TDS UNDER THE CGST ACT, 2017

The concept of Tax Deduction at Source (TDS) was there in the erstwhile VAT Laws. GST Law also mandates Tax Deduction at Source (TDS) vide Section 51 of the CGST/SGST Act, 2017, Section 20 of the IGST Act, 2017 and Section 21 of the UTGST Act, 2017. GST Council in its 28th meeting held on 21.07.2018 recommended the introduction of TDS from 01.10.2018.

Effective date: Notification No. 33/2017-Central Tax dated 15.09.2017 was issued by the CBIC to enable registration of tax deductors. However, Government suspended the applicability of TDS till 30.09.2018. Now, it has been decided that the TDS provision would be made operative with effect from 01.10.2018. Notification No. 50/2018-Central Tax dated 13.09.2018 has already been issued in this regard by CBIC. Similar notifications have been issued by respective State Governments.

Registration and Cancellation (Sec. 24(vi) of the CGST Act, 2017 & Rule 12 of the CGST Rules, 2017)
(i)	Registration is to be done through the common portal "www.gst.gov.in /Registration/New Registration/Tax Deductor" by using PAN OR TAN (PAN is not mandatory for registration)
(ii)	Mandatory Registration as a TAX DEDUCTOR (a) No threshold Limit for registration (b) Tax deductor registration will be separate even if already having regular GSTIN, (c) The existing deductors of STDS/TCS under VAT Act will not be automatically migrated to GST.
(iii)	FORM GST REG-07 - Application for GST registration as a TAX DEDUCTOR and FORM REG-06-Certificate for registration within a period of three working days from the date of submission of the application. (Rule 12(2)).
(iv)	Time Limit for filing Application for registration as TAX DEDUCTOR- Immediately no grace period.
(v)	Cancellation of Registration (Rule 12(3)) : When Registered Person is no longer liable to deduct tax at source under section 51 the said officer may cancel the registration issued under sub-rule (2) and such cancellation shall be communicated to the said person electronically in FORM GST REG-08: Provided that the proper officer shall follow the procedure as provided in rule 22 for the cancellation of registration.

Persons liable to deduct tax under GST Law

As per Section 51(1) of the CGST Act, 2017, the following persons are mandatorily required to deduct TDS:- (a) Department or establishment of the Central/State Government; or (b) Local authority; or (c) Government agencies; or (d) Such persons or category of persons as may be notified by the Government on the recommendations of the Council. (The following class of persons under this clause (d) has been notified vide notification No. 33/2017-Central Tax dated 15.09.2017 (i) An authority or a board or any other body (Refer Section 2(69) of the CGST ACT 2017 for definition of "Local Authority") (ii) Set up by an Act of Parliament or a State Legislature; or (iii) Established by any Government- with fifty-one percent or more participation by way of equity or control, to carry out any function (e) society established by the Central/State Government or a Local Authority under the Societies Registration Act, 1860; (f) Public sector undertakings.

