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Background and Introduction:

The concept of Tax Deduction at Source(TDS) and

Tax Collection at Source (TCS) is very familiar in the

direct tax laws. While tax deduction is made by a

person from the amounts paid/payable by him to

another person which is in the nature of Income for

such another person, tax collection is made by a

supplier of certain goods over and above the amount

the receivable by him from the recipient for such

supply of goods. TDS under income tax are deducted

on incomes such as rent, salary, professional fees,

works contract etc. TCS is collected on sale of luxury

goods such as jewelley, cars above Rs. 10 lacs etc.

In the erstwhile VAT laws, TDS was applicable on the

works contract activities and TCS was applicable on

sale of Scrap. The concept of TDS as well as TCS is

carried forward in Goods and Services tax laws with

some modifications. Wherein, the concept of TDS is

applicable on the contractual supplies, while TCS is

applicable on E-commerce activities.

TDS under GST:

The provisions with respect to the deduction of TDS

is laid down under Section 51 of the CGST/SGST

Act. The applicability of section 51 was deferred by

the Government initially till 30th September, 2017

than till 31st March, 2018 and further till 30th

September, 2018. Finally, the provisions were made

applicable from 1st October, 2018.

Transactions liable for deduction:

Section 51 of the CGST/SGST Act lays down that any

supplies of goods or services or both made under a

contract the aggregate value of which exceeds Rs.

250000 to a specified person is liable for the

deduction of TDS at rate of 1% each under both

CGST and SGST Act. It is worthwhile to note that

supplies have to be made under a contract. If

supplies are not made under a contract no TDS is

required to be deducted. Further, the limit of Rs.

250000 is to be considered separately for each

contract. For example, if value of Contract A is

Rs.200000 and Value of Contract B is Rs. 100000,

the basic limit is to be applied to each contract

separately.

TDS shall not be liable to be deducted on the contracts

where the location of the supplier and the place of supply

is in some other state than in the state of the recipient.

Value of Contract:

Explanation to Section 51(1) of the CGST/SGST Act

provides the "Value of Supply" for the purpose of deducting

TDS. It states that Value of supply shall be taken excluding

the amount of Tax whether CGST, SGST, IGST or Cess

wherever it is mentioned separately under the

corresponding invoice raised for the supply. Thus, it is

pertinent to note that wherever, tax is not indicated

separately in the invoice, TDS will be deducted on the

entire amount indicated in the invoice.

Persons liable to deduct tax:

According to Section 51(1) read with notification

no.50/2018-Central Tax dated 13th September, 2018

mandates the following person to deduct tax at source

namely:

a) a department of establishment of Central

Government or State Government; or

b) local authority;

c) Governmental agencies;

d) an authority or board or any other body,-

i. set up by an act of the parliament or state

legislature; or

ii. 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 Government or

the State Government or a Local Authority under the

Societies Registration Act, 1860 (21 of 1860);

f) Public sector undertaking

The deductors of TDS whether or not registered under the

GST Act are required to obtain mandatorily a separate

registration for the purpose of deducting TDS irrespective of

the threshold limits. Normally, all the registrations under GST

are based on the PAN. However, in the absence of PAN,

registrations under GST can be obtained on the basis of TAN.

TDS AND TCSTDS AND TCSPROVISIONS UNDER GSTPROVISIONS UNDER GST

Compiled by:

CA Poojan M. Dedhia CA Aditya Khandelwal

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37

Deductions and payment of TDS:

Every person liable to deduct TDS shall deduct it from

the value of supply under a contract and amount equal

to 2% (1% CGST and 1% SGST or 2% IGST). The

amount of TDS so deducted shall be liable to be paid to

the credits of the Government by 10th day of the month

succeeding the month in which TDS is deducted.

Moreover, the deductor of TDS shall also file a return

GSTR-7 on the due date same as that of date of

payment.

Once the payment of TDS is made and return is filed by

the deductor, he shall furnish a TDS certificate in form

GSTR-7A within 5 days of the date of payment of TDS

containing therein the following particulars:

i. Value of contract;

ii. Rate of deduction;

iii. Amount deducted;

iv. Amount paid to the government;

v. Such other prescribed particulars

Claim of TDS Credit:

The claim of TDS credits under GST shall be made

available to the deductee to his electronic cash ledger on

the basis of return in GSTR-7 furnished by the

deductor.

Consequences of Non-compliances:

Any failure to comply with the provisions for deduction

and payment of TDS will be liable to interest, fees and

penalties, as the case maybe as follows:

1. In the event of failure to deposit the amount of

TDS deducted, interest shall be liable to be paid at the

rate of 18% in addition to amount of tax deducted.

2. In case of non-filing of GSTR-7 or non-

furnishing of GSTR-7A within the prescribed period,

late fee of Rs. 200 per day (Rs.100 CGST and Rs.100

SGST) shall be levied subject to the maximum of

Rs.10000 (Rs.5000 CGST and Rs.5000 SGST).

