Section 37 of Model GST Law
Key Points about Section 37 of Model GST Law
- Coverage :- Section 37 of Model GST Law specifically lists out the Deductors who are mandated by the Central Government or the State Government to deduct tax at source, the rate of tax deduction and the procedure for remittance of the tax deducted. [ Read relevant Section as per CGST Act 2017 – Section 51. Tax deduction at source. ]
- Deductors specified under Section 37 of Model GST Law are as follow:-
- For CGST
- Central Government department or Establishment.
- Local Authority.
- Central Government Agencies.
- Persons or category of persons notified by the Central Government on recommendation of the Council.
- For SGST
- State Government department or Establishment.
- Local Authority.
- State Government Agencies.
- Persons or category of persons notified by the State Government on recommendation of the Council.
- For CGST
- Rate of TDS :– The Deductors have to deduct tax at the rate of 1% from the payment made or credited to the supplier of taxable goods and / or services, notified by the Central Government or State Government on the recommendations of the Council.
- Value for TDS:- Under Section 37 of Model GST Law, deduction is required where the total value of supply under a contract exceeds INR 10 lakhs Value of supply and it shall exclude the tax indicated in the invoice.
- Payment to Govt :- The amount deducted shall be paid to the credit of the Central Government or the State Government treasury as the case may be, within ten days after the end of the month in
which such deduction is made. For instance if the tax deduction is made between the first and 31st of May, the remittance into the treasury has to be made on or before June 10th i.e. within ten days
after the end of the month.
- Form for TDS Return :- GSTR-7 has to be filed by Deductor by 10th of the month succeeding the month of deduction
- TDS Certificate :- This certificate has to be furnished within 5 days of remittance into the State or Central Treasury as the case may be.The Deductor has to furnish a TDS certificate to the Deductee mentioning in it the following:
(a) contract value
(b) rate of deduction
(c) Amount deducted
(d) Amount paid to the appropriate Government
(e) Any other particulars as may be prescribed
- Penalty if Certificate not furnished by the Deductor:– If the Deductor does not furnish the
certificate of deduction-cum- remittance within five days of the remittance, the Deductor
has to pay a late fee of INR 100 per day from the 6th day until the day he furnishes the
certificate. The maximum late fee is prescribed as INR 5000.
- Penalty if Non-remittance by the Deductor: If the Deductor does not remit the amount deducted as TDS, he is liable to pay penal interest under Section 36 in addition to the amount of tax deducted.
- Claim by Deductee :– The amount of tax deducted reflected in Electronic Cash Ledger of Deductee in the return filed by Deductor shall be claimed as credit.This provision enables the Government to cross-check whether the amount deducted by the Deductor is correct and that there is no mis-match between the amount reflected in the Electronic Cash Ledger as reflected in the return filed by Deductor.
- Refund on excess collection: The Deductor or the Deductee can claim refund of excess
deduction or erroneous deduction. The provisions of section 38 relating to refunds
would apply in such cases. However, if the amount deducted has been credited to the
Electronic Cash Ledger of the Deductee, the Deductor cannot claim refund (only
Deductee can claim).
Section 37 Tax deduction at source of Model GST Law : reproduced
(1) Notwithstanding anything contained to the contrary in this Act, the Central or a State Government may mandate, –
(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 Council,
[hereinafter referred to in this section as “the deductor”], to deduct tax at the rate of one percent from the payment made or credited to the supplier [hereinafter referred to in this section as “the deductee”] of taxable goods and/or services, notified by the Central or a State Government on the recommendations of the Council, where the total value of such supply, under a contract, exceeds rupees ten lakh.
Explanation. – For the purpose of deduction of tax specified above, the value of supply shall be taken as the amount excluding the tax indicated in the invoice.
(2) The amount deducted as tax under this section shall be paid to the credit of the appropriate Government by the deductor within ten days after the end of the month in which such deduction is made, in the manner prescribed.
(3) 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 such particulars as may be prescribed in this behalf.
(4) 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:
Provided that the amount of fee payable under this sub-section shall not exceed rupees five thousand.
(5) The deductee shall claim credit, in his electronic cash ledger, of the tax deducted and reflected in the return of the deductor filed under sub-section (5) of section 27, in the manner prescribed.
(6) If any deductor fails to pay to the credit of the appropriate Government the amount deducted as tax under sub-section (1), he shall be liable to pay interest in accordance with the provisions of section 36, in addition to the amount of tax deducted.
(7) Determination of the amount in default under this section shall be made in the manner specified in section 51.
(8) 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 38:
Provided that no refund to deductor shall be granted if the amount deducted has been credited to the electronic cash ledger of the deductee.
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