Application GST provisions/action points/views for/after TDS deduction
Threshold Limit of TDS :- Total Value of taxable supply under a contract (excluding GST)>2.5 lakh
(i)	TDS is required to be deducted on both inter-State as well as Intra-state Supplies, GST-TDS shall be deducted from making/crediting payment to the supplier (Sec. 51(1)) where the total value of such supply, under a contract, exceeds two lakh and fifty thousand rupees.
	Nature of Supply	Location of supplier (LOS)/Place of supply (POS)	Nature of TDS	Rate of Tax
	(a) For inter-state supply	Location of the supplier & place of supply are in the different States	IGST	2%
	(b) For Intra State-supply	Location of the supplier & place of supply is in the same State/UT without any legislature	CGST/SGST/UTGST	1%
		Location of the supplier and place of supply is in a same State(s)/UT(s) and recipient is registered in different State/UT where the deductor is registered	NO TDS (i.e. for example LOS=Mumbai, POS=Mumbai, LOR=Rajasthan, TAX CHARGED = CGST+SGST MAHARASHTRA GST-TDS provisions will not be applied, No GST TDS is to be deducted)	1%
	Note:-No tax shall be deducted on 'Central tax', 'State tax', 'UT tax', 'Integrated tax' and cess component levied on supply.
(ii)	Make payment of deducted tax to the Government within 10 days after the end of month in which deduction was made (section 51(2))(Rule 85(4)). TDS liability and any amount payable towards interest, penalty, fee or any other amount under the Act can be discharged by debiting of Electronic Cash Ledger only at the time of filing return in FORM GSTR 7.
(iii)	Due date of return-Submit in Form GSTR-7(monthly), within 7 days after the end of the month in which deduction was made (Sec. 39(3) with Rule 66 (1))
(iv)	Furnish system Generated TDS certificate in Form GSTR-7A to the deductee within 5 days of crediting payment of TDS to the Government i.e. furnishing FORM GSTR -7 (Section 51(4))(Rule 66(3))-(omitted w.e.f. 27.03.2020(President assent to Finance Bill 2020 -Section 51 of the CGST Act is being amended to remove the requirement of issuance of TDS certificate by the deductor; and to omit the corresponding provision of late fees for delay in issuance of TDS certificate.)
(v)	Benefit of TDS to deductee: With the deduction of tax and submission of return in FORM GSTR 7 the amount deducted would be available electronically to each of the deductees on the common portal after filing of FORM GSTR-7 [for claiming the amount of tax deducted in his electronic cash ledger after validation (amended through Notf. No. 31/2019 - CT dt. 28.06.2019). The deductee would be able to utilize this amount for discharging his tax liabilities.(Section 51(5))(Rule 66(2)).
(vi)	Filing of TDS Return for period during which there was no registration: All deductions made on or after 1st October, 2018 but before the date of registration may be included in the first return to be furnished after obtaining registration.(inserted as on 27/12/2018)(Rule 66(1).
(vii)	GST-TDS deduction provisions are applicable in case of taxable supplies made by vendors under the composition scheme.
(viii)	GST-TDS has to be deducted on the value including any retention monies withheld as even though the payment to the vendors is not made immediately, the liability towards the same is credited to the suppliers in books of account of the deductor
(ix)	GST-TDS may apply in respect of those liabilities which are freshly for the first time created in books of account on or after 01.10.2018 irrespective of the fact that the supply was made prior or invoice was issued prior to 01.10.2018(Transitional Provisions).
(x)	GST-TDS has to be deducted on advance payments on or after 01.10.2018 made to vendors on the basis of pro forma invoices without having accrued any liability in books,

When tax deduction is not required to be made under GST: Tax deduction is not required in following situations:
(i)	Total value of taxable supply ≤ ₹ 2.5 Lakh under a contract.
(ii)	Contract value >₹ 2.5 Lakh for both taxable supply and exempted supply, but the value of taxable supply under the said contract ≤ ₹ 2.5 lakh.
(iii)	Receipt of services which are exempted. For example services exempted under Notification No. 12/2017 - Central Tax (Rate) dated 28.06.2017 as amended from time-to-time.
(iv)	Receipt of goods which are exempted. For example goods exempted under notification No. 2/2017 - Central Tax (Rate) dated 28.06.2017 as amended from time-to-time.
(v)	Goods on which GST is not leviable. For example petrol, diesel, petroleum crude, natural gas, aviation turbine fuel (ATF) and alcohol for human consumption.
(vi)	Where a supplier had issued an invoice for any sale of goods in respect of which tax was required to be deducted at source under the VAT Law before 01.07.2017, but where payment for such sale is made on or after 01.07.2017[Section142(13)refers]. (Transitional Provisions).
(vii)	Where the location of the supplier and place of supply is in a Same State(s)/UT(s) and recipient is registered in different State/UT where the deductor is registered.
	(i.e. LOS=Mumbai, POS=Mumbai, LOR =Rajasthan, TAX CHARGED = CGST+SGST MAHARASHTRA GST-TDS provisions will not be applied, No. GST TDS is to be deducted)
(viii)	All activities or transactions specified in Schedule III of the CGST/SGST Acts 2017, irrespective of the value.
(ix)	Where the payment relates to a tax invoice that has been issued before 01.10.2018.
(x)	Where any amount was paid in advance prior to 01.10.2018 and the tax invoice has been issued on or after 01.10.18, to the extent of advance payment made before 01.10.2018.
(xi)	Where the payment relates to "Cess" component.
(xii)	With respect to persons specified under clause (a) of sub-section (1) of section 51 of the Act, nothing in this notification shall apply to the authorities under the Ministry of Defence (Inserted vide Notification No. 57/2018 dated 23-10-2018)
(xiii)	Notification No.61/2018 Central Tax dated 05.11.2018 retrospectively exempting applicability of TDS provision on supply of goods & service form one PSU to other PSU. Whether or not a distinct person
(xiv)	TDS provision shall not apply to the supply of goods or services or both which takes place between one person to another person specified under clauses (a), (b), (c) and (d) of sub-section (1) of section 51 of the said Act.". (Inserted vide Notification No. 73/2018 dated 31-12-2018

