Tax Deduction at Source
(TDS) is a system, 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 similar to “pay as you earn”
scheme also known as Withholding Tax, in many other countries. It facilitates
sharing of responsibility of tax collection between the deductor and the tax
administration.
It also ensures regular inflow of cash
resources to the Government. 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.
Under the 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 department or an establishment of the
Central Government or State Government; or Local authority; or Governmental
agencies; or
(d)
Such persons or category of persons as may be notified by the Government on the
recommendations of the Council.
The tax would be deducted @1% of the payment
made to the supplier (the deductee) of taxable goods or services or both, where
the total value of such supply, under a contract, exceeds two lakh fifty
thousand rupees (excluding the amount of Central tax, State tax, Union
Territory tax, Integrated tax and cess indicated in the invoice). Thus,
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. However, no deduction
shall be made if the location of the supplier and the place of supply is in a
State or Union territory, which is different from the State, or as the case may
be,
The earlier statement can be explained in the
following situations:
Supplier, place of supply and recipient are
in the same state. It would be intra-State supply and TDS (Central plus State
tax) shall be deducted. It would be possible for the supplier (i.e. the deductee)
to take credit of TDS in his electronic cash ledger.
Supplier as well as the place of supply are
in different states. In such cases, Integrated tax would be levied. TDS to be
deducted would be TDS (Integrated tax) and it would be possible for the supplier
(i.e. the deductee) to take credit of TDS in his electronic cash ledger.
Supplier as well as the place of supply are
in State A and the recipient is located in State B. The supply would be
intra-State supply and Central tax and State tax would be levied. In such case,
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 in such
cases, TDS would not be deducted.
Thus, when both the supplier as well as the
place of supply are different from that of the recipient, no tax deduction at
source would be made.
Registration of TDS deductors: A TDS deductor
has to compulsorily 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.
Deposit of TDS with the Government: The
amount of tax deducted at source should be deposited to the Government account
by the deductor by 10th of the succeeding month. The deductor would be liable
to pay interest if the tax deducted is not deposited within the prescribed time
limit.
TDS Certificate: A TDS certificate is
required to be issued by deductor (the person who is deducting tax) in Form
GSTR-7A to the deductee (the supplier from whose payment TDS is deducted),
within 5 days of crediting the amount to the Government, failing which the
deductor would be liable to pay a late fee of Rs. 100/- per day from the expiry
of the 5th day till the certificate is issued. This late fee would not be more
than Rs. 5000/-. For the purpose of deduction of tax specified above, 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.
For instance, suppose a supplier makes a
supply worth Rs. 1000/- to a recipient and the GST @ rate of 18% is required to
be paid. The recipient, while making the payment of Rs. 1000/- to the supplier,
shall deduct 1% viz Rs. 10/- as TDS. The value for TDS purpose shall not
include 18% GST. The TDS, so deducted, shall be deposited in the account of
Government by 10th of the succeeding month. The TDS so deposited in the
Government account shall be reflected in the electronic cash ledger of the
supplier (i.e. deductee) who would be able to use the same for payment of tax
or any other amount. The purpose of TDS is just to enable the Government to
have a trail of transactions and to monitor and verify the compliances.
TDS Return: The
deductor is also required to file a return in Form GSTR-7 within 10 days from
the end of the month. If the supplier is unregistered, name of the supplier
rather than GSTIN shall be mentioned in the return. The details of tax deducted
at source furnished by the deductor in FORM GSTR-7 shall be made available to
each of the suppliers in Part C of FORM GSTR-2A electronically through the
Common Portal and the said supplier may include the same in FORM GSTR-2. The
amounts deducted by the deductor get reflected in the GSTR-2 of the supplier
(deductee). The supplier can take this amount as credit in his electronic cash
register and use the same for payment of tax or any other liability.
Consequences of not complying with TDS
provisions:
S. No.
|
Event
|
Consequence
|
1.
|
TDS not deducted
|
Interest to be paid along
|
|
|
with the TDS amount;
|
|
|
else the amount shall
|
|
|
be determined and
|
|
|
recovered as per the
|
|
|
law
|
2.
|
TDS certificate not
|
Late fee of Rs. 100/-
|
|
issued or delayed
|
per day subject to a
|
|
beyond the
|
maximum of Rs. 5000/-
|
|
prescribed period
|
|
|
of five days
|
|
3.
|
TDS deducted
|
Interest to be paid along
|
|
but not paid to
|
with the TDS amount;
|
|
the Government
|
else the amount shall
|
|
or paid later
|
be determined and
|
|
than 10th of the
|
recovered as per the
|
|
succeeding month
|
law
|
Late filing of TDS Late fee of Rs. 100/- for
returns
|
every day during which
|
|
such failure continues,
|
|
subject to a maximum
|
|
amount of five thousand
|
|
rupees
|
Any excess or erroneous amount deducted and
paid to the Government account shall be dealt for refund under section 54 of
the CGST Act, 2017. However, if the deducted amount is already credited to the
electronic cash ledger of the supplier, the same shall not be refunded.
No comments:
Post a Comment