case would be Rs. 20,000.
In case the above supplier makes an inter-state supply, TDS @2% i.e Rs. 20 would be required to be deducted and deducted with the Govt.
The value for the purpose of computing the amount of TDS shall not include 18% GST.
The purpose of introduction of TDS on GST is only to enable the govt to have a trail of transactions and to monitor and verify the compliance.
Who is required to deduct TDS on GST
As per Notification No. 33/2017 Central Tax dated 15th Sept 2017, the following class of persons are required to deduct TDS on GST if the Contract Value is more than Rs. 2.5 Lakhs:-
- An authority or board or any other body with 51% or more participation by way of equity or control
- Set up by an Act of Parliament or a State Legislature; or
- Established by any Govt.,
- Society established by the Central Govt. or State Govt. or a Local Authority under the Society Regulations Act, 1860
- Public Sector Undertakings
Apart from the above 3 class of persons, no other class of persons have been notified by the Govt. However, the govt has the power to notify such persons or category of persons on which such provisions of TDS under the GST Regime would get applicable.
Currently, only the above 3 class of persons are required to comply with the provisions of TDS in GST Regime and these provisions would be applicable from 18th Sept 2017.
When is TDS on GST required to be deducted
TDS on GST is required to be deducted only if the contract value exceeds Rs. 2.5 Lakhs. Moreover, it is required to be deducted only in the following 2 cases:-
- Supplier, Recipient & Place of Supply are in the same state. This would be considered as a case of Intra-state supply and TDS should be deducted in this case.
- Supplier, Recipient & Place of Supply are in different states. In such cases, IGST would be levied as this is a case of Inter-state supply.
The supplier shall take the credit of the TDS in the above 2 cases in his electronic cash ledger.
TDS on GST is not required to be deducted in the following case irrespective of the contract value:-
- Supplier as well as place of supply are in State A and the recipient is located in State B. The supply would be intra-state supply and CGST & SGST would be levied. In such cases, transfer of TDS (Central Tax + State Tax of B) to the cash ledger of the supplier (Central Tax + State Tax of A) would be difficult. Therefore, in this case, TDS would not be deducted.
- Recommended Read: Rules for Determination of Place of Supply under GST Norms
Deposit of GST TDS and TDS Certificate
The amount of TDS deducted should be deposited with the govt by the deductor by the 10th of the next month in Form GSTR 7 through the online portal www.gst.gov.in. The deductor would be liable to pay interest if the tax deducted is not deposited within the prescribed time limit as mentioned above.
A TDS Certificate would also be required to be issued by the deductor (the person who is deducting the tax i.e. the recipient) in GSTR 7A to the deductee (the supplier whose payment is being deducted) within 5 days of depositing the TDS with the Govt.
If the TDS Certificate is not issued within 5 days from the date of deposit with the Govt., the deductor would be liable to pay late fees of Rs. 100/ day. However, the late fees levied should not be more than Rs. 5,000.
The TDS so deducted would also be visible to the suppliers in Form GSTR 2A and the supplier can include and avail the same in GSTR 2. The supplier can take this amount as credit in his electronic cash register and use the same for payment of tax or any other liability.
Penalty for not complying with provisions of TDS on GST
|1.||TDS not deducted||Interest to be paid along with the TDS amount; else the amount shall be determined and recovered as per law.|
|2.||TDS Certificate not issued or delayed beyond the prescribed period of 5 days||Late Fee of Rs. 100 per day subject to a maximum of Rs. 5000.|
|3.||TDS Deducted but not paid to the Govt. or paid later than 10th of the succeeding month.||Interest to be paid along with the TDS amount, else the amount shall be determined and recovered as per law.|
|4.||Late filing of TDS Return||Late fees of Rs. 100 per day for each day for which the failure continues subject to a maximum of Rs. 5000.|
Any excess or erroneous amount deducted and paid to the Govt shall be dealt for refund under Section 54. However, if the deducted amount is already credited to the electronic cash ledger of the supplier, the same shall not be refunded.