TDS ON GST

TDS is one of the ways to collection of tax at the source under which certain percentage of amount is deducted by a recipient at the time of making payment to the supplier. The concept was adopted from Income Tax Act 1961.

Under the GST regime, Section 51 of the CGST Act, 2017 prescribes the authority and procedure for TDS with CGST rules 66. TDS has been applicable since 1st October 2018. Major Heads of Taxes under GST are CGST,SGST & IGST. The TDS is applicable on taxable goods or services.

Who is required to deduct TDS?

The following class of persons shall be required to deduct tax at source @ 2% on the payment made or credited to the supplier where the total value of supply under a contract exceed Rs.2,50,000/-excluding GST.

1. A department or establishment of the Central Government or State Government.
2. Local authority.
3. Governmental agencies.
4. An authority or a board or any other body set up by an Act of Parliament or a State Legislature or established by any Government, with fifty-one percent or more participation by way of equity or control, to carryout any function.
5. Society established by the Central Government or the State Government or a Local Authority under the Societies Registration Act, 1860.
6. Public sector undertakings.

Registration

A person who is liable to deduct TDS must compulsorily register and there is no threshold limit for this. The registration under GST can be obtained without a PAN and by using the existing Tax Deduction and Collection Account Number (TAN) issued under the Income Tax Act. Thus, it can be said having TAN is mandatory.

Value for deduction of tax

CGST, SGST, IGST and Cess levied under GST must be excluded for the purpose of determining total value. contract value is to be taken and not Individual invoice wise for determination of deduction of TDS.

Rate of TDS

As per section 51(1) , the following class of person shall be required to deduct tax at source @ 2% on the payment made or credited to the supplier where the total value of supply under a contract exceed Rs.2,50,000/-excluding GST.

TDS Applicability with different scenarios

SLNo	Location of Supplier	Place of Supply	Type of GST	Place of Recipient	TDS   Applicability	TDS%
1	Karnataka	Karnataka	CGST & SGST	Karnataka	Yes	(1%+ 1%)
2	Karnataka	Maharashtra	IGST	Karnataka	Yes	2%
3	Karnataka	Maharashtra	IGST	Delhi	Yes	2%
4	Karnataka	Karnataka	CGST & SGST	Delhi	No	–

Deposit of TDS with the Government

TDS shall be paid within 10 days from the end of the month in which tax is deducted and filed in FORM GSTR -7. The payment shall be made to the appropriate government which means. The central government in the case of the IGST and CGST. The state government in the case of the SGST.

TDS Returns and TDS Certificate

The deductor is also required to file a return in Form GSTR-7 within 10 days from the end of the month. If the supplier is unregistered, name of the supplier rather than GSTIN shall be mentioned in the return. The deductor would beliable to pay interest if the tax deducted is not deposited within the prescribed time limit.

A TDS Certificate would also be required to be issued by the deductor (the person who is deducting the tax i.e., the recipient) in GSTR 7A to the deductee (the supplier whose payment is being deducted) within 5 days of depositing the TDS with the Government.

The TDS so deducted would also be visible to the suppliers in Form GSTR 2A and the supplier can include and avail the same in GSTR 2. 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.

Consequences of non-compliance of TDS provisions

Sl.No	Event	Penalties
1.	TDS not deducted	Interest is to be paid @ 18% along with the TDS. Otherwise, the amount shall be determined and recovered as per the provisions of the law.
2.	TDS certificate has not been issued or delayed beyond 5 days	A late fee of Rs.100 per day will be charged (subject to a maximum of Rs.5000) under each Act.
3.	TDS is deducted but not paid to the government or paid after the 10th of the following month	Interest is to be paid @18% along with the TDS, calculated beginning from the next day of the return filing deadline until the actual date of payment. Otherwise, the amount shall be determined and recovered as per the Provisions of the law.
4.	Late filing of TDS return	A late fee of Rs.100 per each day of delay will be charged (subject to a maximum of Rs.5000) under each Act.

This article is a part of Article Writing Competition 2025.