TDS APPLICABILITY ON GOVERNMENT CONTRACTS UNDER GST (Under Section 51 of the CGST Act, 2017)
By: – CASanjay Kumawat
Goods and Services Tax – GST
Dated:- 19-9-2017
Introduction
Tax Deducted at Source (TDS) is a system introduced by Income Tax Department, where person responsible for making specified payments such as salary, commission, professional fees, interest, rent, etc. is liable to deduct a certain percentage of tax before making payment in full to the receiver of the payment. It is one of the modes/methods to collect tax, under which, certain percentage of amount is deducted by a recipient at the time of making payment to the supplier. It is similar to “pay as you earn” scheme also known as Withholding Tax, in many other countries.
The Central Excise Act, 1944 or the provisions contained in Chapter V of the Finance Act, 1994 did not make any provisions for deduction of tax at sources for supply of goods or for supply of services. The VAT of the State Government
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the Ministry of Finance of Central Government.
* The establishment of Central Government of Central Government and State Government is not defined.
Local authority; or
As per section 2(69) of the CGST Act, 2017, “local authority” means –
* a “Panchayat” as defined in clause (d) of article 243 of the Constitution;
* a “Municipality” as defined in clause (e) of article 243P of the Constitution;
* a Municipal Committee, a Zilla Parishad, a District Board, and any other authority legally entitled to, or entrusted by the Central Government or any State Government with the control or management of a municipal or local fund;
* a Cantonment Board as defined in section 3 of the Cantonments Act 2006;
* a Regional Council or a District Council constituted under the Sixth Schedule to the Constitution;
* a Development Board constituted under article 371 of the Constitution; or
* a Regional Council constituted under article 371A of the Constitution.
Governmental agencies; or
A
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untability of government agencies also vary widely.
The term agency in India has several meanings; for example, the Cabinet and the parliament Secretariat describes itself as a "nodal agency for coordination amongst the ministries of the Govt. of India". Most notably as an international feature, what appear to be independent agencies (or apex agencies) include some that have active roles for Ministers, such as,
* The National Security Council,
* The Indian Council of Agricultural Research,
* The Aeronautical Development Agency
* The Defence Intelligence Agency, and
* the Planning Commission,
which is chaired ex officio by the Prime Minister.
Such persons or category of persons as may be notified by the Government on the recommendations of the Council.
The Central or State Government has power to specify such person or a category of such persons as may be notified on the recommendations of the GST Council.
Accordingly, in continuation to the smooth applicabili
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cted @1% of the payment made or credited to the supplier (the deductee) of taxable goods or services or both. As per explanation to the section 51(1) of the CGST Act, 2017, the value of supply shall be taken as the amount excluding the central tax, State tax, Union territory tax, integrated tax and cess indicated in the invoice.
Point of taxation
As per section 51(1) of the CGST Act, 2017, TDS is require to be deducted by the deducter where the total value of supply of taxable goods and/ or services, under a contract, exceeds 2,50,000/- (excluding the amount of Central tax, State tax, Union Territory tax, Integrated tax and cess indicated in the invoice). Thus, individual supplies may be less than ₹ 2,50,000/-, but if contract value is more than ₹ 2,50,000/-, TDS will have to be deducted.
This can be understood by way of following example:
Department of Health has entered into three agreements with a supplier, are as follows:
* Contract for cleaning : Contact value –
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of the recipient(LOR).
This proviso can be explained in the following situations:
* LOS, POS and LOR are in the same state/union territory. It would be intra-State/Union Territory supply and TDS (CGST plus SGST/UTGST) shall be deducted. It would be possible for the supplier (i.e., the deductee) to take credit of TDS in his electronic cash ledger.
LOS as well as POS is in different states. In such case, IGST would be levied. TDS to be deducted would be TDS (Integrated tax) and it would be possible for the supplier to take credit of TDS in his electronic cash ledger.
LOS as well as POS is in Mumbai State and the recipient is located in Rajasthan State. The supply would be intra-State supply and CGST plus SGST would be levied. In such case, transfer of TDS (CGST plus SGST of Mumbai State) to the cash ledger of the supplier (CGST plus SGST of Mumbai State) would be difficult as it will require the registration of recipient in the state of Mumbai. So in such case, TDS would not be d
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istration under GST if he is otherwise not required to take registration in other cases. Therefore, supplier is not required to take registration under GST for this case.
