TDS on GST – Tax Deducted at Source (TDS) under GST
TDS on GST: Under Goods and Service Tax, Tax Deducted at Source (TDS) is a tax payable to the government by the receiver on goods/services at certain percentage on the amount. It is deducted at the time of payment above the prescribed amount under a single contract at a specified rate and paid to the government. It is paid in addition to the GST.
Lets Take an example of TDS provisions under GST :
Selling price of 10 Laptops @ Rs. 30,000/- each (Taxable Value) =Rs. 3,00,000
GST will apply on it as it apply in other cases of registered seller. If the rate of tax on Laptop is 18%
CGST will be @9% = Rs. 27,000
SGST will be @ 9%= Rs. 27,000
Total Invoice Value will become = Rs. 3,54,000
Now, If suppose the above supply is done to Public Sector Undertaking (PSU) TDS will be deducted by PSU at the time of payment. As the amount of payment is in excess of threshold limit Rs. 2,50,000.
TDS is calculated on the base (taxable value) = Rs. 3,00,000/-
TDS rate in GST = 1% (CGST) and 1% (SGST)
Calculation is made excluding the tax amount (Rs. 3,54,000 (-) Rs. 54,000)
In the given example TDS calculation would be
Rs. 3,00,000 x 1 % = Rs. 3000 (CGST)
Rs. 3,00,000 x 1%. = Rs. 3,000 (SGST)
Q. Who are liable to deduct TDS under GST law?
- A department or an establishment of the Central Government or State Government; or
- Local authority; or
- Governmental agencies; or
- Such persons or category of persons as notified by the Government.
As per the latest Notification dated 13th September 2018, the following entities also need to deduct TDS-
- 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 (PSU).
Q. When will the liability to deduct TDS arise?
Ans: TDS is deducted on payments made to the supplier of taxable goods and/or services under an individual contract when the total value of supply exceeds Rs. 2,50,000.
No deduction of Tax is required when the location of supplier and place of supply is different from the State of the registration of the recipient. For example, If supplier is registered in Maharashtra and goods are supplied in same state but the buyer is registered in Delhi , then no liability to deduct TDS will not arise.
The above concept is summarized in the table below-
Location of Supplier
Place of Supply
Location of Recipient
Q. What is the rate of TDS?
Ans: The rate of TDS under GST is 2 percent. IGST TDS @2% or CGST TDS @1% and SGST TDS @1%.
Q. What will be the Value of supply on which TDS deducted?
Ans: The value of supply is the amount excluding the tax indicated on the invoice. In Other words, TDS is not deducted on the CGST, SGST or IGST mentioned of invoice.
For Instance, Supplier X makes a supply of Rs. 10000 to B. The rate of GST is 12%. When B pays X then B will pay Rs. 10000 (worth of Supply) + Rs 1200 (GST) to A and Rs. 200 (RS. 10000*2%) as TDS to the government. Therefore, TDS is not deducted on the tax element (GST) of a transaction.
Q. Whether TDS provisions are applicable to taxable supplies received from suppliers registered under composition scheme?
Ans: Yes, Deductor is required to deduct TDS w.r.t to payment made for the taxable supplies received from registered person whether the supplier is registered as normal taxpayer or under composition scheme.
Q. What is the benefit of TDS to the deductee (Supplier)?
Ans: TDS deducted will be automatic reflect in the electronic ledger of the deductee (supplier), once the deductor files returns. The deductee can claim credit the TDS so deducted in his electronic cash ledger of this tax deducted and use it for payments of other taxes.
Q. What is the difference between income tax TDS and GST TDS?
Ans: In Brief, TDS relates to deduction of income tax and deposit the same against their PAN Number. It is part of Income Tax Act. Income Tax is a direct Tax. In Income Tax there are different limits for different kind of payment.
GST is a separate law for the collection of indirect tax. Both GST and TDS are totally different and their return filings are also separate. In GST regime, Government notified the applicability of TDS from 1st Oct 2018.
Q. Is TDS applicable on Payments under reverse charge mechanism (RCM) category e.g. I have to make a payment to an Advocate and GST is payable under RCM for this payment. I want to know whether TDS under GST is applicable on such payment if taxable amount exceeds 2.5 lakh?
Ans: TDS provisions under GST are applicable only to government department, local authority and PSU.
Q. We are a PSU, when we have to deduct TDS on GST. For example, Service received / goods purchased in December 2018 and payment made in January 2019. Whether TDS under GST has to be applicable on payment basis or due basis?
Ans: TDS is deducted either when payment is made or credited to the deductee whichever is earlier.
Q. I am doing Government Contracts the government has deducted 2% of TDS in my GST Number and I want to know how to avail the TDS in my GSTR 3B the party told me to accept the TDS amount in TDS column of GST return?
Ans: There will be an automatic reflection in the electronic ledger of the deductee (supplier) once the deductor files TDS Return in GSTR 7. The deductee can claim credit in his GSTR 3B (TDS column) of this tax deducted and use it for payments of other taxes.
Q. Is TDS on GST liablity ariseses on supply from one Govt. department or PSU to another Govt. department or PSU?
Ans: CBIC has exempted supply of Goods and Services from PSU to PSU from applicability of provisions relating to TDS vide Notification No. 61/2018 – Central Tax Dated 5th November, 2018.
Q. If the government department is doing payment of 3 lakhs then will it be deducting both TDS in GST as well as TDS in Income Tax?
Ans: Yes, when both are applicable under different act.
Q. The customer has deducted 2% TDS on GST. Payment came after 2 days in January but the Invoice is of December. When should we claim the TDS amount at the time of filing GSTR 3B for Dec or for the month of January?
Ans. In the return of December month you should accept the TDS Entry in Part-C of GSTR-2A. After that TDS amount get credit to your electronic cash ledger.
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