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13 Oct 2018

TDS under GST

GST Law mandates Tax Deduction at Source vide Section 52 of CGST/SGST Act 2017, Section 20 of the IGST Act 2017 and Section 21 of the UTGST Act 2017. Further, the Central Government vide Notification number 50/2018 - Central Tax has made Tax Deduction at Source applicable from 01.10.2018.

GST council has clarified various issues through Standard Operating Procedure released on 28th September 2018. Some of the clarifications given in the SOP have been reproduced below for the purpose of understanding:

Sno. Issue Clarification
1. Is there any threshold exceeding which tax is required to be deducted? Yes, TDS is required to be deducted from the payment made or credited to a supplier, if the value of supply under a single contract in respect of taxable goods or services or both exceeds Rs. 2,50,000/-. This value shall exclude value of exempt supplies (if any) and taxes and cess leviable under GST.
2. What will be the applicability of TDS provisions where three separate contracts are entered into between governmental undertaking and supplier each valuing less than Rs. 2,50,000/- but collectively the value exceeds Rs. 2,50,000/-? No deduction is required since the value of taxable supply in neither of the contract exceeds Rs. 2.5 Lakh.
3. Whether TDS is required to be deducted where payment relates to a tax invoice that has been issued before 01.10.2018? No
4. Whether TDS will be deducted where advance is paid prior to 01.10.2018 but tax invoice is issued on or after 01.10.2018? TDS shall not be deducted to the extent advance payment made before 01.10.2018.
5. As a deductor, am I supposed to deduct TDS where the payment is made to an unregistered supplier? No, Tax deduction is not required to be made where payment is made to an unregistered supplier.
6. A contract has been entered into for Rs. 10 Lakh with a supplier prior to 01.10.2018. Now, a payment of Rs. 1.5 Lakh in respect of an invoice dated 25.10.2018 is submitted by the supplier. Whether TDS is required to be deducted on Rs.1.5 Lakh? Yes, TDS is required to be deducted since the payment is being made after the effective date.
7. A contract has been entered into worth Rs.10 Lakh with a supplier prior to 01.10.2018. A payment of Rs.3 Lakh has been made to the supplier prior to 01.10.2018. Now, payment of the balance amount i.e. Rs.7 Lakh is made after 01.10.2018. Whether tax to be deducted on Rs.10Lakh? No, tax cannot be deducted for any payment made prior to 01.10.2018. So, deduction will be made only in respect of Rs.7 Lakh.
8. A contract with a supplier has been entered into for a value of Rs.2 Lakh and payment of Rs.1Lakh has been made on 15.10.2018. Now, on 20.10.2018 the contract value is revised from Rs.2Lakh to Rs.6Lakh. On which amount, TDS will be deducted in this scenario? TDS shall be deducted on entire amount i.e. Rs.6Lakh while making remaining payment of Rs.5 Lakh. Thus, Rs.12,000/- would be deducted when remaining period of Rs.5 Lakh is made.
9. Where Govt of Haryana engages a contractor of Delhi for renovation of a building in Delhi, shall TDS provisions be applicable on such transaction? No, since the location of supplier and place of supply is Delhi i.e. in a state different from the state where the deductor is registered.
10. When is TDS not required to be deducted under GST?
No deduction is required in respect of payment against-
  • All services which are exempted vide N/N12/2017-Central tax (Rate) as amended from time to time
  • All goods which are exempted vide N/N 2/2017-Central tax (Rate) as amended from time to time
  • When the goods and services are supplied before 30.09.2018 and payments are being made after 01.10.2018