TDS under GST refers to Tax Deducted at Source. In general, TDS is a mechanism where tax is deducted at the source of income generation directly. It enables to reduce tax evasion and maintain a steady revenue flow for the government. Under GST norms, TDS rate is usually 2% of the value of goods and split between CGST and SGST or IGST (for interstate supplies) as applicable. Details on GST TDS can be found under Section 51 of the CGST Act and Rule 66.
For more information on Tax Deducted at source, visit the GST official website: //www.gst.gov.in/
What is TDS in GST?
Let us understand GST TDS meaning – what is Tax Deducted at Source under GST?
TDS put simply refers to the mechanism of deducting taxes at the outset when payments are being made to the supplier for goods/services. Under GST rules, there are specific guidelines and eligibility criteria, fulfilling which tax is deducted at the source of payment.
TDS is collected at a specific rate (usually 2%) and then remitted to the government. All discussions on GST TDS fall under Section 51 of the CGST Act and Rule 66.
Who can deduct GST TDS?
Under the GST regime, there are several government entities that can deduct TDS in GST such as government bodies, local authorities, government boards, public sector undertakings, among others. That is, these entities are required to deduct a certain percentage of GST as TDS on the total amount paid to the supplier of taxable goods and services.
What is the TDS threshold limit?
For TDS to be applicable under the GST regime, the value of goods and services supplied must exceed ₹2.5 lakhs (i.e., ₹2,50,000). This limit is exclusive of GST.
What is the GST TDS rate?
The standard TDS rate under GST is 2% of the total payment made to the supplier. This rate is split between CGST and SGST. That is, 1% CGST and 1% SGST for all intra-state supply of goods and services.
In case of inter-state supply of taxable goods and services, the applicable IGST rate is 2%.
Example of TDS under GST
To understand how TDS in GST works, we take a look at a simple example (hypothetical).
Consider a scenario, where a government department (G) hires a company (Company C) for their repair work services. The actual contract value is ₹5 lakh and applicable GST rate is 18%.
This is how GST TDS will be calculated:
Value of goods/services = ₹5,00,000
Applicable GST% = 18% x ₹5,00,000 = ₹90,000
Total value (including GST) = ₹5,00,000 + ₹90,000 = ₹5,90,000
TDS applicable (since contract value exceed ₹2.5 lakhs) = 2% of ₹5,00,000 = ₹10,000
Final payment for Company C = ₹5,90,000 – ₹10,000 = ₹5,80,000 (including GST and TDS)
Tax Deducted at Source (TDS) applicability for GST
Now that we understand the basis of TDS in GST, let’s take a look at its applicability. As mentioned, TDS is applicable in specific cases when the taxable amount exceeds ₹2,50,000.
However, no TDS is required if the recipient’s registration state is different from the location of the supplier and place of supply.
Let’s understand this with the example of a steel supplier in West Bengal – Supplier S. The supplier provides goods to businesses across states (i.e., inter and intra supply of goods).
- Recipient Y is registered in Odisha and buys goods from Supplier S for its factory in West Bengal. Here no TDS will be applicable.
- Recipient Y now buys goods for its factory in Guwahati. Here, TDS of 2% will be applicable (i.e., IGST).
- Recipient R is registered in West Bengal and buys goods from Supplier S for its factory in West Bengal. Here TDS of 2% will be applicable (i.e., 1% CGST and 1% SGST).
- Recipient R now buys goods for its factory in Ranchi. Here TDS will also be applicable (i.e., 2% IGST).
Also read: GST structure and rates
Which GSTR forms should be filed for TDS?
From the above scenarios, it can be understood that TDS in GST is treated based on multiple factors. As such, the likely question is – how does TDS impact GST returns filing? Let’s take a look at the different GSTR return forms that impact TDS payments.
GSTR-7 for TDS filing:
The main GST return form that is applicable here is GSTR-7. Entities that deduct TDS must fill in and file GSTR-7 every month that list details on all TDS deductions and payments.
The correct TDS amount must be paid to the government within 10 days from the end of the month in which TDS has been deducted.
So, if TDS was deducted on the 8th of April 2024, it must be deposited with the government by the 10th of May 2024.
GSTR-7A for TDS certificate
When TDS is deducted, a certificate must be issued (i.e., GSTR-7A) within 5 days of submitting the tax to the government. This is auto-generated on the GST portal. That is, as soon as GSTR-7 is filed, GSTR-7A will be generated for the deductee.
Non-compliance can lead to fines/late fees of ₹100 per day, with a maximum late fees of ₹5,000.
Also read: GST Amnesty Scheme
Penalties, fines and refunds for TDS under GST rules
Before closing our discussion on TDS under GST rules, let’s understand the penalties/fines and refund processes in place.
GST TDS Penalties and fines:
- TDS must be submitted to the government within 10 days of the next month in which TDS has been deducted, and non-compliance can attract a late fees of ₹100 per day or ₹5,000 maximum late fees, under each Act
- If TDS Certificate is not issued with 5 days of depositing the sum to the government, a late fees of ₹100 per day or ₹5,000 maximum late fees, under each Act is applicable
- If TDS is not deducted, 18% interest is applicable to be paid along with the TDS amount
- If payment of TDS is delayed beyond the timeline, 18% interest and the TDS amount is to be paid
These penalties ensure that all entities adhere to the guidelines of GST TDS and stay compliant.
TDS under GST refund process:
A refund process is in place in case of excess or erroneous deductions. Here’s how it works:
- File for refund on the GST portal
- Verification takes place where the refund claim is verified and if approved, the amount is returned
- The process takes approximately 60 days to complete
Note: This is not applicable if the refund sum is already added to supplier’s electronic cash register. In such cases a separate process of tax refund is followed.
FAQs
What is the TDS for GST entries?
Under GST rules, TDS is deducted at 2% on payments to the supplier of taxable goods or services. There are specific government entities who can deduct Tax Deducted at Source on payments that exceed the sum of ₹2,50,000.
How do I check my TDS on GST?
To view details on GST TDS, you will have to log in to the GST portal with your credentials.
- Login to GST portal and navigate to the ‘Services’ tab
- Visit the ‘Returns’ section and select the ‘TDS and TCS credit received’ option
- Proceed by updating details on financial year and filing period
- Click Search to proceed
You can next choose to prepare details online or offline.
Which GST form for TDS?
The two GSTR forms relevant to TDS are GSTR-7 and GSTR-7A. Once the deductor has filed GSTR-7, the GSTR-7 form which is a TDS Certificate will be auto generated (must accept the details).
What is the threshold limit of TDS on GST?
The threshold limit of TDS on GST is ₹2,50,000.
*This article is for information only. For more details please visit the official GST website or consult with a GST practitioner or CA or tax consultant for professional advice.
Sohini is a seasoned content writer with 12 years’ experience in developing marketing and business content across multiple formats. At Tata nexarc, she leverages her skills in crafting curated content on the Indian MSME sector, steel procurement, and logistics. In her personal time, she enjoys reading fiction and being up-to-date on trends in digital marketing and the Indian business ecosystem.
In case the refund process doesn’t complete in the mentioned 60 days, who do we address the issue to? Are there any point of contacts for such problems?
I finally got to understand how TDS actually works by going through this blog. It definitely helps in reducing the opportunities of non-compliance. Although I’m still not clear on where and how TDS is not applicable.
Could you please elaborate that how TDS interacts with reverse charge mechanisms under GST? Are there any overlaps or exclusions?
We have written an article on the same, pls read it through, it has all the details – https://blog.tatanexarc.com/msme/reverse-charge-mechanism-rcm-under-gst/