Tax deduction at source under GST
Clause 37 of GST Model Law, 2016 make provisions for GST TDS.
GST TDS provisions can apply where total value of such supply, under a contract, exceeds rupees ten lakh.
The Central or a State Government may mandate following persons to deduct GST TDS @ 1% of taxable goods and/or services from the payment made or credited to the supplier.
| (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 GST Council. |
[Under clause (d), large companies may be asked to deduct tax at source].
Deductor and deductee – Person deducting GST TDS will be termed as ‘deductor’.
Supplier from whose invoice tax is deducted will be termed as ‘deductee’.
Value to be taken excluding tax – 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.
Deductor to pay tax deducted to Government – 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.
Certificate of TDS to deductee – 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 [Note : deductee can claim credit of GST TDS only when deductor files return with Government].
Deductor to file electronic return – Deductor is required to file return electronically to Government.
Late fee if certificate not given – 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 (maximum Rs 5,000]
Credit of TDS in electronic cash register of deductee – The deductee shall claim credit, in his electronic cash ledger, of the tax deducted and reflected in the return of the deductor.
Thus, deductee can take credit in electronic cash register only when deductor files return and not on the basis of TDS certificate.
Interest if deductor does not pay tax deducted to Government – If any deductor fails to pay to the credit of the appropriate Government the amount deducted as tax, he shall be liable to pay interest in accordance with the provisions of section 36, in addition to the amount of tax deducted.
Determination of the amount in default under this section shall be made in the manner specified in section 51 – clause 37(7) of GST Model Law, 2016
Refund of tax to deductee – 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. Refund to deductor shall not be granted if the amount deducted has been credited to the electronic cash ledger of the deductee.