The full form of TDS stands for tax deducted at source (TDS). As per section 51, this provision is meant for government undertakings and other notified entities making contractual payments where the total value of such supply under a contract exceeds rs.2.5 lacks to suppliers. In this blog, we will discuss TDS on GST, in detail.
TDS or Tax Deducted at Source is income tax reduced from the money paid when making specified payments such as rent, commission, professional fees, salary, interest, etc. by the persons making such payments. Usually, the person receiving income is liable to pay income tax.
While making any payments under such contracts, the concerned Government/authority shall deduct 2% of the total payment made (1% under each Act and 2% in case of
IGST) and remit it into the appropriate GST account.
INTRODUCTION
GST is a digitalized form of VAT where you can also track the goods & services. Both VAT and GST have the same taxation slabs. It is a comprehensive, multistage, destination-based tax: comprehensive because it has subsumed almost all the indirect taxes except a few state taxes.
the person making the payment is liable to deduct the tax at a specified rate and deposit it with the government. TDS Deductee: Is the one who receives the balance money after the deduction of tax at the source or the person and deposited on his/her behalf to the government by the Deductor.
To ensure compliance with TDS and TCS provisions, taxpayers are required to deduct and deposit tax within the specified time limits and file regular returns. Failure to comply with TDS and TCS provisions may attract penalties, interest, and even prosecution. Therefore, taxpayers need to understand the compliance requirements and ensure timely compliance to avoid adverse consequences.
SCOPE
Once logging into the GST portal, the taxpayer is facilitated by TDS and TCS credit received which could be filed by all the taxpayers who are successful in making a specified limit of sales on the e-commerce platforms and not necessary but are indulged in any works contract with Government departments.
The concept of TDS was introduced to collect tax from the very source of income. As per this concept, a person (deductor) who is liable to make a payment of a specified nature to any other person (deductee) shall deduct tax at source and remit the same into the account of the Central Government.
Under the Income Tax Act, Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) are important compliance requirements for taxpayers. TDS is the mechanism through which tax is deducted at the source of income, such as salaries, interest, rent, and professional fees before the recipient receives the income.
On the other hand, TCS is the mechanism through which tax is collected at the source of income, such as the sale of goods and services. Both TDS and TCS play a significant role in the tax revenue collection of the government and are important tools to prevent tax evasion. Read below about the TDS and TDS liability in detail.
TDS ON GST TRANSACTIONS
TDS/TCS credit received is a facility that is provided to all such taxpayers from whom tax is either deducted or collected at source by the respective registered TDS deductor or TCS collector.
Now, after deduction or collection, the deductor or collector is supposed to file the GSTR-7 form or GSTR-8 form respectively before the 10th of the succeeding month. In the next step, the deductee is required to accept or reject the TDS/TCS credit on the GST portal by just filing the TDS/TCS Credit Received tab.
Thus, to get the benefit of GST, the deductee is required to file the ‘TDS/TCS credit received’ tab on the GST portal. The portal is designed such that the deducted amount gets reflected in Cash Ledger which could be further used for the payment of the balance amount of tax after the ITC has been cleared.
LIABILITY
TDS stands for Tax Deducted at Source. As per the Income Tax Act, if any person makes a payment to another person or entity for various specified types of income, such as salary, interest, commission, rent, etc., then they are required to deduct a certain percentage of tax at the time of making such payment. The person who deducts such tax at source is called a “deductor,” and the person whose income is being paid is called the “deductee.” The TDS liabilities under the Income Tax Act are as follows:
In addition to interest, the deductor may be subject to penalties for non-compliance with TDS provisions. Therefore, deductors should ensure timely compliance with TDS provisions under the Income Tax Act.
CONCLUSION
It facilitates the sharing of responsibility for tax collection between the deductor and the tax administration. Ensures a regular inflow of cash resources to the Government. It acts as a powerful instrument to prevent tax evasion as well as expand the tax net.
TDS full form is Tax Deducted at Source. Under this mechanism, if a person (deductor) is liable to make payment to any other person (deductee) will deduct tax at source and transfer the balance to the deducted.
Tax Deducted at Source, or TDS is the amount of income tax reduced by the person responsible for paying our salaries, rents, educational fees, and more as per rates prescribed by the Government. Tax Deduction at Source acts as a means of stable revenue for the Government and helps manage their expenses.
This Blog is written by Kratika Pal.
