Tax deduction at source (GST TDS) :
Section 51 of CGST Act make provisions for GST TDS.
GST TDS provisions can apply where total value of such supply, under a contract, exceeds rupees 2.50 lakhs.
The Central or a State Government may mandate following persons to deduct GST TDS @ 1% of taxable goods or services or both from the payment made or credited to the supplier.
(a) a department or establishment of the Central or State Government, or
(b) Local authority, or
(c) Governmental agencies, or
(d) such persons or category of persons as may be notified, by the Central or a State Government on the recommendations of the GST Council.
[Under section (d), large companies may be asked to deduct tax at source].
Deductor and deductee – Person deducting GST TDS will be termed as ‘deductor’.Supplier from whose invoice tax is deducted will be termed as ‘deductee’.
No deduction if recipient is from different State i.e. inter state supply- 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, Union territory of registration of the recipient – proviso to section 51(1) of CGST Act.
Value to be taken excluding GST – For the purpose of deduction of tax specified above, the value of supply shall be taken as the amount excluding the tax (CGST, SGST or UTGST and Compensation Cess) indicated in the invoice – explanation to section 51(1) of CGST Act.
Deductor to pay tax deducted to Government – The amount deducted as tax under this section shall be paid to the credit of the Government by the deductor within ten days after the end of the month, in the prescribed manner – section 51(2) of CGST Act.
Certificate of TDS to deductee – The deductor shall, in the manner prescribed, furnish to the deductee a certificate mentioning therein the contract value, rate of deduction, amount deducted, amount paid to the appropriate Government and other prescribed details- section 51(3)of CGST Act.
[Such certificate does not seem to have any use as deductee can claim credit of GST TDS only when deductor files return with Government].
Deductor to file monthly return electronically – Deductor is required to file return electronically to Government. The return is to be filed in prescribed form and manner within ten days after end of each month – section 39(3) of CGST Act.
If there is no transaction in a particular month, he is not required to file return for that month – section 39(8) of CGST Act.
Time limit for filing return can be extended by Commissioner by issuing notification – section 39(6) of CGST Act.
Late fee if certificate not given – 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 appropriate Government, the deductor shall be liable to pay, by way of a late fee, a sum of rupees one hundred per day from the day after the expiry of the five day period until the failure is rectified (maximum Rs 5,000] – section 51(4) of CGST Act.
[The deductee will have to make complaint to GST department for demanding late fee from deductor – very difficult task indeed]
Credit of TDS in electronic cash register of deductee – The deductee shall claim credit, in his electronic cash ledger, of the tax deducted and reflected in the return of the deductor – section 51(5) of CGST Act.
Thus, deductee can take credit in electronic cash register only when deductor files return and not on the basis of TDS certificate.
Interest if deductor does not pay tax deducted to Government – If any deductor fails to pay to the credit of the appropriate Government the amount deducted as tax, he shall be liable to pay interest in accordance with the provisions of section 50(1), in addition to the amount of tax deducted.
Determination of the amount in default under this section shall be made in the manner specified in section 73 or 74 of CGST Act – section 51(7) of CGST Act.
Refund of tax to deductee – Refund to the deductor or the deductee, as the case may be, arising on account of excess or erroneous deduction shall be dealt with in accordance with the provisions of section 54 of CGST Act. Refund to deductor shall not be granted if the amount deducted has been credited to the electronic cash ledger of the deductee – section 51(8) of CGST Act.