TDS Procedure under GST Act
GST Payment regime:
In the GST regime, for any intra-state supply, taxes to be paid are the Central GST (CGST, going into the account of the Central Government) and the State GST (SGST, going into the account of the concerned State Government). For any inter-state supply, tax to be paid is Integrated GST (IGST) which will have components of both CGST and SGST. In addition, certain categories of registered persons will be required to pay to the government account Tax Deducted at Source (TDS). Here, we will try to understand procedures related to TDS under revised model law.
What is TDS?
Sec 46 of revised GST law: (1) notwithstanding anything contained to the contrary in this Act, the Central or a State Government may mandate, –
(a) a department or establishment of the Central or State Government, or
(b) Local authority, or
(c) Governmental agencies, or
(d) such persons or category of persons as may be notified, by the Central or a State Government on the recommendations of the Council,
[hereinafter referred to in this section as “the deductor”], to deduct tax at the rate of one percent from the payment made or credited to the supplier [hereinafter referred to in this section as “the deductee”] of taxable goods and/or services, notified by the Central or a State Government on the recommendations of the Council, where the total value of such supply, under a contract, exceeds five lakh rupees.
This provision is meant for Government and Government undertakings and other notified entities making contractual payments in excess of Rs.5 Lakhs to suppliers. While making such payment, the concerned Government/authority shall deduct 1% of the total payable amount and remit it into the appropriate GST account (either of central government or state government as may be applicable to deductor).
Value of supply on which TDS shall be deducted:
The value of supply shall be taken as the amount excluding the tax indicated in the invoice. This means TDS shall not be deducted on the CGST, SGST or IGST component of invoice.
To whom TDS shall be paid:
TDS shall be paid within 10 days from the end of the month in which tax is deducted. The payment shall be made to appropriate government. As per sec 2(11) of revised GST model law appropriate Government means the Central Government in case of the IGST and the CGST, and the State government in case of the SGST. Further following procedural compliances shall be done by deductor:
- Such deductors needs to get compulsorily registered under section 23 read with Schedule IV of revised Model GST Law.
- Such deductor shall have TAN issued under income tax act to get registered under the act.
- They need to remit such TDS collected by the 10th day of the month succeeding the month in which TDS was collected and reported in GSTR 7.
- The amount deposited as TDS will be reflected in the electronic cash ledger of the supplier.
- They need to issue certificate of such TDS to the deductee within 5 days of deducting TDS mentioning therein the contract value, rate of deduction, amount deducted, amount paid to the appropriate Government and such particulars as may be prescribed.
- Non deduction / short deduction / non payment or short payment of TDS is on offence under the act for which a minimum penalty of Rs 10000/- is prescribed under the act.
How deductee can claim benefit of TDS:
The deductee shall claim credit, in his electronic cash ledger, of the tax deducted and reflected in the return of the deductor furnished under sub-section (3) of section 34, in the manner prescribed. Any amount deducted as TDS and reported in GSTR – 7 will automatically reflected in electronic cash ledger.
Refund of excess amount deducted:
- In case amount is claim by deductee in electronic cash ledger:
Refund to deductor is not possible such case. However, deductee can claim refund of tax subject to refund provisions of the act. Practically it is not possible to claim any erroneous deduction of TDS by deductor.
- In case amount is not so claimed by deductee.
Refund of erroneous excess TDS deducted is possible to deductor subject to refund provision and procedure of the act.