GST TDS - Rate, Applicability & Payment

Tax Deducted at Source which is most commonly known as TDS is the system through which certain percentage of tax is collected at the source of the income. Certain Government Department, Local Authorities, Agencies and Public Sector Undertaking are required to deduct GST TDS. TDS acts as a powerful tool towards reduction of tax evasion. In this article, we would try to understand the concept of GST TDS as provided under GST law. Section 51 of the CGST Act, 2017, contains the provisions of Tax Deducted at Source (TDS) under GST. As per the said provisions, following list of persons are liable to deduct tax at source under GST;

A department or establishment of the Central Government or State Government;
Local authority;
Governmental agencies;
Such person or category of persons as may be notified by the Government on the recommendations of the Council.

On the basis of rights available to the Government (refer point no. 4 above), the Government has held following additional category of person liable to deduct tax at source, vide notification no. 33/2017 dated 18.09.2017:

An authority or a board or any other body which has been set up by Parliament or a State Legislature or by a government, with 51% equity (control) owned by the government;
A society established by the Central or any State Government or a Local Authority and the society is registered under the Societies Registration Act, 1860;
Public Sector Undertakings.

TDS Rate under GST

The TDS rate under GST is 2%. In other words, the deductor has to deduct tax at source @ 2% from the payment made or credited to the deductee for supply of taxable goods or services or both. Click here to find GST rate for all goods and services.

GST Registration

It is compulsory to obtain GST registration for the person who are liable to deduct TDS as per the provisions of section 51 of CGST Act, 2017. Threshold exemption limit is not applicable to such persons. Unique feature of GST registration, for person liable to deduct TDS, is that PAN is not mandatory while obtaining GST registration, however, GST registration can be obtained on the basis of existing Tax Deduction and Collection Account Number (TAN).

Liability to Deduct TDS under GST

GST TDS is required to be deducted when total value of supply, under a contract, exceeds and an amount of INR 2,50,000/-. For the purpose of GST TDS, the value of supply shall be an amount excluding the amount of central tax, state tax, union territory tax, integrated tax and cess as reflected in the invoice.

GST TDS – Non-Applicable Transactions

When location of the supplier and the place of supply is in a State or Union Territory, which is different from the State, or as the case may be, Union Territory of the registration of the recipient, than in such case no TDS should be deducted. In simple words, when both the supplier and the place of supply are different from the recipient, no tax deduction at source would be made.

Payment of GST TDS

The deductor of Tax Deducted at Source is required to deposit the amount so deducted to the Government by the 10th day of the succeeding month in which the tax is so deducted. The payment of TDS should be made to the respective Government i.e. IGST and CGST should be deposited to Central Government, whereas, SGST should be deposited to State Government.

GST TDS Certificate

TDS certificate in FORM GSTR-7A is to be issued by the deductor to the deductee within a period of 5 days of crediting the amount to the Government. In case the deductor fails in issuing the certificate in required time limit, he would be liable to pay a late fee of INR 100/- per day from the expiry of the 5th day till the date certificate has been issued. Maximum amount of late fee payable would be INR 5,000/- i.e. late fee payable amount will not be more than INR 5,000/-.

GST TDS Credit

Tax Deduction at Source deducted by the deductor and deposited to the Government shall be reflected in the electronic cash ledger of the deductee (i.e. supplier). The deductee would be able to use the said amount against payment of tax or any other amount.

GST Return Filing

The person deducting TDS (i.e. deductor) is liable to file GST return in FORM GSTR-7 within a period of 10 days from the end of the month.

GST TDS Refund

When TDS has been deducted erroneously or has been deducted in excess of the amount actually to be deducted, than, in such case deductor or deductee can claim for refund of such excess / erroneous TDS. However, if the excess / erroneous amount so deducted is already credited to electronic cash ledger of the deductee than no refund is available. Know more about GST refund.