Interest, Penalty and Late fee (Payable only by Deductor)
(i)	Interest u/s. 50(1) fails to pay the tax or any part thereof to the Government within the period prescribed, shall for the period for which the tax or any part thereof remains unpaid, pay, on his own, interest at such rate, not exceeding eighteen percent Both deducted tax and interest @ 18% to be paid (Section 50(1) read with Section 51(6). Note :- There is no relaxation in interest as available to GSTR-3B as provided in COVID 2019 relaxation provisions.
Late Fee
(ii)	(a) Fails to furnish FORM GSTR-7 (return) with due date:- Late fee payable (Section 47(1):- i.e., ₹ 100/- + ₹ 100/- per day(Maximum ₹ 5,000/-) under CGST Act & SGST/UTGST Act separately	(b) Fails to furnish FORM GSTR-7A (certificate) within due date:- Late fee payable (Section 51(4)) ₹ 100/- + ₹ 100/- per day (Maximum ₹ 5,000/-) under CGST Act & SGST/UTGST Act separately (omitted from w.e.f. 27.03.2020 Finance Bill 2020)
(iii)	Penalty Section 122(1)(v) = Fails to deduct or lesser deduction or fails to make payment of tax deducted:- He shall be liable to pay a penalty of ten thousand rupees or an amount equivalent to the tax evaded or the tax not deducted under section 51 or short deducted or deducted but not paid to the Government whichever is higher

 

Refund of TDS under GST (Section 51(8) read with section 54)

If excess amount deducted, refund may be claimed by the deductor/deductee as the case may be (if excess tax gets credited to the deductee then no refund shall be granted to the deductor. Refund of payment under wrong head :-where taxes so deducted or collected is deposited under the wrong head (e.g. an amount deducted as Central tax is deposited as Integrated tax/State tax), thereby creating excess balance in the cash ledger of the deductor or the collector as the case may be. Doubts have been raised on the fate of this excess balance of TDS/TCS in the cash ledger of the deductor or the collector. It is clarified that such excess balance may be claimed by the tax deductor or the collector as the excess balance in electronic cash ledger. In this case, the common portal would debit the amount so claimed as refund. However, in case where tax deducted or collected in excess is also paid while discharging the liability in FORM GSTR 7 or FORM GSTR 8, as the case may be, and the said amount has been credited to the electronic cash ledger of the deductee, the deductee can adjust the same while discharging his output liability or he can claim refund of the same under the category "refund of excess balance in the electronic cash ledger". (CIRCULAR NO. 125/44/2019-GST [CBEC-20/16/04/18-GST], Dated 18-11-2019)

(Note:- Recovery may be initiated u/s. 73 or 74 for interest, penalty and late fee)

Covid-19 Relief by Notification No. 35/2020 Dt. 03.04.2020

Time limit for issuance of notice, notification, approval order, sanction order, filing of appeal, furnishing of return, statements, applications, reports, any other documents or any compliance under the GST laws where the due date is expiring between 20-3-2020 to 29-6-2020 shall be extended to 30-6-2020.

