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TDS APPLICABILITY ON GOVERNMENT CONTRACTS UNDER GST (Under Section 51 of the CGST Act, 2017)

Goods and Services Tax - GST - By: - CASanjay Kumawat - Dated:- 19-9-2017 - Introduction Tax Deducted at Source (TDS) is a system introduced by Income Tax Department, where person responsible for making specified payments such as salary, commission, professional fees, interest, rent, etc. is liable to deduct a certain percentage of tax before making payment in full to the receiver of the payment. It is one of the modes/methods to collect tax, under which, certain percentage of amount is deducted .....

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tate Government. The deductor was also required to issue TDS certificate to the deductee. Under the GST regime, section 51 of the CGST Act, 2017, makes provisions relating to tax deducted at sources. Accordingly, it prescribes the authority and procedure for Tax Deduction at Source . Tax to be deducted by specified person As per section 51(1) of the CGST Act, 2017, the tax shall be deducted on supply of goods and services only by specified persons. The Government may order the following persons .....

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Government is not defined. Local authority; or As per section 2(69) of the CGST Act, 2017, local authority means - a Panchayat as defined in clause (d) of article 243 of the Constitution; a Municipality as defined in clause (e) of article 243P of the Constitution; a Municipal Committee, a Zilla Parishad, a District Board, and any other authority legally entitled to, or entrusted by the Central Government or any State Government with the control or management of a municipal or local fund; a Cant .....

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e oversight and administration of specific functions, such as an intelligence agency. There is a notable variety of agency types. Although usage differs, a Government agency is normally distinct both from a department or ministry, and other types of public body established by Government. The functions of an agency are normally executive in character, since different types of organizations (such as commissions) are most often constituted in an advisory role-this distinction is often blurred in pr .....

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itself as a nodal agency for coordination amongst the ministries of the Govt. of India . Most notably as an international feature, what appear to be independent agencies (or apex agencies) include some that have active roles for Ministers, such as, The National Security Council, The Indian Council of Agricultural Research, The Aeronautical Development Agency The Defence Intelligence Agency, and the Planning Commission, which is chaired ex officio by the Prime Minister. Such persons or category .....

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an authority or a board or any other body, - set up by an Act of Parliament or a State Legislature; or established by any Government, with fifty-one percent or more participation by way of equity or control, to carry out any function; society established by the Central Government or the State Government or a Local Authority under the Societies Registration Act, 1860 (21 of 1860); public sector undertakings Further, it is also provided that the said persons shall be liable to deduct tax from the .....

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xcluding the central tax, State tax, Union territory tax, integrated tax and cess indicated in the invoice. Point of taxation As per section 51(1) of the CGST Act, 2017, TDS is require to be deducted by the deducter where the total value of supply of taxable goods and/ or services, under a contract, exceeds 2,50,000/- (excluding the amount of Central tax, State tax, Union Territory tax, Integrated tax and cess indicated in the invoice). Thus, individual supplies may be less than ₹ 2,50,000 .....

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,000/-(including GST of ₹ 60,000/-) Let s analyze the impact of TDS on these contracts in the same order as given above: No TDS is required to be deducted as the value of contract is less than ₹ 2,50,000/- No TDS is required to be deducted as the value of contract is equal to ₹ 2,50,000/- (Rs. 2,95,000- ₹ 45,000/-) TDS is required to be deducted as the value of contract exceeds ₹ 2,50,000/- (Rs. 3,50,000- ₹ 60,000/-) No Deduction of TDS As per proviso to secti .....

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sible for the supplier (i.e., the deductee) to take credit of TDS in his electronic cash ledger. LOS as well as POS is in different states. In such case, IGST would be levied. TDS to be deducted would be TDS (Integrated tax) and it would be possible for the supplier to take credit of TDS in his electronic cash ledger. LOS as well as POS is in Mumbai State and the recipient is located in Rajasthan State. The supply would be intra-State supply and CGST plus SGST would be levied. In such case, tran .....

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n New Delhi Mumbai POS Rajasthan Rajasthan Mumbai LOR Rajasthan Rajasthan Rajasthan TDS applicability Yes (CGST plus SGST) Yes (IGST) No [Covered by proviso to section 51(1) of CGST Act, 2017]. No deduction of TDS in other cases The amount deducted by the deductor (or recipient) as TDS can be claimed as credit by the deductee (or supplier) in its electronic cash ledger. For the purpose of transfer of credit to the deductee, deductor has to file GSTR-7 and where GSTIN, value of contract, etc. has .....

