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ARN. No. KLI/23-24/E-BB/1201
Features
Ref. No. KLI/22-23/E-BB/999
TDS under GST applies to government entities and notified persons for contracts over ₹2,50,000 at a 2% rate, requiring registration, timely payment, issuing certificates, and filing returns, with penalties for non-compliance and refund options available.
TDS on GST rate is a compliance measure mandating specific entities, including government departments and notified persons, to deduct tax on payments for goods and services. This raises the question: What is TDS on GST rate? The purpose of this measure is to ensure tax is collected at the source, improving compliance and reducing tax evasion.
For contracts exceeding ₹2,50,000, a TDS rate of 2% is applicable, divided into 1% CGST and 1% SGST, or 2% IGST for inter-state transactions. Entities are required to register for a unique GSTIN, facilitating timely tax remittance and allowing suppliers to claim TDS credits. This system promotes transparency and ensures efficient tax collection.
To ensure smooth tax collection and settlement, Tax Deducted at Source (TDS) under the Goods and Services Tax (GST) regime serves as a critical compliance mechanism. It requires certain entities to deduct tax on payments made to suppliers of goods and services. This discussion delves into the details of TDS under GST, covering aspects such as liability, rates, registration requirements, and compliance.
Tax deducted at source under GST, the following entities are liable to deduct TDS:
These entities typically make significant payments to suppliers and contractors, thus ensuring a consistent flow of tax revenue.
The liability to deduct TDS arises when the total supply value under a contract exceeds ₹2,50,000, exclusive of GST. The rate of TDS on GST is 2% (1% CGST and 1% SGST or 2% IGST for inter-state supplies).
Entities liable to deduct TDS must register for TDS under GST. They need to obtain a Tax Deduction and Collection Account Number (TAN) and apply for registration through the GST portal. This registration is mandatory, and the deductors are provided with a unique GST Identification Number (GSTIN) specific to TDS purposes.
The deducted TDS amount must be deposited with the government by the 10th of the succeeding month. Payment is made through the GST portal, ensuring timely credit to the government’s account and avoiding any interest or penalties for delayed payments.
Upon deduction of TDS, the deductor must furnish a TDS certificate to the deductee (supplier) within five days from the settlement date. In Form GSTR-7A, this certificate contains details such as the amount deducted and the payment made to the government. The deductee can use this certificate to claim the deducted amount as credit in their GST returns.
TDS is deducted from the taxable value of the supply under the contract, excluding tax deducted at source under GST. This ensures that the tax amount is not subjected to further deduction, preventing cascading effects and ensuring transaction clarity.
The TDS deductor must file a return in Form GSTR-7. This return includes details of the TDS deducted, the TDS certificates issued, and the amount paid to the government. The due date for filing GSTR-7 is the 10th of the month following the month in which TDS was deducted.
The primary benefit to the deductee is the availability of TDS credit. The deducted TDS amount is reflected in the deductee’s Electronic Cash Ledger, allowing them to claim it while discharging their GST liabilities. This mechanism ensures timely tax credits and reduces suppliers’ cash flow burden.
Non-compliance with TDS provisions attracts penalties. If the deductor fails to deduct TDS, a penalty equivalent to the amount of TDS not deducted is levied. Additionally, failing to deposit TDS with the government can lead to interest charges and a penalty of up to ₹25,000. It is crucial for deductors to adhere to these provisions to avoid such TDS late filing penalties.
TDS refunds can be claimed by filing a refund application in Form RFD-01. The deductee must provide details of the TDS deducted and that way, you can claim TDS refund. The application is processed by the tax authorities, and the refund is credited to the deductee’s bank account after verification.
1
Yes, a separate GSTIN is allotted to deduct TDS. This ensures proper tracking and accounting of TDS transactions separately from regular GST transactions.
2
The threshold limit for TDS deduction is when the value of supply under a contract exceeds ₹2,50,000, exclusive of GST.
3
Tax is required to be deducted from the taxable value of the supply, excluding GST.
4
The rate of TDS under GST is 2%, with 1% CGST and 1% SGST for intra-state supplies or 2% IGST for inter-state supplies.
5
Yes, a separate GSTIN is allotted for TDS purposes, even if the person has a PAN and TAN. This GSTIN is specifically used for TDS-related transactions and filings.
Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.
Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors
Pay 10,000/month for 10 years, Get 1,65,805/Year* for next 15 years.
ARN. No. KLI/23-24/E-BB/1201
Features
Ref. No. KLI/22-23/E-BB/999
The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The content has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision. Further customer is the advised to go through the sales brochure before conducting any sale. Above illustrations are only for understanding, it is not directly or indirectly related to the performance of any product or plans of Kotak Life.