New Returns (proposed) -once the suppliers files the TDS return, TDS/TCS credit will be auto-populated in table 5 of RET-1.

TCS UNDER THE CGST ACT, 2017

Tax Collected at Source: Section 52 of the CGST Act, 2017 made applicable to IGST vide Section 20 of the IGST Act, 2017 and UTGST vide Section 21 of the UTGST Act, 2017

(Press Release issued by the Government highlighting decisions of 22nd GST Council Meeting held on 6.10.2017, reads that after assessing the readiness of the trade, industry and Government departments, it has been decided that registration and operationalization of TDS/TCS provisions shall be postponed till 31.03.2018. Further 26th Council Meeting deferred till 30.06.2018, further deferred to 30th Sep. 2018 by press release dated 26th June 2018.)

Section 52

"Notwithstanding anything to the contrary contained in the Act, every electronic commerce operator (hereinafter referred to in this section as the "operator"), not being an agent, shall collect an amount calculated at such rate not exceeding 1 per cent as may be notified by the Government on the recommendation of the council of the net value of taxable supplies made through it by other suppliers where the consideration with respect to such supplies is to be collected by the operator.

Electronic Commerce Operator:- Section 2(45) means any person who owns, operates or manages digital or electronic facility or platform for electronic commerce.(There are many e-Commerce operators [hereinafter referred to as an Operator], like Amazon, Flipkart, Jabong, etc. operating in India. These operators display on their portal products as well as services which are actually supplied by some other person to the consumer. The goods or services belonging to other suppliers are displayed on the portals of the operators and consumers buy such goods/services through these portals. On placing the ­order for a particular product/service, the actual supplier supplies the selected product/service to the consumer. The price/consideration for the product/service is collected by the Operator from the consumer and passed on to the actual supplier after the deduction of commission by the Operator) "Electronic commerce" Section 2(44), means the supply of goods or services or both, including digital products over digital or electronic network.

Provisions of collection of tax source do not apply

 (a) If the electronic commerce operator sell goods and/or services on his own behalf.

 (b) If the consideration for supplies is not collected by him.

 (c) As per section 10(2)(d) of the CGST Act, 2017, a composition taxpayer cannot make supplies through e-commerce operator. Thus, question of collecting TCS in respect of supplies made by the composition taxpayer does not arise.

The Government has placed the responsibility on the Operator to collect the 'tax' at a rate of 1% from the supplier. This shall be done by the Operator by paying the supplier, the price of the product/services, less the tax, calculated at the rate of 1%.

Registration:

Compulsory registration :-Following Categories of Persons are notified for Compulsory Registration :- u/s. 24 Notwithstanding anything contained in sub-section (1) of section 22, the following categories of persons shall be required to be registered under this Act,–

(iv) person who are required to pay tax under sub-section (5) of section 9;

(ix) persons who supply goods or services or both, other than supplies specified under sub-section (5) of section 9, through such electronic commerce operator who is required to collect tax at source under section 52; Exception Sec. 23(1)(c) specifies that, Government may, on the recommendations of the Council, by notification, specify the category of persons who may be exempted from registration under this Act. Persons supplying Services through e-Commerce Operators Subject to Threshold Limit have been notified under this clause (Notification No. 65/2017-CT dated 15.11.2017)

(x) every electronic commerce operator who are required to collect tax u/s. 52 i.e. Separate Registration is reqd. for TCS in Form GST REG-07as compared to existing GSTIN as a supplier

However, in case of supplier where the consideration with respect to supplies made on electronic commerce is not collected by the electronic commerce operator, then in such case, such supplier will be eligible to claim the threshold benefit for registration as per section 22 of the CGST Act, 2017.