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a-State supplies of goods or services or both received by a deductor (or recipient) under section 51 of the CGST Act, from any supplier, who is not registered, from the whole of the CGST leviable thereon under sub-section (4) of section 9 of the CGST Act, i.e., supplies from unregistered persons, subject to the condition that the deductor is not liable to be registered otherwise than under sub-clause (vi) of section 24 of the CGST Act. Accordingly, a deductor (or recipient) is not required to pa .....

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(3)] or unregistered supplier [Section 9(4)], on which recipient will have to pay GST under reverse charge mechanism. For cases covered by section 9(3) of the CGST Act, 2017 With reference to the section 24(iii) of the CGST Act, 2017, a person (, i.e., recipient) is required to take registration if he is required to pay GST under reverse charge mechanism [section 9(3)]. Accordingly, deductor (or recipient) will take registration under GST and pay GST under RCM. But, whether deductor is also requ .....

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on. Since, deductor would have paid whole tax under RCM, and then there is no requirement to deduct tax at source again at the time of payment. According to the second school of thoughts, TDS may be deducted at the time of making of payment to the supplier as in section 51 of the CGST Act, 2017, law is silent and it is no where specifically specified that in case of RCM, deductor is not required to deduct TDS. For cases covered by section 9(4) of the CGST Act, 2017 With reference to Notification .....

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levy of CGST by aforesaid Notification therefore, there is no requirement for deduction of TDS at the time of making payment to the supplier. According to the second school of thoughts, TDS may be deducted at the time of making of payment to the supplier as in section 51 of the CGST Act, 2017, law is silent and it is no where specifically provided that in case of supplies from unregistered suppliers, deductor is not required to deduct TDS. Conclusion The C.B.E. & C vide FAQs (Short) on GST - .....

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ronic cash ledger which can be used for payment of tax. Q.28 Please clarify ITC credit status for the following condition: If commission received without deducting GST in cases where distributor under exemption or composition scheme? Ans. The section concerning GST deduction (section 51 of CGST Act, 2017) has not been operationalized till now. But if the distributor is under threshold exemption or under composition scheme, the requirement for GST deduction depends upon the taxable supply and val .....

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y is not a taxable supply or exempt from GST. TDS may not be required to be deducted where supplier is unregistered and recipient is not liable to pay GST under reverse charge mechanism under section 9(4) of the CGST Act, 2017. Exemption is provided by way of Notification No.9/2017-Central Tax (Rate), dated 28.06.2017 in respect to the intra state supplies received by the deductor from the unregistered suppliers. TDS shall not be deducted where contract value is not exceeding the value of 2.5 la .....

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nment account by the deductor by 10th of the succeeding month. The deductor would be liable to pay interest if the tax deducted is not deposited within the prescribed time limit. TDS Certificate As per section 51(3) of the CGST Act, 2017, a TDS certificate is required to be issued by deductor (the person who is deducting tax) in Form GSTR-7A to the deductee (the supplier from whose payment TDS is deducted), within 5 days of crediting the amount to the Government. The certificate shall contain fo .....

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luding the CGST, SGST, UTGST, IGST and cess indicated in the invoice. For instance, suppose a supplier makes a supply worth ₹ 1000/- to a recipient and the GST @ rate of 18% is required to be paid. The recipient, while making the payment of ₹ 1000/- to the supplier, shall deduct 1% viz ₹ 10/- as TDS. The value for TDS purpose shall not include 18% GST. The TDS, so deducted, shall be deposited in the account of Government by 10th of the succeeding month. The TDS so deposited in .....

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hall be made available to each of the suppliers in Part C of FORM GSTR-2A electronically through the Common Portal and the said supplier may include the same in FORM GSTR-2. The amounts deducted by the deductor get reflected in the GSTR-2 of the supplier (deductee). The supplier can take this amount as credit in his electronic cash register and use the same for payment of tax or any other liability. The following information will be declared by the deductor in GSTR-7: S.No. Particulars 1. GSTIN .....

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