Section 51 of CGST | TDS under GST with Example

Tax deducted at source (TDS) under GST is given under section 51 of the CGST Act. It provides the provisions related to deduction of TDS by government departments while making the payment for receipt of supply of taxable goods or services or both from the supplier.

In the following we have explained the concept of TDS under GST and how to deduct TDS on GST bill with example:

What is the concept of TDS under GST?

Government brings the concept of TDS under GST to track their various business transactions and generate revenue. This is a way to keep check on supply of goods, services or both and collect tax.

Who is liable to deduct TDS under GST?

Following are the government departments who are liable to deduct TDS under GST:

A department or an establishment of central government or state government; or
Local authority; or
Governmental agencies; or
Such persons or category of persons as may be notified by the government.

As per the notification dated 13-09-2018 following also need to deduct TDS under GST:

Authority or a board or any other body which is setup by parliament or a state legislature or by a government with 51% equity owned by the government
Society established by the central or state government or a local authority and that society is registered under societies registration act, 1860.

Also Read: Composition Scheme under GST(For Goods and Services)

When to deduct TDS under GST?

The list of government department mentioned above is required to deduct TDS at the rate of 2% (i.e. 1% for CGST and 1% of SGST in case of intra state and for interstate 2% for IGST) when making the payment for the receipt of supply of goods or services or both from the supplier.

The threshold limit for deducting TDS is Rs. 2,50,000 i.e. if the contract value is more than Rs. 2,50,000 then TDS need to be deducted.

Example:

If the government department gives a contact for constructing a bridge to Mr. A then in this case Mr. A is a supplier and the government is a recipient of supply then the government department is liable to deduct TDS while making the payment for the receipt of supply.

Point to be noted:

For checking the threshold limit of Rs. 2,50,000 one must take the total contract value (not individual invoices).
No TDS, if location and place of supply of the supplier is in a state/union territory which is different from state/union territory of the recipient. Example:

If Supplier and PoS (place of supply) are in State A & recipient is located in State B – No TDS.
If supplier, PoS and recipient are in the same state – Intra state supply & TDS is required.
If supplier & PoS are in different states – Interstate supply & IGST will be deducted.

Total value of supply for calculation threshold limit shall exclude central tax, state tax, union territory tax, integrated tax and cess.

Also Read: GST- QRMP Scheme (Quarterly Return Monthly Payment Scheme)

Whether deductors need to be registered in GST for deducting TDS?

Those who are liable to deduct TDS under GST have to compulsorily take registration under GST. He can take registration without a PAN, by using TAN. TAN is mandatory required.

How to take credit of TDS under GST?

Deductor of TDS is required to issue a TDS certificate to deductee within 5 days of deposit of TDS to the government. It contains information regarding total contract value, total amount deducted, rate of TDS and amount paid to appropriate government.

Then on the basis of TDS certificate deductee can take the credit of this. TDS deducted by the Government department (deductor) will reflect in the electronic cash ledger of the deductee hence, the deductee can claim credit of TDS.

If the deductor fails to issue TDS certificate within the time limit then he is liable for penalty of late fees Rs.100/- per day starting from the expiry of 5 days (time limit), but maximum late fee will be Rs.5000/-.

What is the due date of depositing TDS to the Government?

TDS under GST should be deposited to an appropriate government account within 10 days after the end of the month in which TDS deducted.

Example:

TDS deducted in September month needs to be deposited till 10th Oct from the end of September month.

If TDS does not deposit within time limit then he is liable to pay interest for the period starting from due date till final date of deposit of TDS.

Important Points:

TDS to be deposited to appropriate government means:

For IGST and CGST => Central Government
For SGST => State Government

TDS to be deducted for supply of taxable goods or services or both means the goods or services which supplied must be taxable.
TDS certificate form is GSTR- 7A
TDS to be calculated on value of supply excluding taxes (like. CGST, SGST, IGST or Cess)
If excess TDS is deducted then you can claim for refund.

Also Read: Section 194Q: (TDS on Purchase of Goods above Rs. 50 Lakhs)

Conclusion

Section 51 of CGST Tax deducted at source (TDS) provides the provisions related to deduction of TDS by government departments @2% on Intra state and @1% on Inter state while making the payment for receipt of supply of taxable goods or services or both from the supplier.