Exemption from Registration : vide Notification No. 65/2017 - Central Tax dated 15.11.2017, the Central Government, on the recommendations of the Council, exempted persons making supplies of services, other than supplies specified under section 9(5) of CGST Act through an e-commerce operator who is required to collect TCS under section 52, from obtaining registration provided their aggregate turnover to be computed on all India basis, does not exceed ₹ 20 lakh (₹ 10 lakh in special category states) [Press release on Policy issues dated 10th November 2017, Notification No. 65/2017-Central Tax dated 15th November, 2017].

Procedure :-Form GST REG-07: Application for GST Registration as tax collector and Form GST REG 06-Certificate for registration within 3 days from date of submission of application, Rule 12(1A): A person ­applying for registration to collect tax in accordance with the provisions of section 52, in a State or Union territory where he does not have a physical presence, shall mention the name of the State or Union territory in PART A of the application in FORM GST REG-07 and mention the name of the State or Union territory in PART B thereof in which the principal place of business is located which may be different from the State or Union territory mentioned in PART A. (Registration is required in each State/UT where deductees are located, However, for Registration can be taken using the Head Office Address as the place of business

SERVICES NOTIFIED U/S. 9(5)

Sr. No.	Description of supply of service	Supplier of service	Person liable to pay GST	Notification No.
1	Transportation of passengers by a radio-taxi, motorcab, maxicab and motor cycle	Any person	E-Commerce Operator	17/2017-CT dated 28.06.2017
2	Providing accommodation in hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes	Any person except who is liable for registration under sub- section (1) of section 22 of the said CGST Act	E-Commerce Operator	17/2017-CT dated 28.06.2017
3	Services by way of housekeeping, such as plumbing, carpentering etc	-do-	E-Commerce Operator	23/2017-CT dated 22.08.2017

Relevant Provisions once TCS is deducted

  1. 'Persons' liable to make collection of tax & Rate of Tax under Section 52 (1 and 2) of CGST Act.

Every e-Commerce Operator shall collect TCS at a rate not exceeding 1% (As per Notification No. 52/2018 -Central Tax 0.5%=1%) on the net value of taxable supplies made through it by other suppliers in which he collects consideration of the supply Such TCS shall be made only where the consideration with respect to such supplies is to be collected by the operator. Such TCS to be deducted at GSTIN Level (supplier wise)

Credit of tax collected: The tax collected by the Operator shall be credited to the cash ledger of the supplier who has supplied the goods/services through the Operator. The supplier can claim credit of the tax collected and reflected in the return by the Operator in his [supplier's] electronic cash ledger. (Section 52(7)).

net value of taxable supplies

The expression "net value of taxable supplies" shall mean the aggregate value of taxable supplies of goods or services or both, other than services notified under sub-section (5) of section 9, made during any month by all registered persons through the operator reduced by the aggregate value of taxable supplies returned to the supplier during the said month. As per Section 15(2), Net value of taxable Supplies shall include - (a) Any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than GST/Compensation Cess if charged separately to be included. Any TCS under income tax not to be included

However in following situation TCS may not be deducted (a) Collection by e-Commerce operator being an Agent (b) Where the consideration with respect to such supplies is not collected by the operator. (c) Payment in respect of Non-Taxable/Exempt Supplies (d) Payment to Suppliers who are not required to be registered under GST Law (e) Supplies where Tax is to be paid on reverse charge basis by the Recipient.

Time of Deduction:- No clarity in Section 52 for time at which the tax should be collected at source by the electronic commerce operator. However, it may be opinion that TCS is to be collected once supply has been made through the e-commerce operator and where the business model is that the consideration is to be collected by the e-commerce operator irrespective of the actual collection of the consideration. For example, if the supply has taken place through the e-commerce operator on 30th October, 2018 but the consideration for the same has been collected in the month of November, 2018, then TCS for such supply has to be collected and reported in the statement for the month of October, 2018. [GST Council - Law Committee FAQ 13]

Adjustment of Payment:-If out of the total consideration received by the operator some part is adjusted against receivable from the supplier, tax should tax be collected at source by the operator even on such amount which is adjusted against other amounts received from the supplier. As per section 52, irrespective of the mode of recovery of consideration by the supplier from the operator, tax should be collected at source on the net value as defined in section 52(1) of the CGST Act, 2017. There is no deduction envisaged in the CGST Act, 2017 in this regard.

