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 Price | 236000 |
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 Price | 236000 |
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
- Circular No 23/ 2017 Dated 19h July 2017
- GST – TDS / TCS Provisions postponed under CGST / SGST Act 2017
