Tax Deducted at Source TDS Mechanism under GST

Tax Deducted at Source TDS Mechanism under GST Presented by PAMS Professional Group 1

Content � Introduction (page no. 3 -4) � Who is liable to deduct TDS (page no. 5) � When TDS to be deducted (page no. 6) � TDS rate and Taxable Value (page no. 7) � When TDS not to be deducted (page no. 8 -12) � Registration and payment of TDS and return (page no. 13) � TDS Certificate and refund (page no. 14) 2

Introduction � TDS stands for Tax deduction at Source. � The concept of TDS was initially introduced in the Income Tax Act and has now been introduced in GST as well. � GST TDS is different from TDS under Income Tax. � The purpose of introduction of TDS on GST is only to enable the Govt. to have a trail of transactions and to monitor and verify the compliance. � The provisions of GST TDS are applicable w. e. f. 01 Oct 2018 (Notification No. 50/2018 dated 13 Sep 2018). � 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. 3

Introduction � If a transaction is covered under both GST and Income Tax Act, separate deductions will be made, separate returns, and separate TDS certificates will be issued under respective Act. � Just like in the Income Tax Act, the person deducting the TDS is required to deposit the TDS with the Govt. and issue Form 16 and Form 16 A, similarly under GST Act as well, the person deducting the TDS would be required to deposit the same with the Govt. by the 10 th of the next month and issue Form GSTR 7 A to the person whose TDS has been deducted. � The concept of TDS under GST is a fairly new concept and has initially been implemented only on a small no. 4 of assessee.

Who is Liable to Deduct TDS � As per Section 51 of CGST Act following persons are liable to deduct GST TDS from the payment made of taxable Goods & services w. e. f 01 Oct 2018: ◦ ◦ ◦ (a) Central or State Government Departments (b) Local Authorities (c ) Government Agencies (d) Entity controlled by Government companies. (e) An Authority/ Board/ any other body set up by an Act of Parliament / State L egislature with 50% or more participation by way of equity or control to carry out any function. ◦ (f) Society established by Central Government/State Government/Local Registration Act 1860. ◦ (g) Public Sector Undertakings. ◦ Note: No TDS on the supply made between any of the above persons. 5 Say, a local body providing service to central govt. Notification No.

When TDS to be Deducted � TDS need to be deducted if total contract is of value exceeding Rs 2. 50 lakhs exclusive of tax & cess even if an individual invoice is less that Rs 2. 50 Lakhs. � Que 1: Is TDS to be deducted for 2 separate contract of 1. 5 lakh each? � Ans: No, the provision of TDS is applied separately in every contract. � Que 2: Is TDS to be deducted on GST amount? � Ans: No, the value of supply shall be taken as the amount for TDS deduction. I repeat again, TDS should not deducted on GST amount. � Example: Under a contract, Mr. Ram of Kolkata provides service to Local Authority (Kolkata) for a value of Rs. 300000 (Excl. GST) over a period of 3 months. At the end of 1 st Month Mr. Ram bills for Rs. 1, 18, 000 (3 lakh/3 month + 18% GST). 6

TDS Rate and Taxable Value � 2% on the payment made or credited to the supplier (goods/services). Supply TDS % Inter-state 2% IGST Intra-state 1% SGST + 1% CGST � CGST, SGST/UTGST, IGST and Cess levied under GST has to be excluded for the purpose of determining total value. Contract Value is to taken and not Individual Invoice Wise for Determination of Deduction Of TDS. � For example Mr. A supplied certain machinery to PUBLIC SECTOR UNDERTAKING under an contract. : -The total value of contract was Rs 2, 49, 999 plus GST as applicable. Tax is not liable to be deducted in such cases as contract value excluding taxes is below Rs 2, 50, 000. 7

When TDS not to be deducted � TDS on GST is only required to be deducted where the payment made or credited to the supplier is done by the earlier mentioned category of persons. � There are certain exceptions to this and in the following cases, TDS would not be deducted even if the payment is made by the above mentioned persons: � Contract Value does not exceed Rs. 2. 5 Lakhs � Eg 1: Mr. Arjun enters into a contract of Rs. 2 Lakhs with a Public Sector Undertaking to provide Income Tax Advisory. He also enters into a contract worth Rs. 1. 5 Lakhs to provide GST Advisory. � In the above mentioned example – the total value of services provided is Rs. 3. 5 Lakhs which is more than Rs. 2. 5 Lakhs. However, in this case – the provisions of TDS on GST would not be applicable as the value of each contract is less than Rs. 2. 5 Lakhs. 8