Threshold Limit for TCS:-No such limit prescribed, tax should always be collected at source if the conditions envisaged u/s. 52 are met.

2. Time Limit of TCS Payment (Section 52(3)and Rule 85(4)) :- The amount of tax collected by the e-Commerce Operator has to be paid to the credit of the appropriate Government within 10 days after the end of the month in which such TCS is made.

3. Returns:- e-Commerce operators should file

 (a) Monthly Return Section 52(4) and Rule 67(1) of the CGST Act require filing of GSTR-8 (containing (i) Statement of outward supplies of goods and services. (ii) Return of goods and services (iii) Amount collected during a month by e-Commerce Operator within ten days after the end of such month. (Rule 67(2)(2)). The details furnished by the operator under sub-rule (1) shall be made available electronically to each of the suppliers on the common portal after filing of FORM GSTR-8 [for claiming the amount of tax collected in his electronic cash ledger after validation]

 (b) Annual Return Section 52(5) & Rule 62(4) of CGST Act requires filing of GSTR 9B Annual return (containing (i) Outward supplies of Goods and Services, (ii) Return of goods and services during the Financial Year, (iii) Amount collected during a financial year.) by E-Commerce operator on or before 31st December following the year end (31st March of relevant year)

  4. Rectification of errors in Return: The Operator can rectify errors in the statements filed, if any, latest by the return to be filed for the month of September, following the end of every financial year, no rectification will be allowed. After the due date of furnishing the statement for the month of September following the end of Financial Year, or actual date of furnishing the Annual Statement, whichever is earlier.

  5. Penalty: e-Commerce operator receiving notice which sought information as per Section 52 of the CGST Act but he failed to duly respond to the same. Both the penalty u/s. 52 as well as 122 shall be there.

Failure to submit the required details will cause

 (a) Section 52(14): Any person who fails to furnish the information required by the notice served under sub-section (12) shall, without prejudice to any action that may be taken under section 122, be liable to a penalty which may extend to twenty- five thousand rupees.

In addition to this

 (b) Penalty under section 122 of the Act 'shall' be payable ₹ 10,000 or an amount equivalent to the tax evaded or the tax not deducted under section 51 or short deducted or deducted but not paid to the Government or tax not collected under section 52 or short collected or collected but not paid to the Government or input tax credit availed of or passed on or distributed irregularly, or the refund claimed fraudulently, whichever is higher.

  6. Mismatch, Rectification of Mismatch and Interest (Section 52(8) to 52(11)).

The details of the supplies, including the value of supplies, submitted by every operator in the statements will be matched with the details of supplies submitted by all such suppliers in their returns.

Any mismatch between the data submitted by the e-Commerce Operator in his monthly returns and that of suppliers making supplies through him shall cause due 'mismatch enquiry' from the proper officer; If there is any discrepancy in the value of supplies, the same would be communicated to both of them. either party may rectify the erroneous data.

If rectification is not carried out by supplier his offences get confirmed. Short remittance, if any, identified thus will have to be rectified then such amount would be added to the output tax liability of such supplier and will be paid by erring supplier (who under reported the turnover) with interest calculated as per Section 50 (Interest @18%)

  7. Notice (Section 52 (12&13)): A notice to e-Commerce Operators seeking information of

  (a) supplies of goods or services or both effected through such operator during any period; or

  (b) stock of goods held by the suppliers making supplies through such operator in the godowns or warehouses, by whatever name called, managed by such operator and declared as additional places of business by such suppliers, as may be specified in the notice can be issued by Deputy Commissioner. A reply shall furnish the required information within fifteen working days of the date of service of such notice.

8. Refund, Covid-19, New Return:- Please refer contents mention in TDS chapter.

❑❑