SOP for TDS under GST is issued by the CBIC to clarify various aspects of applicability and procedure surrounding tax deduction at source under GST.

The GST Law requires certain categories of registered people to deduct tax while making payments to suppliers and deposit the same with the Government. Every registered person who is deducting TDS under GST is required to file a return in Form GSTR-7.

Concept of Supply in GST and value of taxable supply

SOP for TDS under GST states that as per section 7 of the CGST Act, supply for TDS covers goods and services to the government departments and others as listed under ‘persons liable to deduct TDS under GST law’.

The specified individuals are required to deduct TDS if the total value of supply under a particular contract for the supply of taxable goods or services or both, exceeds Rs.2,50,000. This value shall exclude Central tax, State tax, UT tax, Integrated tax and Cess.

Let us understand the value of supply with the help of the examples below as per the SOP for TDS under GST:

 

Supplier

Case

Value of taxable supply

A (registered + contract value is excluding GST)

He made taxable supply worth Rs.10,000  to a local authority where the contract for supply is Rs.10,00,000. Consider the GST rate to be 18%.

Here, the local authority makes payment of Rs.10,000 under a contract of Rs.10,00,000, which is above Rs.2.5 lakh. Hence, a tax deduction is required.

Value of taxable supply = Rs.10,000 (CGST Rs.900 + SGST Rs.900) 

Tax to be deducted @ 1% of Rs.10,000 = Central tax Rs.100 + State tax Rs.100

Payment due after TDS under GST provisions = Rs.11,600/- (11,800-200)

B (registered + contract value is including GST)

He made taxable supply worth Rs.10,000 and exempted supply worth Rs. 20,000 to a local authority where contract for supply is for Rs.5,00,000 (Rs.2,20,000 for taxable supply including GST and Rs.2,30,000 for exempted supply). Consider the GST rate to be 18%.

Here, the local authority makes payment of Rs.10,000 under a contract of Rs.1,86,440 (2,20,000*100/11) which is less than Rs.2.5 lakh. Hence, deduction of tax is not required.

C (registered under composition scheme)

He made taxable supply worth Rs.10,000 to a local authority where the value of taxable supply under the contract is for Rs.2, 55,000

Here, the local authority makes payment of Rs.10,000 under a contract of Rs. 2,55,000 (value of taxable supply) which is above Rs.2.5 lakh. Hence, deduction of tax is required.

 

Conditions for tax deduction & rate of deduction

The SOP for TDS under GST states that tax is required to be deducted if all the following conditions are satisfied:

  1. The total taxable value of taxable supply exceeds Rs.2,50,000 under a single contract excluding Central tax, State tax, UT tax, Integrated tax & Cess.
  2. If a contract includes both taxable supply and exempted supply then, the deduction will be made only on the total value of taxable supply (if the contract value of taxable supply is more than Rs.2.5 lakh).
  3. The table below provides the rate of tax for each nature of supply:
  4. Nature of supply

    Name of TDS

    Rate of tax

    Location of the supplier and place of supply is in the same state/UT without any legislature.

    CGST

    SGST/ UTGST

    1%

    1%

    Location of the supplier and place of supply is in different states.

    IGST

    2%

     

  5. The tax must be deducted on advance paid to a supplier on or after 1st October 2018 for the supply of taxable goods or services or both.

Non-applicability of TDS under GST

The SOP for TDS under GST further elaborates the cases where TDS under GST need not be deducted.

  1. The total taxable value of supply is less than or equal to Rs.2,50,000
  2. Receipt of goods or services which are exempted as per notification no. 12/2017 and 2/2017 dated 28.06.2017 as amended from time to time.
  3. Goods on which GST is not leviable. For example, petrol, diesel, petroleum crude, natural gas, etc.
  4. All activities which are neither treated as supply of goods nor supply of services as per Schedule III of the CGST/SGST Acts 2017, irrespective of the value.
  5. In cases where the payment relates to a tax invoice that has been issued before 1st October 2018.
  6. Where the tax is to be paid on reverse charge by the recipient, i.e. the deductee.
  7. Payments made to unregistered suppliers.
  8. Payments made in relation to the ‘Cess’ part.
  9. Cases where the state/UT of the deductor is different from the location of the supplier and place of supply.
  10. To the extent of advance payment in cases where the amount was paid in advance before 1st October 2018 and the tax invoice has been issued on or after that date.

