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15 Sep 2018

TDS under GST

Section 51 of the CGST Act,2017 provides for provisions regarding deduction of tax at source by the following persons where the total value of supply under a contract exceeds Rs. 250,000:

(a) a department or establishment of the Central Government 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 Government on the recommendations of the Council;

In addition to persons notified to deduct tax at source under clause (a) to (c) of the abovementioned section, the government vide notification no. 50/2018- Central Tax (Rate) dt. 13th September 2018 has notified the following persons who are liable to deduct tax at source under the said section:

(a) an authority or a board or any other body, -

(i) set up by an Act of Parliament or a State Legislature; or

(ii) established by any Government, with fifty-one per cent or more participation by way of equity or control, to carry out any function;

(b) Society established by the Central Government or the State Government or a Local Authority under the Societies Registration Act, 1860 (21 of 1860);

(c) public sector undertakings.

The provisions of the said section shall come in force from 1st October 2018.

Rate of tax: 2% of the payment made or credited to the supplier, of the taxable supplies.

Registration: As per section 24 & 25 of the CGST Act, 2017, every person liable to deduct tax at source, whether or not separately registered under the GST Act, is required to obtain registration within 30 days of becoming liable to register, on the basis of a Permanent Account Number (PAN) or a Tax deduction and Collection Account Number (TAN).

Filing of Return: Section 39(3) of the CGST Act, 2017 provides the time limit for furnishing of return by the person deducting tax. As per the said section, every registered person required to deduct tax at source under the provisions of section 51 needs to furnish the details for the month in which such deductions have been made within ten days after the end of such month through GSTR-7. Also, the payment needs to be made before furnishing of return.

Certificate for deduction of tax: The deductor is required to furnish a certificate to the deductee, mentioning therein the contract value, rate of deduction, amount deducted, amount paid to the Government and such other particulars, within 5 days of crediting the amount deducted to the government. Further, failure to furnish such certificate attracts late fee of Rs. 100 per day after the expiry of such five days period until the failure is rectified, subject to a maximum amount of five thousand rupees.