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CBIC recently issued a notification CGST-50/2018 on 13.09.2018 notifying the date applicability of provisions of ‘Tax Deduction at Source’ (TDS) under GST laws. 1st October 2018 has been appointed as date from which such provisions are required to be followed. In this article, we will understand the various provisions concerned to TDS under GST Act and rules.

Section 51 of CGST Act, 2017 (and of State/UT GST Acts) prescribes the law relating to TDS. This section is somehow matches to provisions of TDS under Income Tax laws.

As per section 51, specified persons are required to deduct a portion of amount payable to suppliers of taxable goods or services or both and deposit the same to Government. Such amount (deducted from suppliers) will be added to electronic cash ledger of such suppliers and can be adjusted against GST payable on their account. Such TDS amount will always be treated as cash payment made by supplier.


Who are the specified persons liable to deduct TDS ?

Section 51(1) of CGST Act provides a list of various persons who are liable to deduct TDS. The list is given below:-

(a) a department or establishment of the Central Government or State Government; or
(b) local authority; or
(c) Governmental agencies; or
(d) Other notifed persons:-

  • Society established by the Central Government or the State Government or a Local Authority under the Societies Registration Act, 1860 (21 of 1860);
  • public sector undertakings;
  • an authority or a board or any other body:-
    (i) set up by an Act of Parliament or a State Legislature; or
    (ii) established by any Government,
    with fifty-one per cent. or more participation by way of equity or control, to carry out any function;

Rate of TDS

Section 51 has prescribed rate of TDS as per follows:-

CGST :  1%

SGST/UT GST : 1%

IGST : 2%


Value of Supplies on which TDS to be deducted

TDS to be deducted from the payment 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 2.50 lakh.

TDS is to be deducted from the whole amount of payment ‘made’ or ‘to be made’ only for value of supplies excluding GST.

TDS to be deducted only for Taxable supplies. Supplies which are not taxable under GST are not liable for TDS deduction.

TDS to be deducted only where total value of taxable supply exceeds Rs 2.50 lakh.

The value of supply shall be taken as the amount excluding the central tax, State tax, Union territory tax, integrated tax and cess indicated in the invoice.


Exceptions where TDS not required to be deducted

1) In case where ‘Location of the supplier’ and ‘the place of supply’ is in a State or Union territory which is different from the State/Union territory of registration of the recipient, there is no requirement of TDS to be deducted by such recipient.

e.g. Location of supplier in state ‘Delhi’

Place of Supply in state ‘Delhi’

Recipient of Supply in ‘Maharashtra’

In this case, no TDS is required to be deducted by recipient of Supply in ‘Maharashtra’.

2) Where goods or services or both are supplied by a Public Sector Undertaking (PSU) to another PSU.


Time limit to pay TDS to Government

The amount deducted as tax under this section shall be paid to the Government by the deductor within ten days after the end of the month in which such deduction is made.

If any deductor fails to pay to the Government the amount deducted as tax, he shall pay interest in accordance with the provisions of sub-section (1) of section 50 of CGST Act , in addition to the amount of tax deducted.


TDS Certificate

The deductor shall furnish to the deductee a certificate mentioning therein the contract value, rate of deduction, amount deducted, amount paid to the Government and such other particulars as may be prescribed.

If any deductor fails to furnish to the deductee the certificate, after deducting the tax at source, within five days of crediting the amount so deducted to the Government, the deductor shall pay, by way of a late fee, a sum of one hundred rupees per day from the day after the expiry of such five days period until the failure is rectified, subject to a maximum amount of five thousand rupees.


Registration of person required to deduct TDS

As per section 24 & 25 of the CGST Act, 2017, every person liable to deduct tax at source, whether or not separately registered under the GST Act, is required to obtain registration within 30 days of becoming liable to register, on the basis of Tax deduction and Collection Account Number (TAN) issued under Income Tax Act, 1961.


Filing of Return

Section 39(3) of the CGST Act, 2017 provides the time limit for furnishing of return by the person deducting tax. As per the said section, every registered person required to deduct tax at source under the provisions of section 51 needs to furnish the details for the month in which such deductions have been made within ten days after the end of such month through GSTR-7. Also, the payment needs to be made before furnishing of return.


Instructions for DDOs for TDS >>> CIR-65/39/2018-GST

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