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Tax Deducted at Source (TDS) under GST

The background of Tax Deducted at Source (TDS) or Tax Collected at Source (TCS) in Goods and Services Tax (GST) goes to concept of TDS & TCS in Income Tax Act. This concept of TDS & TCS is introduced by government to track transactions & ultimately prevent tax evasion. TDS or TDS is an advance tax and is an early source of revenue for government.

Who is Required to Deduct TDS under Goods and Services Tax (GST)?

Liability to deduct TDS is limited to selected class of person or persons and its not all applicable on all entities.

Following are the entities liable to deduct TDS under GST:

  • A department or establishment of Central Government or State Government, example Department of Health
  • Local Authority, for example MCD
  • Government Agencies

Such persons or categories as notified by the government, which as per latest notification are as follows as:

  • 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 participation by way of 51% equity or control by the government.
  • A society established by the Central or any State Government or a Local Authority registered under the Societies Registration Act, 1860.
  • Public sector undertakings (PSUs)

What is Rate of TDS under Goods and Services Tax (GST)?

In case of Interstate supply rate of TDS under GST is 2% under head IGST
In case of Intra-state supply i.e. within state TDS is deducted at the rate of 1% under head CGST & 1% under head SGST

When is TDS Liable to be Deducted under GST?

TDS is liable to be deducted when value of supply under a contract in respect of a supply exceeds Rs. 2,50,000/-. For determining value of supply for TDS under GST, taxes leviable under GST shall be excluded.

When is TDS under GST Required to be Deposited with Government?

TDS is required to be deposited with government by 10th of next month in which TDS is liable to be deducted. Form GSTR7 is used to pay TDS under GST via online GST portal. For example, if TDS is deducted in on 1st of January, 2019, then due date of deposit same with government is 10th February, 2019.

Which Returns are Filed for TDS under GST?

GSTR 7 is used by deductor to file return of TDS under GST. Due date of filing return of TDS under GST in form GSTR 7 is 10th of next month. Form GSTR 7 consists of details pertaining to deductor and deductee, period for which return is filed, amount paid to deductee, amount of TDS, details of interest and late fee (if applicable) and refund claimed among other things.

How Certificate of Deduction for TDS under GST is Issued?

TDS Certificate is issued by deductor (person liable to deduct and deposit tax) to deductee (supplier whose payment is deducted as a TDS & deposited with government to his credit) in Form 7A. Form 7A is issued through GST portal within 5 days of depositing tax.
Form 7A consists of details of deductee & deductee, contract value, amount paid, rate of deduction among other things.
Late fee is applicable for not furnishing TDS certificate in Form 7A at the rate of Rs. 100/- per day starting from the day after expiry of 5 days as above mentioned till the time failure continues, subject to a maximum of Rs. 5,000/.

What is Late Fee for Default in furnishing Return of TDS under GST?

Late fee at the rate of Rupees 100 per day subject to a maximum of Rupees 5000 is liable to be paid for default in furnishing TDS Return of any month calculated from the day immediately succeeding the due date. If TDS under GST is paid after due date of same, interest at the rate of 18% per annum is also applicable for the period under default.

Documents for Online Filing of TDS Under GST

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PAN of Directors/Subscribers to Memorandum

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ID Proof of Directors/ Subscribers to Memorandum – DL/Voter ID/ Passport (Any one)

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Address Proof of Directors/ Subscribers to Memorandum – Latest 2 month – Telephone/Mobile/Electricity bill/Bank Statement (Any one)

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Photo of Directors/ Subscribers to Memorandum

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Email ID of Directors/Subscribers to Memorandum

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Mobile Number of Directors/Subscribers to Memorandum

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Place of Business Address Proof with NOC (Ownership/ Rent Agreement/ Lease deed/ Consent Letter

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Electricity bill of place of business (Latest 2 months)

FAQ

Whether registration for TDS under GST is mandatory even if GSTIN is allotted?

Yes, the entities who are going to deduct tax as a tax deductor they are government entity/ public sector undertaking etc. should get the registration as a ‘tax deductor’ even though already registered as ‘Tax Payer’

What is TDS return?

Depositing the tax amount along with the deductor should filed TDS return.TDS return is given to IT department in quarterly depositing. It is mandatory to deposit TDS return on time.

What is TDS rate in GST?

As per law, 1% rate should be deducted and deposited from the payments made or credited to the supplier of taxable goods and services as may be notified by the central or state government on the recommendation of GST council.

TDS certificate is required to be issued ?

Yes, a deductor should issue the certificate to the deductee in Form GSTR-7A within 5 days decided by the government.

Who can deduct TDS in GST?

The TDS is required to be deducted by the person at 2% of the total value of supply under a contract exceeds RS. 2,50,000. The deduction is to be made on the payment of supplier taxable goods or services or both.