Further, the Central Government vide Notification No.9/2017-Central Tax (Rate) dated 28.06.2017 has exempted intra-State supplies of goods or services or both received by a deductor (or recipient) under section 51 of the CGST Act, from any supplier, who is not registered, from the whole of the CGST leviable thereon under sub-section (4) of section 9 of the CGST Act, i.e., supplies from unregistered persons, subject to the condition that the deductor is not liable to be registered otherwise than under sub-clause (vi) of section 24 of the CGST Act.
Accordingly, a deductor (or recipient) is not required to pay GST under RCM in case of supplies received from unregistered suppliers provided deductor is not required to take registration in any cases other than case covered by clause (vi) of section 24 of the Act, i.e., 'p
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ier. As discussed earlier, TDS is one of the modes/methods to collect tax, under which, certain percentage of amount is deducted by a recipient at the time of making payment to the supplier. It facilitates sharing of responsibility of tax collection between the deductor and the tax administration. Since, deductor would have paid whole tax under RCM, and then there is no requirement to deduct tax at source again at the time of payment.
According to the second school of thoughts, TDS may be deducted at the time of making of payment to the supplier as in section 51 of the CGST Act, 2017, law is silent and it is no where specifically specified that in case of RCM, deductor is not required to deduct TDS.
* For cases covered by section 9(4) of the CGST Act, 2017
With reference to Notification No.9/2017-Central Tax (Rate), dated 28.06.2017, whole tax in respect to all intra-state supplies is exempt from levy of GST under RCM. Accordingly, deductor will not be required to pay GST under RC
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tract rather than the nature of the supplier.
“Q.27 Please clarify ITC credit status for the following condition: on GST deducted commission for distributor registered under GST taxpayer?
Ans. Any deductions under TDS/TCS provisions from amount paid or credited to the supplier shall be credited to the electronic cash ledger which can be used for payment of tax.
Q.28 Please clarify ITC credit status for the following condition: If commission received without deducting GST in cases where distributor under exemption or composition scheme?
Ans. The section concerning GST deduction (section 51 of CGST Act, 2017) has not been operationalized till now. But if the distributor is under threshold exemption or under composition scheme, the requirement for GST deduction depends upon the taxable supply and value of contract rather than the nature of the supplier.”
Accordingly, if a person is providing taxable supplies and value of contract is exceeding 2.5 lakhs then TDS is required to b
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has a privilege of obtaining registration under GST without requiring PAN. He can obtain registration using his Tax Deduction Account Number (TAN) issued under the Income Tax Act, 1961.
Deposit of TDS with the Government
As per section 51(2) of the CGST Act, 2017, the amount of tax deducted at source should be deposited to the Government account by the deductor by 10th of the succeeding month. The deductor would be liable to pay interest if the tax deducted is not deposited within the prescribed time limit.
TDS Certificate
As per section 51(3) of the CGST Act, 2017, a TDS certificate is required to be issued by deductor (the person who is deducting tax) in Form GSTR-7A to the deductee (the supplier from whose payment TDS is deducted), within 5 days of crediting the amount to the Government. The certificate shall contain following:
* Contract value,
* Rate of deduction,
* Amount deducted,
* Amount paid to the Government, and
* such other prescribed particulars.
As per se
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or payment of tax or any other amount. The purpose of TDS is just to enable the Government to have a trail of transactions and to monitor and verify the compliances.
TDS Return
The deductor is also required to file a return in Form GSTR-7 within 10 days from the end of the month. The details of tax deducted at source furnished by the deductor in FORM GSTR-7 shall be made available to each of the suppliers in Part C of FORM GSTR-2A electronically through the Common Portal and the said supplier may include the same in FORM GSTR-2. The amounts deducted by the deductor get reflected in the GSTR-2 of the supplier (deductee). The supplier can take this amount as credit in his electronic cash register and use the same for payment of tax or any other liability. The following information will be declared by the deductor in GSTR-7:
S.No.
Particulars
1.
GSTIN of the deductee
2.
Contract Number
3.
Contract Date
4.
Contract Value
5.
Invoice Number
6.
Invoice Date
7.
Invoice Value
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