TDS under GST regime

By Registrationwala

10th April 2017


Since all the economic entities are going to be impacted by GST, how can we now discuss the impact it will have on TD. Under the GST regime, whenever, there is an intra-state supply (where goods move from one state to the other), the taxes that are paid come under the CGST, meaning the tax goes into the account of the central government. While for the inter-state supply, integrated taxing is done and the taxation has components of both CGST and SGST. Apart from these, certain categories of individuals will have to pay the TDS (Tax Deducted at Source) to the government accounts. The following write-up seeks to understand the details and procedure for TDS under GST regime.


According to section 46 of the GST law: Any state or central government can mandate a department or establishment of the Central or State Government, or any Local authority, orGovernmental agencies, orsuch persons or category of persons as may be notified, by the Central or a State Government on the recommendations of the Council,to deduct one percent tax from the payment made or credited to the supplier of taxable goods and/or services, notified by the Central or a State Government on the recommendations of the Council. Such tax will only be deducted where the total value of such supply, under a contract, exceeds five lakh rupees.

This provision is for government and government undertakings and some other notified entities that are obliged to make contractual payments that exceeds 5 lakhs. Whenever such payment is made, the concerned Government/authority must deduct 1% of the total payable amount and deposit it into the appropriate GST account (either of central government or state government whichever is applicable for the deductor).

Value of supply for TDS deduction

Any amount exceeding the tax indicated in the invoice is taken as the value of supply. Hence TDS must not be deducted on the CGST, SGST or IGST part of the invoice.

Who gets the TDS

TDS must always be paid within 10 days from the end of the month in which tax is deducted and the payment needs to be made to appropriate government. Section 2(11) of the revised GST model law clearly states that appropriate Government means the Central government in case of the IGST and the CGST, and the State government in case of the SGST. Moving forward on this certain procedural compliances need to be completed by the deductor. Those are mentioned below:-

All such deductors are mandated to beregistered under section 23 read with Schedule IV of revised Model GST Law.

  1. All these deductors must have TAN issued under income tax act to get registered under the act.
  2. TDS must be collected by the 10th day of the month succeeding the month in which TDS was collected and reported in GSTR 7.
  3. Any amount that is deposited as TDS will be automatically reflected in the electronic cash ledger of the supplier.
  4. The deductor must issue a certificate of such TDS to the deductee within 5 days of deducting TDS mentioning the details like the contract value, the rate at which deduction is done, the amount that has been deducted, the amount that was paid to the appropriate Government and such particulars that have been prescribed.
  5. Acts like Non deduction / short deduction / non-payment or short payment of TDS is considered an offence according and a penalty of minimumRs 10000/- will have to be paid.

Deductee and the claim benefits of TDS

The deducteecan claim credit that will be reflected in his electronic cash ledger. It will also be shown in the return of the deductor that is submitted under sub-section (3) of section 34, in the ways as prescribed. Any amount, howsoever in limit it maybe, deducted as TDS and reported in GSTR – 7 automatically reflects in the electronic cash ledger.

Refund of extra TDS

Once the amount gets deducted and the dedcutee claims it, it is not possible. Although there is a provision that the deductee can claim refund of tax subject to refund provisions of the act. In most cases it is not possible to claim any extra TDS deducted by the deductor. In cases where the amount is not so claimed by deductee, refund of excess TDS is possible to deductor subject to refund provisions of the act.


TDS under GST regime