When TDS not to be deducted � Eg 2: Mr. Karan enters into a single contract to provide services worth Rs. 3 Lakhs. He receives Rs. 1. 5 Lakhs as advance on 1 st Oct 2018 and the balance Rs. 1. 5 Lakhs on 1 st May 2019. � The provisions of TDS on GST will get applicable as the contract value is more than Rs. 2. 5 Lakhs. � Therefore, while determining the applicability of TDS on GST – it is the individual contract value which would be considered irrespective of the total no. of contracts. � Location of Recipient is different from Location of Supplier and Place of Supply � TDS on GST would not be applicable if the Location of Recipient is different from the Location of Supplier and the Place of Supply. 9 � This can be explained with the help of an example.

When TDS not to be deducted For e. g. : Delhi Govt. enters into a contract worth Rs. 5 Lakhs with Radisson Haryana to rent space for the purpose of conducting an event in their hotel. In this case, Radisson hotel will levy Haryana SGST and CGST. � Place of Supply – Haryana � Location of Supplier – Haryana � Location of Recipient – Delhi � The provisions of TDS would not apply in this case irrespective of the contract value as the Place of Supply and Location of Supplier is different from the Location of Recipient. � E. g. 2: A vendor registered in Karnataka provides services to the Maharashtra Govt. worth Rs. 3 Lakhs. In this case, IGST would be levied. � Place of Supply – Maharashtra � Location of Supplier – Karnataka � Location of Recipient – Maharashtra 10 � The provisions of TDS will apply in this case. �

When TDS not to be deducted Location of Recipient Location of Supplier Place of Supply TDS Applicability West Bengal Odisha Yes West Bengal Odisha West Bengal Yes West Bengal Odisha Bihar No � TDS should not be deducted when deductor’s state of registration is different from the state as mentioned in the tax invoice. � One more Example: NTPC (PSU) branch in Chhattisgarh hires a caterer from Kolkata to cater an event in Kolkata for Rs. 4 lakh (Excl. GST). � Both the place of supply and location of the supplier is in West Bengal (Kolkata) and the recipient’s location is Chhattisgarh. 11 � In this case, there is no requirement to deduct TDS.

When TDS not to be deducted � Provisions of TDS do not apply when supply of Goods or Services is made by one PSU (Public Sector Undertakings) to another PSU � Specific Authorities under Ministry of Defence are exempt from TDS compliance under GST � TDS is not required to be deducted for Goods or Services exempted and Goods on which GST is not leviable such as Petrol, Alcohol for human consumption etc. � TDS is not required to be deducted where the tax is to be paid on reverse charge by the recipient ( Deductee). � TDS provisions are not applicable on payments to unregistered suppliers. � TDS provisions are not applicable to payments related to Cess (GST Compensation Cess) components. 12

Registration and payment of TDS and Return � A person who is liable to deduct TDS has to compulsorily register and there is no threshold limit for this. � The registration under GST can be obtained without PAN and by using the existing Tax Deduction and Collection Account Number (TAN) issued under the Income Tax Act. � Thus it can be said having TAN is mandatory. � The amount of TDS deducted should be deposited with the Govt. by the Deductor by the 10 th of the next month in Form GSTR 7 through the online portal. � The Deductor would be liable to pay interest if the tax deducted is not deposited within the prescribed time limit as mentioned above. � Deductor should file TDS return in Form GSTR-7 within 10 days from the end of the month. � If the supplier (Deductee) is unregistered, the name of the supplier rather than GSTIN shall be mentioned in the return. 13

TDS Certificate and refund � Deductor should issue TDS certificate to the Deductee in form GSTR 7 A within 5 days of crediting the amount to the Govt. , failing which the Deductor would be liable to pay a late fee of Rs. 100/- per day from the expiry of the 5 th day till the certificate is issued. Maximum late fees is Rs. 5000/� There will an automatic reflection in the electronic ledger of the Deductee (supplier) once the Deductor files his/her returns. The Deductee can claim credit in his electronic cash ledger of this tax deducted and use it for payments of other taxes. � If any excess amount is deducted and paid to the government, a refund can be claimed However, if the deducted amount is already added to the electronic cash ledger of the supplier, the amount so added cannot be got back as a refund by the Deductor. 14

Thank You so much for giving your precious time. PAMS Professional Group 15