When GST TDS will not be deducted ?
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. [ Refer Notification No. 50/2018 – Central Tax ]
Video Lecture by CA Satbir Singh in Hindi when GST TDS will not apply
However there are the situations when TDS under GST will not be deducted
Tax deduction is not required in following situations:
Person is not Specified Tax Deductor
Every person registered under GST is not required to deduct GST TDS . only Sepcified person are required to deduct GST TDS.
Following would be the deductors of tax in GST under section 51 of the CGST Act, 2017 read with notification No. 33/2017-Central Tax dated 15.09.2017:
(a) a department or establishment of the Central Government or State Government; or
(b) local authority; or
(c) Governmental agencies; or
(d) an authority or a board or any other body,-
(i) set up by an Act of Parliament or a State Legislature; or
(ii) established by any Government,
with fifty-one per cent. or more participation by way of equity or control, to carry out any function; or
(e) a society established by the Central Government or the State Government or a Local Authority under the Societies Registration Act, 1860 (21 of1860); or
(f) public sector undertakings
[ Section 2(69) of 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 Cantonment Board as defined in section 3 of the Cantonments Act, 2006;
a Regional Council or a District Council constituted under the Sixth Schedule to the
a Development Board constituted under article 371 of the Constitution; or
a Regional Council constituted under article 371A of the Constitution. ]
Taxable Supply does not exceeds Rs 2.5 Lakh
GST TDS will not be deducted if Total value of taxable supply <= 2.5 Lakh under a contract.
Example 1 :
Health Department executed a contract with a local supplier to supply “medical grade oxygen” of Rs.2.6 Lakh (including GST) and is making full payment.
Total value of supply as per the contract is Rs.2.6 Lakh (including GST). Tax rate is 12%. So, taxable value of supply (excluding GST) stands at Rs.2.6L x 100/112 = Rs.2.32 L < Rs.2.5 Lakh
Hence, deduction is not required.
Example 2 :
Finance Department, is making payment of Rs.1.5 Lakh to a supplier of ‘car rental service’. and Total contract value is Rs 3 Lakh.
Deduction is mandatory in case the total value of taxable supply under the contract > Rs.2.5 Lakh irrespective of the amount paid.
However, if the total value of supply under a contract is < Rs.2.5 Lakh, deduction is not required.
Value of each Contract does not exceeds Rs 2.5 Lakh
Suppose three separate contracts for supply are given to M/S ABC by the Health Department of the Government of West Bengal and the value of taxable supply is below Rs.2.5 Lakh in case of each contract though their combined value is more than Rs.2.5 Lakh; in such case no deduction under GST is required to be made since value of taxable supply in neither of the contract exceeds Rs. 2.5 Lakh.
Supply made from one PSU to Other PSU
Taxable and Exempted Supply under a contract
GST TDS will not be deducted if Contract value > Rs. 2.5 Lakh for both taxable supply and exempted supply, but the value of taxable supply under the said contract <= 2.5 Lakh.
Education Department is making payment of Rs.4.5 Lakh to a supplier of ‘printed books and printed or illustrated post cards’ where payment for
- books is Rs.2 Lakh and
- other printed or illustrated post cards is Rs.2.5 Lakh
Books are exempted goods; no deduction is required in respect of supply of books.
Payment involving ‘printed or illustrated post cards’ is for supply of taxable goods and But value of such supply is <= Rs.2.5 Lakh; so TDS deduction is not required under GST.
Receipt of Exempt Services
GST TDS will not be deducted on 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.
Fisheries Department is making a payment of Rs.10 Lakh to a contractor for supplying labour for digging a pond for the purpose of Fisheries.
This supply of service is exempt in terms of Sl. No. 3 of notification No.12/2017 – Central Tax (Rate) dated 28.06.2017 and hence TDS deduction under GST is not required.
Municipality is making payment of Rs.5 Lakh to a supplier in respect of cleaning of drains where the value of supply of goods is not more than 25% of the value of composite supply.
This supply of service is exempt in terms of Sl. No. 3A of notification No.12/2017 – Central Tax (Rate) dated 28.06.2017 as amended by notification no. 2/2018- Central Tax (Rate) dated 25.01.2018 and hence TDS deduction under GST is not required.
Government school is making a payment of Rs.3 Lakh to a supplier for supply of cooked food as mid-day meal under a scheme sponsored by Central/State Government.
This supply of service is exempt in terms of Sl. No. 66 of notification No. 12/2017 – Central Tax (Rate) dated 28.06.2017 as amended and hence deduction is not required.
Receipt of Exempt Goods
GST TDS will not be deducted on 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.
Health Department is making payment of Rs.10 Lakh to a supplier for supply of Hearing Aids.
This supply of goods is exempt in terms of Sl. No.142 of notification No. 2/2017 – Central Tax (Rate) dated 28.06.2017 as amended and hence TDS deduction under GST is not required.
Receipt of Non GST Goods
GST TDS will not be deducted on Goods on which GST is not leviable.
For example petrol, diesel, petroleum crude, natural gas, aviation turbine fuel (ATF) and alcohol for human consumption.
Receipt of Goods on which TDS to be deducted under VAT Law
GST TDS will not be deducted 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 [Section 142(13) refers].
Location of Supplier and Place of Supply is different
GST TDS will not be deducted where the location of the supplier and place of supply is in a State(s)/UT(s) which is different from the State / UT where the deductor is registered.
Govt. of WB engages a contractor of Delhi for renovation of Bangla Bhawan in Delhi
Location of Supplier :Delhi
Place of Supply : Delhi
State of registration of recipient :West Bengal
Type of Supply : Intra State in the State of Delhi
TDS deduction under GST : No
Schedule III of CGST Act 2017
GST TDS will not be deducted on all activities or transactions specified in Schedule III of the CGST/SGST Acts 2017, irrespective of the value.
Invoices issued before 01.10.2018
GST TDS will not be deducted where the payment relates to a tax invoice that has been issued before 01.10.2018.
Advance Payments made before 01.10.2018
GST TDS will not be deducted 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.
Tax Paid under Reverse Charge
GST TDS will not be deducted where the tax is to be paid on reverse charge by the recipient i.e. the deductee.
Payment to unregistered Supplier
GST TDS will not be deducted where the payment is made to an unregistered supplier.
Payment of Cess
GST TDS will not be deducted where the payment relates to “Cess” component.
No GST TDS on GST Component
For purpose of deducting of TDS, the value of supply is to be taken as the amount excluding the tax indicated on the invoice. This means TDS shall not be deducted on the CGST, SGST or IGST component of invoice.
Mr Z has issued a Tax Invoice of Rs. 11,800/- which comprises a GST component of Rs. 1,800/-. TDS in this case is to be deducted @ 2% (1% of CGST & 1% of SGST) on Rs. 10,000/-. Mr A will deduct Rs. 200/- which he will deposit in the proper Govt. A/c head. Mr A will pay Rs. 11600/- (11800/ – 200/-) = (i.e. Full Invoice Value – TDS amount) to Mr Z.