No TDS on component of CGST, SGST and UTGST- thanks for timely Circular- more scope and clarity is desired

[CA DEV KUMAR KOTHARI]

References and links:

CIRCULAR No. 23/2017 dt. 19^th  July 2017 (appears applicable to all levies of GST)

Circular No. 1/2014 dated 13.01.2014 (Extended NO TDS on service tax on all services)

Circular No.4/2008 dated 28-04-2008  (No TDS on service tax on rent, S 194 J)

CIT (TDS) Jaipur v. Rajasthan Urban Infrastructure and 239/2011) 2013 (8) TMI 12 - RAJASTHAN HIGH COURT

General discussion about nature of GST and documentation aspects:

GST (CGST, SGST and UTGST)- diversion at source:

GST is collected by a registered supplier of goods or service provider, as a levy to be deposited with Government.

Even if GST is not collected and the supplier/ service provider is liable to pay, he has to pay irrespective of fact that it has not been collected from the customer/ client.

Even if GST is collected wrongly it has to be deposited with Government.

Therefore, it is clear that GST collected is diverted at source and is not received as income. Therefore, GST element cannot be called income of receiver of payment or credit for supply of goods or providing services.

Earlier there were conflicting circular that in some situations or some type of services tax was to be deducted from gross amount (inclusive of Service tax) and in some cases it was on net basis. After judgment in case of CIT (TDS) Jaipur v. Rajasthan Urban Infrastructure (supra.) , the earlier circular was modified  to extend  no TDS on service tax element in  cases of other services on which tax is deductible u/s 194J.

As per contract or agreement:

There can be a written or verbal contract or agreement. There can be contract by way of conduct between parties and also by way of trade practices.

Generally GST or any levy, which is levied is to be paid by the customer / client, unless otherwise decided. This is for the reason that levy of tax is not stagnant, it may change from time to time. Therefore, tax is to be paid by customer / client, at the time when levy is attracted and at the applicable rate at that time.

GST Charged separately:

As per format of Tax Invoice a registered supplier/ service provider is required to show GST separately in invoice. In case of unregistered dealers this is not applicable and therefore, when GST is not attracted, it is not shown in the invoice/ bill/ cash memo.

Therefore, even if contract or agreement is silent on the issue of GST, there should not be TDS on element of GST.

Even if GST is not separately shown in invoice and invoice states that GST is included in charges, then also there should not be TDS/ TCS.

Observations on Circular dt.19.07.17:

As discussed in general discussions, author feels that to avoid disputes the circular should also cover exemption from TDS in situations like:

a.       Verbal contracts and agreements and trade practices according to which GST is charged separately or rates are mentioned inclusive of GST.

b.      In case receiver of services is required to pay tax under reverse charge method, then there should not be TDS on GST paid under reverse charge mechanism (RCM). The amount paid under RCM is neither paid nor credited to account of service provider or supplier.

c.       GST on all supplies and services should be exempted from TDS and piecemeal approach should be avoided this is because provisions of GST and TDS and TCS are changing from time to time and there can be frequent changes due to implementation of GST is its initial stage.

 A clarification on above issues would be helpful for taxpayers and tax authorities both.