• Team VRAC

Tax deduction at source (TDS) under section 51 of Central Goods and Service Tax Act, 2017 (CGST Act)

1. What is effective date of enforcement of TDS provisions under GST?

The Government has mandated tax deduction at source (TDS) under section 51 of CGST Act with effect from 1st October, 2018 (Notification No. 50/2018 – Central Tax dated 13th September, 2018).

2. Who is required to deduct TDS under GST?

TDS is to be deducted by the following person who shall be known as “the deductor” for the purpose of GST TDS provisions:

a. Department or establishment of the Central or State Government

b. Local Authority

c. Governmental Agencies

d. Authority or a board or any other body, set up by an Act of Parliament/State Legislature or established by any Government with fifty-one per cent or more participation by way of equity or control, to carry out any function.

e. Society established by the Central Government or the State Government or a Local Authority under the Societies Registration Act, 1860 (21 of 1860)

f. Public sector undertakings

Thus, all the Drawing and Disbursement Officers (DDO) who play the role of deductor shall register themselves with the Common portal and get the GST Identification Number (GSTIN).

2. When is TDS under GST to be deducted?

TDS is to be deducted when the total value of supply under contract exceeds Rs. 2,50,000. The value of supply shall be the amount excluding CGST, SGST, IGST, UTGST and Cess indicated on the invoice.

Example 1: Mr. Saket Agarwal enters into contracts with Public sector undertaking for providing GST consultancy services of Rs. 2,00,000 and another contract of Rs. 1,50,000 for providing management consultancy services. No TDS shall be deducted by the PSU since there is two separate contracts and either of the contract value does not exceed Rs. 2,50,000.

Example 2: Mr. Saket Agarwal enters into a single contract with PSU for providing GST Consultancy services of Rs. 5,00,000. Since, the contract value is greater than Rs. 2,50,000, TDS shall be deducted by PSU while making payment to Mr. Saket Agarwal.

3. What is rate of TDS under GST?

TDS shall be deducted @ 2% on the value of supply of goods or services. If the transaction is Intra-State supply then TDS @ 1% CGST and 1% SGST. If the transaction is Inter-State Supply then TDS @ 2% IGST.

4. Is there any exception where no TDS under GST is required to be deducted?

TDS under GST will not be applicable if the location of supplier and the place of supply is in a State or Union Territory which is different from the State or Union Territory of registration of the recipient (Government) of goods or services.

Example 1: Delhi Government enters into a contract with hotel Grand Leela located in Maharashtra for renting of hall for Rs. 10,00,000. Even if the contract value is more than Rs. 2,50,000, no TDS will be deducted by Delhi Government while making payment to Hotel Grand Leela.

Location of Supplier: Maharashtra

Place of Supply: Maharashtra

Registration of Recipient: Delhi

Example 2: M/s Ace Technology e-Service providers located in Maharashtra enters into a contract with Delhi Government to supply Digital Signature tokens for Rs. 10,00,000. TDS shall be deducted by Delhi Government while making payment to M/s Ace Technology.

Location of Supplier: Maharashtra

Place of Supply: Delhi

Registration of Recipient: Delhi

5. When TDS to be deposited with the Government?

Tax deducted by deductor shall be paid to the Government within 10 days from the end of the month in which tax is deducted. Deductor shall pay interest along with the tax deducted if fails to pay the tax deducted to the Government within the time specified.

The deductee shall claim credit of the tax deducted in his electronic cash ledger

6. What is TDS Certificate under GST?

TDS Certificate under GST is given in Form GSTR 7A. Deductor shall furnish TDS Certificate to the deductee mentioning the value on which tax deducted, TDS amount and other such particulars. If the deductor fails to furnish the certificate within 5 days of crediting to the Government the amount of deducted tax, then the deductor shall be liable to pay late fee of Rs. 100 per day from the day after the expiry of such 5 days until the day the failure is rectified subject to maximum of Rs. 5,000. The certificate shall be made available electronically to the deductee on the common portal on the basis of the return furnished by the deductor.

Form GSTR 7A

7. Which GST Return to be filed?

Every registered person i.e. DDO shall furnish GSTR 7 electronically for the month in which tax is deducted within 10 days after the end of such month. The details furnished by the deductor in the return filed shall be available to the deductee in Part C of GSTR 2A or GSTR 4A on the common portal after the due date of filing of FORM GSTR 7. It is to be noted that the return cannot be filed until full payment of the tax liability.



CA. Saket Agarwal

Partner – Indirect Taxation

+91 9619510210