How to Charge TDS on GST Portion of Tax Invoice

By | September 8, 2018
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(Last Updated On: September 8, 2018)

TDS on GST Component

In this article we will discus when we needs to deduct TDS on GST Component under Income Tax Act

CBDT has clarified through Circular No. 23/2017 that wherever in terms of the agreement or contract between the payer and the payee, the component of ‘GST on services‘ comprised in the amount payable to a resident is indicated separately, tax shall be deducted at source under Chapter XVII-B of the Act on the amount paid or payable without including such ‘GST on services’ component.

GST for these purposes shall include Integrated Goods and Services Tax. Central Goods and Services Tax, State Goods and Services Tax and Union Territory Goods and Services Tax.

[ Refer Circular No 23/ 2017 Dated 19h July 2017 ]

Mr A  pays Rs. 2,00,000 construction fees to an engineer (Mr B) for construction of office building.

Example 1: Intra-state contract (Mr A and Mr B are in same states)

Contract Price 200000
GST
CGST @ 9%18000
SGST @ 9%18000
Total Price236000

TDS under Section 194J of Income Tax to be deducted @ 10% on Rs 200000  i.e Rs 20000

Example 2: Inter-state contract (Mr  A and Mr B are in different states)

Contract Price 200000
GST
IGST @ 9%36000
Total Price236000

TDS under Section 194J of Income Tax to be deducted @ 10% on Rs 200000  i.e Rs 20000

Example 3: GST is not shown separately

Contract Price inclusive of Taxes 236000

TDS under Section 194J of Income Tax to be deducted @ 10% on Rs 236000  i.e Rs 23600

Video Lecture on TDS on GST  [GST News Part 242 ]

Reasons why Govt Allowed no TDS on GST Portion if Shown Separately

Govt does not want to block working capital of payee, whose TDS is required to be deducted. moreover GST charged on invoice is not income of the person hence TDS should not be deducted on the same.

What are your opinion on this relaxation given by the Govt . Pls comment.

Reference Material on TDS on GST Component

TDS on GST Component Tax Practice Manual-Day to Day Tax Practice Guide for Professionals (As Amended by Finance Act 2018)

Direct Taxes Ready Reckoner
Service Tax Ready Reckoner
Company Law Ready Reckoner
tax deduction at source

3 thoughts on “How to Charge TDS on GST Portion of Tax Invoice

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