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Tax Deducted at Source (TDS) under GST

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What is TDS?

TDS stands for Tax Deducted at Source. TDS is one of the modes to collect tax under which a certain amount is deducted, at a prescribed rate, by a recipient at the time of making payment to the supplier. The concept of TDS ensures a regular inflow of tax collection to the Government.

In the GST regime, TDS provisions are given under Section 51 of the CGST Act and Rule 66 of the CGST Rules.

Who is required to deduct TDS under GST?

The following category of persons are required to deduct TDS on GST:

  • A department or establishment of the Central Government or State Government
  • Local authority
  • Governmental agencies
  • An authority or board or any other body with 51% or more participation by way of equity or control

(i) Set up by an Act of Parliament or a State Legislature; or

(ii) Established by any Government.

  • Society established by the Central or any State Government or a Local Authority under the Societies Registration Act, 1860
  • Public sector undertakings
  • Such persons or category of persons as may be notified by the Government on the recommendations of the Council

When is TDS required to be deducted on GST?

It is mandatory for the abovementioned persons to deduct TDS on GST from payments made to the supplier if the total value of supply of taxable goods and/or services under a contract exceeds Rs 2,50,000 exclusive of tax & cess.

Standard rate of deduction

TDS would be deducted at the rate of 2% on the net value of taxable supplies. Further, In the case of an intra-state supply, 2% TDS will be bifurcated into two parts i.e 1% under CGST and 1% under SGST. 

For example, Shyam enterprises make a supply within the same state worth Rs 20,00,000 to a government agency and CGST @ 9% and SGST @9% are required to be paid. The government agency while making the payment of Rs 20,00,000 to Shyam enterprises shall deduct 1% TDS i.e. Rs 20,000 under the CGST Act and 1% TDS i.e. Rs 20,000 under the SGST Act and therefore the total TDS deducted would be Rs 40,000.

Due date to deposit TDS deducted on GST

The amount of tax deducted should be deposited to the Government account by the deductor by the 10th of the next month. if the deductor fails to deposit the TDS deducted within the prescribed time, interest would be charged on late payment.

What is a TDS certificate?

1. A TDS certificate is required to be issued by the deductor in Form GSTR-7A to the deductee within 5 days of depositing the tax to the government.

2. GST portal will automatically make GSTR-7A available to the deductee on the basis of the TDS return (GSTR-7) filed.

3. If the deductor does not furnish the certificate within 5 days, the deductor has to pay a late fee of Rs 100 per day for a period of delay. The maximum limit of the late fee is Rs 5000.

4. The content of the TDS certificate (GSTR-7A) are given as under:

  • TDS Certificate No.
  • GSTIN of deductor
  • Name of deductor
  • GSTIN of deductee

(a) Legal name of the deductee

(b) Trade name, if any

  • Tax Period in which tax deducted and accounted for in GSTR-7
  • Details of supplies
  • Amount of tax deducted

Refund on excess TDS deduction

The deductor or the deductee can claim a refund of excess deduction /wrong deduction under section 54. However, if the deducted amount is already credited to the electronic cash ledger of the supplier, the same shall be refunded.

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CA Anand Singh

CA Anand Singh

I am a practising Chartered Accountant with 6 years of experience in Direct and Indirect Taxation, FEMA, Corporate Law and Audit etc.