What is TDS under GST?
TDS, or Tax Deducted at Source, in the Goods and Services Tax (GST) system involves deducting tax when the buyer of goods or the recipient of a service makes a payment to the supplier. The deducted TDS amount needs to be submitted to the GST department.
When are TDS provisions applicable under GST?
The provisions related to TDS under GST are governed by Section 51 of the CGST Act, 2017.
According to this section, TDS applies to Government, Government undertakings, and other specified entities when making contractual payments exceeding Rs. 2.5 Lakhs for the total value of the supplied goods or services.
What is the rate of TDS?
When making payments under contracts, the applicable Government/authority should deduct 2% of the total payment (1% CGST and 1% SGST or 2% IGST) and deposit it into the relevant GST account.
What is the threshold for TDS?
TDS needs to be deducted when the value of the taxable supply of goods or services or both exceeds Rs. 2.5 lakhs under a contract.
On which amount TDS is to be calculated?
TDS is calculated on the total transaction value, excluding GST.
Who falls under the category of deductors for TDS under GST?
Deduction under Section 51 is applicable to the following:
(a) Departments or establishments of the Central Government or State Government
(b) Local authorities
© Governmental agencies
(d) Individuals or categories of individuals as notified by the Government based on the recommendations of the Council.
Is a separate registration necessary for TDS under GST?
Yes. Entities like government departments or public sector undertakings involved in commercial activities must register as “TAX DEDUCTOR,” even if they are already registered as taxpayers.
However, a government department engaged in commercial activities requiring regular business must obtain registration as a normal taxpayer based on PAN (where a bank account is not mandatory).
If the department is not involved in any taxable supply of goods and/or services, registration is only required as a deductor of tax at source, based on TAN/PAN.
How does the deductor pay TDS under GST?
The deductor must deposit the deducted TDS amount to the government by the 10th of the following month using Form GSTR 7 on the official GST portal at www.gst.gov.in.
Is TDS applicable if goods or services received are exempted?
No, TDS is not required in such cases.
How can the deductee claim TDS while paying the taxes?
To claim TDS, the deductee needs to file the “TDS and TCS Credit Received” form. This form allows the deductee to accept or reject the reflected TDS online.
Upon filing the form, the accepted TDS amount will be credited to the deductee’s electronic cash ledger, which can be used to pay GST liabilities.
When should I file the “TDS and TCS Credit Received” form?
Filing the “TDS and TCS Credit Received” form does not have a specific due date or late filing fees. However, it is advisable to submit it before the tax payment deadlines:
- By the 20th of the following month before filing GSTR-3B, OR
- By the 18th of the month following every quarter for those filing GSTR-4.
This form can be filed monthly and exclusively through the online platform. It is recommended to submit the “TDS and TCS Credit Received” form before filing Form GSTR-1 or GSTR-3B to ensure timely compliance with GST regulations.
Conclusion
TDS under GST serves as a mechanism for deducting tax at the source, ensuring smooth transactions and compliance. Governed by Section 51, it applies to specified entities making contractual payments exceeding Rs. 2.5 Lakhs.
With a clear rate and threshold, deductors, including government entities, require separate registration. The deducted TDS is paid using Form GSTR 7, promoting timely compliance.
Importantly, the deductee can claim TDS by filing the “TDS and TCS Credit Received” form, providing a transparent process.
While there’s no specific due date for filing, it is recommended to submit it before tax payment deadlines for seamless GST compliance.