Demands and Refunds

The demands for the amounts of TDS shall be made in

accordance with the provisions of Section 73 or Section

74 which deals with bona-fide or mala-fide cases

respectively. The cases with mala-fide intensions shall

attract penal provisions of the act.

The refund of excess/erroneous deductions shall be

made in accordance with the provisions of section 54 of

CGST Act. However, refund of excess/erroneous

deductions shall not be given to the deductor if the

amount so deducted is credit to the cash ledger of the

deductee.

TCS under GST:

The provisions of TCS under GST act are made

applicable on the transactions carried through an

electronic commerce operator (ECO) by a supplier vide

section 52 of the GST Act. The liability to deduct TCS

has been casted upon the electronic commerce

operators like Fipkart, Amazon, Snapdeal etc.

Who is an Electronic Commerce Operator?

According to definition laid down in Section 2(45) of the

CGST Act, an 'electronic commerce operator' means a

person who owns, operates or manages digital or

electronic facility or platform for electronic commerce.

Further, 'electronic commerce' is defined in Section

2(44) as supply of goods or services or both including

digital products over digital or electronic network.

Thus, for the purpose of Section 52, a person acting as

electronic commerce operators has to deduct TCS of a

person who supplies goods or services or both through

the ECO. Therefore, no TCS is required to be deducted

if goods are supplied by an ECO on his own account.

Further, no TCS is required to be deducted where ECO

acts as an agent for the supplier.

Rate of TCS:

According to notification no. 2/2018- Integrated tax and

notification no.52/2018-Central tax, the rate of TCS

required to be collected by the ECOs are 1% on all intra-

state and inter-state supplies of goods and services

through the electronic facility/platform of the ECO.

Value on which TCS is collected:

TCS is to be made on the "Net Value of Taxable

Supplies". The net value of taxable supplies means the

aggregate value of goods or services or both made

during the month by all the registered persons through

the ECO as reduced by the aggregate value of taxable

supplies returned to the suppliers during the same

month. It is to be noted that no TCS is required to be

made on the value of services where the burden of

payment of tax is casted upon the ECO as per section

9(5).

Registration:

As per the requirements of Section 24(x), every ECO is

required to register itself as a collector of TCS

irrespective of the threshold limits. Accordingly, even in

cases where ECO was supplying goods or services or

both on electronic platform only on his own account

and thus, not liable to collect TCS shall also be required

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to be registered as collector of TCS. In GST

(Amendment) Act, 2018 which is yet to be notified,

government has made changes in requirements

whereby it has specified that only ECOs who are

required to collect the tax are required to get themselves

mandatorily.

Payment of TCS and returns:

Every ECO who are liable to collect TCS and have

collected the same are required to deposit in the

government treasury by 10th of the month succeeding

the month in which the TCS is collected. Further, the

ECO is required to furnish a monthly statement in form

GSTR-8 by 10th of the succeeding month containing

details of outward supplies made through it including

goods or services returned through it along-with the

amount of TCS collected. Furthermore, ECOs are also

required to furnish an Annual return in form GSTR-9B

by 31st December of the succeeding financial year. Any

rectification in the statements furnished by it can be

made before the statement for the succeeding month is

furnished by it.

Credit of TCS:

The credits of TCS collected by the ECO shall be

credited to the electronic cash ledger of the supplier

who has supplied goods or services or both through the

ECO.

Matching of Data:

The details furnished by the ECO shall be matched with

the outward supplies furnished by the supplier through

ECO. In case of discrepancies, it shall be communicated

both to the supplier and the ECO. Where discrepancies

communicated are not rectified either by the supplier or

the ECO, and such discrepancies leads to the increase

in liabilities of the supplier, it shall be added to the

output tax liabilities of the supplier. The amount of tax

so added to the output tax liability of the supplier shall

be required to be paid along with interest.

Other responsibilities of ECOs:

The ECOs will be required to submit to the any

authority not below the rank of Deputy Commissioner

upon receipt of the notice from such office details

relating to supplies of goods or services made through it

and details of stock held by a supplier/s in the godowns

or warehouses provided and managed by it. In the event

of failure to furnish such information, the ECO shall be

chargeable to penalty upto Rs.25000

Conclusion:

Looking at the tedious provisions relating to TDS and

TCS, it can be construed that the implementation of the

same and preparing a system strong enough to deal

with the matching mechanism could have led to the

delayed implementation of these provisions. However,

success of the system can only be judged in the times to

come when the actual implementation is done, returns

are filed and credit matching are performed.

                                         

C.V.O. CA'S NEWS & VIEWSVOL. 22 - NO. 3 & 4 - SEPTEMBER - OCTOBER 2018