Tax Deducted at Source (TDS) under Goods and Services Tax (GST)

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Provision under the law:

Section 51 of the CGST Act, 2017 deals with the authority and procedure for TDS under GST regime.

Who will act as deductor?

The following persons maybe ordered to act as deductor to deduct TDS under GST:

  1. Any department or establishment of Central Government or State Government; or
  2. Local authority; or
  3. Government Agencies; or
  4. Such persons or category of persons as may be notified by the Government on the recommendations of the GST Council.

What will be the rate of TDS under GST?

TDS will be deducted at the rate of 1% of payment made to supplier of taxable goods or services. The value on which TDS will be deducted will not include any CGST, SGST or IGST or any CESS.

When will TDS be deducted? (Conditions for TDS under GST):

If the total value of supply under a contract exceeds Rupees 2.5 lakhs (excluding the amount of CGST, SGST and all Cesses) then TDS will have to be deducted. Please note that the value of an individual invoice may be less than Rupees 2.5 lakhs but if the contract value exceeds Rupees 2.5 lakhs then TDS will have to be deducted.

Exception to the above: No TDS shall be deducted if the location of supplier and place of supply is in a particular state or union territory and the recipient of goods or service is registered under GST in a different state or union territory.

Registration of the Deductor:

A TDS deductor under GST has to be compulsorily registered under Section 23. However, a deductor will have the benefit of availing registration without quoting PAN. He can obtain registration by quoting TAN (Tax Deduction and Collection Account Number) issued by Income Tax Department.

Deposit of TDS to Government:

Any TDS deducted in a particular month is to be deposited to the Government account within 10th of the succeeding month. Delay in deposition will lead to levy of interest.

TDS certificate:

TDS Certificate in Form GSTR 7A is to be issued by the deductor to the deductee within 5 days of crediting the amount to the Government. Failure to do so will attract a late fee of Rupees 100 per day up to a maximum of Rupees 5000.

TDS Return:

The deductor is required to file TDS return in Form GSTR 7 within 10 days from the end of the month in which the TDS was deducted. In case of unregistered deductee (i.e. supplier), the name of the deductee is to be mentioned in the return instead of his GSTIN. Registered deductee can take credit of the TDS made in his electronic cash register and use the same for payment of tax or any other liability under GST.

Dealing with errors:

Any errors in amount deducted and paid to the Government shall be considered for refund under Section 54 of the CGST Act, 2017. However if the deducted amount is credited to the deductor’s electronic cash ledger, it will not be refunded.

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