Understanding on TDS Under GST

TDS Mechanism Under GST

TDS on GST to ensure efficient tax collection and to check that tax responsibilities are being met. It is the system under which certain percentage of tax is required to be deducted by the certain individual or entities when making payment to supplier. TCS is collected by the seller of the goods and services and deposited with the government. Payment of salary, professional fee, rent, salary is covered under TDS under GST.

TDS on GST is collected on rent, salary, professional fee and deposited on the tax responsibilities. Get help from the Profesional Utilities in TDS on GST.

 

Table of content  

• What is TDS under GST?

• Example of the TDS ON GST

• TDS under GST Applicability

• Feature of the TDS under GST

• TDS Return form 

• Refund of the TDS under GST

• Benefit of the TDS in GST 

• TDS to be paid - when and to whom

• TDS on GST Rate

• GST TDS Exemption list 

• Conclusion 

• Frequently Asked Questions

 

What is TDS on GST?

TDS  under GST means that certain person need to deduct tax at sources at the time of the payment of the goods and services. TDS under GST enable the collection of tax in the transaction chain at the earliest point by the government. 

Example of the TDS ON GST

Example startup company pays the property's owner Rs. 90,000 in rent each month. The corporation must deduct Rs. 9,000 and pay Rs. 10,000 because the TDS that applies to the amount is 10%.

 

TDS under GST Applicability

There are certain GST Applicability as mentioned below -

• A department or an establishment of the Central Government or State Government

• Such persons or categories of persons as may be notified by the Government.

• Public sector undertakings.

• Governmental agencies

• The society is registered under the Societies Registration Act, 1860 and A society established by the Central or any State Government or a Local Authority

• Local authority

• 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.

 

Feature of the TDS under GST

There are certain feature of the TDS under GST as mentioned below - 

• Any person who become liable to deduct TDS Under section 24(vi) has to register compulsorily.

• There is no fundamental exemption limit. 

• Even if he has a separate registration as a supplier, a person who is obligated to deduct tax must register as a deductor.

• Without a PAN, you can register for GST using your current tax deduction and collection account number (TAN), which was granted under the Income Tax Act. 

 

TDS Return form 

In GSTS -7 Tax deducted at source within 10 days at the end of the month. GSTIN need to be mention and Name of the supplier in case of the unregistered supplier.

 

Refund of the TDS under GST

Refund is made to the deductor by crediting excess amount in electronic cash ledger.

 

Benefit of the TDS in GST 

• Reflection of the amount in the electronic ledger of the deductee automatically.

• Balance of electronic cash ledger can be used by the deductee for the payment of other taxes.

 

TDS to be paid - when and to whom

In Form GSTR-7 TDS is paid within 10 days at the end of the month to the government - 

•  SGST in the case of the The State government.

•  IGST and the CGST in the case of the The Central Government.

 

TDS on GST Rate

Rate of TDS on GST is 2% on payment of taxable goods and services. Total value for the individual contract on supply of services and goods is more then 2.5Lakhs.

 

GST TDS Exemption list 

There are certain supplies which are exempted from the GST on TDS - 

• In the contract taxable supply of the total value less than equal to 2.5 lakhs.

• GST on goods such as  petroleum crude, alcohol for human consumption, petrol, diesel, natural gas and aviation turbine fuel (ATF). 

• Under notification No. 12/2017 - central tax dated 28.06.2017 there are various receipt of service which are exempted.

• Under reverse charges taxes paid by the recipient i.e deductee.

• Under notification No. 2/2017 central tax  dated 28.06.2017 receipt of goods which are exempted.

• Schedule III of the CGST/SGST Acts 2017 include all activities or transaction irrespective of the value.

• Before 01.10.2018 payment against tax invoice is issued.

• Where deductor is registered Place of supply and location of the supplier is in different state or U.T.

• Payment is made for the cess component.

• When payment is made unregistered supplier.

• If any sum was paid in advance prior to January 10, 2018, and the tax invoice was issued on or after January 10, 2018, the amount of the advance payment made prior to January 10, 2018 will be credited. 

 

Conclusion 

TDS under GST is a mechanism which ensure collection of the revenue and payment of taxes on time. Rules under TDS under GST must be followed to avoid any penalties. In case of the inter supplies is 2% and intrastate supply rate of TDS is 2%. The deducted amount will show up in the Cash Ledger and can be used to pay the remaining tax after the input tax credit has been applied.