Registration of deductor of tax in GST

The SOP for TDS under GST explains the section 24(vi) of the CGST Act, 2017 that provides for mandatory registration for the deductors of TDS. The existing deductors under VAT will not be automatically shifted to GST. Below is the step-by-step process of registration of TDS deductors under GST:

A. Entering user credentials

  1. Visit the GST portal.
  2. Navigate to Services>Registration>New registration
  3. Select ‘tax deductor’ under applicant and then look for options ‘I have a)PAN b)TAN’. Enter TAN.
  4. Enter your state and district.
  5. Enter the legal name as per TAN.
  6. Enter the mobile number and email address.
  7. Enter the captcha and then click on proceed. You will be directed to the next page. The system will send two OTPs, one to the mobile number and one to the email address.
  8. B. OTP verification

    1. Enter both the OTPs in the respective boxes and click proceed.
    2. A TRN (Temporary Reference Number) will be generated. Click proceed.
    3. C. Filling up the registration form: entering TRN

      1. Visit the GST portal.
      2. Navigate to Services>Registration>select TRN
      3. Enter TRN and captcha code.
      4. Click proceed.

      D. Filling up the registration form: OTP verification

      1. A single OTP will be sent to both the mobile number and email ID. Enter the OTP and click proceed.
      2. My saved applications page will open. Click on the pen icon under the action field for filling up the details. The application form GST REF-7 has five different tabs:
        • Business details: The applicant is required to update office details, type of government, etc while some details like email, legal name, mobile name etc. will be auto-populated. He also needs to select state jurisdiction details from the drop-down and then click on ‘Save’.
        • Drawing and Disbursing Officer (DDO) details: It has three parts. In the first part, the applicant needs to enter basic entails of the DDO such as name, mobile number, etc. In the second part, he needs to enter the designation of the DDO, PAN and Aadhaar. In the third part, the applicant needs to enter the residential address, upload a photo, select authorised signatory and click save.
        • Authorised signatory details: The DDO details will be auto-populated here. Click on ‘Save’ and continue.
        • Office address details: Here, the applicant needs to enter the DDO’s office address details in the first part and office contact details in the second part. Select the nature of possession and upload an address proof. Then, click save and continue.
        • Verification: Tick on the verification check-box. Select DDO’s name, enter the place and select the option to sign either with DSC or EVC. Click proceed. You will receive a message that the application is submitted successfully and an acknowledgement will be displayed.

      Payment of TDS

      The SOP for TDS under GST provides details about TDS payment under GST. The method of depositing TDS under GST is similar to the one followed under VAT. Under GST, there is a single portal for registration, payment and filing of Returns. The deductor has to generate a challan in the portal at www.gst.gov.in and deposit the tax so deducted through e-payment mode (Net Banking/Debit-Credit card/NEFT-RTGS) or OTC Mode (Cash/Cheque/DD).

      TDS return and its submission

      The SOP for TDS under GST provides details about GSTR-7 return under GST.

      Return & time limit: Every registered TDS deductor is required to file a return in FORM GSTR-7 electronically within the 10th of the month succeeding the month in which deductions have been made. It can be filed through online or offline mode. For deductions made on or after 1st October 2018 but before the date of registration, shall be included in the first return to be furnished after obtaining registration.

      Payment by challan: Tax deposited by challan would get credited in the electronic cash ledger of the deductor. The deductor is required to pay his liability by debiting his electronic cash ledger.

      Issuance of certificate: The deductor is required to provide a system generated certificate to the deductee in FORM GSTR-7A mentioning the contract value, rate of deduction, the amount deducted, the amount paid to the government, etc. This certificate should be provided within five days of crediting the amount so deducted to the government, i.e. within five days of filing a return in FORM GSTR-7.

      Credit claim by deductee: With the submission of Form GSTR-7, the amount deducted will be available in Form GSTR-2A/4A of the registered deductee and the same will get reflected in the electronic cash ledger. The deductee can utilise this amount for discharging his tax liabilities.

      Late fee, interest and penalty as per SOP for TDS under GST

      There are two cases which attract late fees under TDS, states the SOP for TDS under GST, as follows:

      1. If the deductor fails to file the return in FORM GSTR-7 within 10 days of the month succeeding the month in which deduction was made – late fee of Rs.100 per day under CGST Act & SGST/UTGST Act separately during the period in which such failure continues.
      2. If the deductor fails to submit the certificate of TDS to the deductee within five days of crediting the amount so deducted to the government – late fee of Rs.100 per day under CGST Act & SGST/UTGST Act separately after five days of crediting the amount till the period such failure continues.

      Under both the cases, the late fee is subject to a maximum of Rs.5,000 each under the CGST Act and SGST/UTGST Act.

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