TDS under GST: A Complete Guide

TDS under GST stands for Tax Deducted at Source, which is a mechanism under the Goods and Services Tax (GST) system in India. It requires the recipient of goods or services to deduct a certain percentage of tax at the time of making payment to the supplier. This deducted tax is then deposited with the government. It helps ensure that the government receives its tax revenue in a timely manner.

According to the latest Notification dated 13th September 2018, entities such as departments or establishments of the Central Government or State Government, local authorities, governmental agencies, and certain other notified persons are required to deduct TDS under GST. Additionally, entities like authorities, boards, bodies set up by the government with 51% government equity, societies registered under the Societies Registration Act, 1860, and public sector undertakings also need to deduct TDS.

Rate of TDS deduction

Under GST, TDS is deducted at a rate of 2% on payments exceeding Rs. 2,50,000 for taxable goods and/or services. However, if the supplier’s location and place of supply are different from the recipient’s state of registration, no TDS deduction is required. The deductor is the person who deducts the tax at the source and makes the payment to the government. The deductee is the person from whose payment the tax is deducted.

Registration for TDS under GST

To register for TDS under GST, you need to follow these steps:

1. Visit the official GST portal.
2. Click on the “Services” tab and select “Registration”
3. Choose “New Registration” and select “Tax Deductor (TDS/TCS)” as the type of taxpayer.
4. Fill in the required details such as PAN, email address, and mobile number.
5. Enter the OTPs received on your email and mobile to verify your details.
6. Fill in the necessary information about your business, including the state and district of registration.
7. Upload the required documents, such as PAN card, address proof, and bank account details.
8. Submit the application and wait for the application to be processed.
9. Once approved, you will receive your TDS registration certificate.

Remember to comply with the TDS provisions and fulfill your obligations as a tax deductor.  GST registration is mandatory for TDS on GST to ensure proper compliance with tax regulations and facilitate seamless tax collection and reporting. It helps track and reconcile tax deductions made by the deductor. While PAN is not necessary, TAN is required for TDS on GST.

Documents to Maintain for TDS on GST

• Statement showing Invoice-wise payment and TDS deduction
• Serially numbered PO/WO copies for audit
• Copy of Challan for TDS payment to Govt.
• Suppliers’ Invoice copy for TDS deduction
• TDS Returns & Certificates
• Invoice/Bills for CESC supervision charges
• Challan for goods movement in Job work
• You need to maintain your job worker Bill for receipt of repaired goods
• Purchase Bills if ITC credit taken
• Keep these documents for 5 years from filing the Annual return

What is the procedure for deposits on TDS?

To deposit the TDS amount for the previous month, you need to make the payment before the 10th of the next month using a Challan on the GST Portal. Remember, you cannot use your Input Tax Credit (ITC) account for this payment.

After deducting TDS, you should prepare a party-wise statement for uploading the data, which includes all the invoices for the month.

Then, file the monthly TDS Return in Form GSTR-7 before the 10th of the next month. Once you’ve filed the return, the TDS amount will be credited to the supplier’s GST account in cash, which they can use for their sales.

Don’t forget to generate and issue the TDS Certificate to the supplier in GSTR-7A by the 15th of the next month. Keep in mind that if there’s a delay in payment, you’ll need to pay interest at 18%. Additionally, there’s a late fee of Rs. 200 per day (CGST: Rs. 100 and SGST: Rs. 100), up to a maximum of Rs. 10,000, for late filing of the return and late issuance of certificates.

Consequences of Not Deducting TDS for Contract above Rs.2.50L

• The tax dept will recover TDS from CESC
• Interest at 18% and Penalty will be imposed
• The normal penalty is up to 25% but can be up to 100% for suppression of fact
• Dept can recover up to 5 years from the date of filing the annual return (up to 7 years)
• The supplier is not responsible for the recovery of the TDS
• CESC is responsible for Tax, Interest & Penalty
• Govt can freeze the company bank account, recover from vendors, and detain property
• The person in charge may be prosecuted for recovery
• Every person in a company is responsible

Certificate of TDS

The deductor should issue a TDS certificate in GSTR 7A to the deductee within 5 days of depositing the TDS. Non-compliance can result in a late fee of Rs 100 per day, up to a maximum of Rs 5000.

Exceptions to tax deduction

The tax deduction is not required in the following situations under TDS in GST:

• Total value of taxable supply less than or equal to Rs. 2.5 Lakh under a contract
• Contract value greater than Rs. 2.5 Lakh, but the value of taxable supply is less than or equal to Rs. 2.5 Lakh
• Receipt of services or goods that are exempted or not leviable under GST
• Payment made for goods where tax was required to be deducted under VAT Law before 01.07.2017, but payment made on or after 01.07.2017
• Activities or transactions specified in Schedule III of CGST/SGST Acts 2017
• Payment made to an unregistered supplier
• Payment relates to the “Cess” component.

Can you claim a refund under TDS?

You can claim a TDS refund under GST, you just need to follow the refund provisions of the act. The excess deducted amount can be claimed as a refund. However, if the amount is already added to the supplier’s electronic cash ledger, it cannot be refunded by the deductor. The deductee can claim the refund.

This Blog is written by Sarwashree Bawari.