Tax Deducted at Source (TDS) under Goods and Service Tax (GST) in India - GST In India

Wednesday, 21 February 2018

Tax Deducted at Source (TDS) under Goods and Service Tax (GST) in India


Tax Deducted at Source (TDS) under Goods and Service Tax (GST)
We know about TDS under Income Tax 1961 and the relevant penalties thereon. However, in Central Excise Act 1944, Finance Act 1994 there is no concept of TDS. Only Sales Tax law (Value Added Tax) of the State Governments has the provision relating to TDS in respect of works contract. The rates of TDS are different from state to state, in some of the states it is as high as 8%.


Tax Deduction at Source (TDS) is a system, which was initially introduced by the Income Tax Department. It is one of the modes/methods to collect tax, under which, certain percentage of amount is deducted by a recipient at the time of making payment to the supplier. It is a source of regular revenue for Government. It facilitates sharing of responsibility of tax collection between the deductor and the tax administration. It acts as a powerful instrument to prevent tax evasion and expands the tax net, as it provides for the creation of an audit trail.

TDS under GST regime
Who are liable to deduct TDS under GST regime?
Section 51 of the CGST Act, 2017 prescribes the authority and procedure for ‘Tax Deduction at Source. The Government may order the following persons (the deductor) to deduct tax at source:
(a) A department or an establishment of the Central Government or State Government, or

(b) Local authority, or

(c) Governmental agencies, or

(d) Persons or category of persons as may be notified, by the Central or a State Government on the recommendations of the GST Council.

Is Registration as TDS deductors under GST regime mandatory?
Yes, Each TDS deductor has to mandatorily register without any threshold limit. The deductor has a privilege of obtaining registration under GST without requiring PAN. He can obtain registration using his Tax Deduction and Collection Account Number (TAN) issued under the Income Tax Act, 1961.

Relaxation in requirement of the registration for certain deductors

Under what conditions TDS is not deducted TDS under GST regime? 
Basic exemption limit for TDS under GST regime is Rs. 2.5 lakhs for total value of supply under a contract. For the purpose of the above total value of supply, taxes like CSGT, SGST, UGST, IGST and cess indicated in the invoice should not be considered.
(Note : Individual supplies may be less than Rs. 2,50,000/-, but if contract value is more than Rs. 2,50,000/-, TDS will have to be deducted.)

TDS is not to be deducted if the location of supplier and place of supply both are same but it is different from that of the recipient.
[eg. Location of Supplier as well as the place of supply are State A and the location of recipient is State B. The supply would be considered as intra-State supply and Central tax and State tax would be levied. In such cases, transfer of TDS (Central tax + State tax of State B) to the cash ledger of the supplier (Central tax + State tax of State A) would be difficult. So TDS would not be deducted.]

What is the rate of TDS under GST regime?
The tax would be deducted at a uniform rate of 1% from the payments made or credited to the supplier of taxable goods or services or both, where the total value of such supply, under a contract, exceeds Rs. 2.5 lakhs(excluding the amount of Central tax, State tax, Union Territory tax, Integrated tax and cess indicated in the invoice).

When TDS is to be deducted under GST regime ? 
As per section 51(1) of GST Act,2017, TDS will be deducted at the time of making payment to the supplier. Unlike Income Tax Act where the TDS is suppose to be deducted either at the time of making the payment or credited to account whichever is earlier. 

What is the due date of depositing the TDS under GST regime ?
The amount of TDS deducted should be deposited by the deductor within 10 days from the end of the month. Above TDS should be deposited either to Central Govt. or State Govt. depending upon the type of transaction involved. The deductor would be liable to pay interest if the tax deducted is not deposited within the prescribed time limit.

What is the time limit to furnish the return under GST regime ?
As per the provision of section 39(3) Return of TDS is to be filed by the deductor in Form GSTR-7 within 10 days after the end of the month in which deduction is made.
The details of TDS are furnished by the deductor in FORM GSTR-7 which should be made available to each of the suppliers in Part C of FORM GSTR-2A electronically through the Common Portal. The said supplier may include the same in FORM GSTR-2. The amounts deducted by the deductor will be reflected in the GSTR-2 of the supplier (deductee). The supplier can take this amount as input credit in his electronic cash re