Wednesday 2 January 2019

STANDARD OPERATING PROCEDURE ON TDS UNDER GST AS ON 27/12/2018

INTRODUCTION
GST Law 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.

Effective Date
Notification No. 33/2017 – Central Tax dated 15.09.2017 was issued by the CBIC to enable registration of tax deductors. However, Government suspended the applicability of TDS till 30.09.2018. Now, it has been decided that the TDS provision would be made operative with effect from 01.10.2018. Notification No. 50/2018-Central Tax dated 13.09.2018.

Person Responsible to deduct Tax
Following person are required to deduct tax from the payment made / credited to a supplier, if the total value of supply under a contract in respect of supply of taxable goods or services or both, exceeds Rs. 2,50,000/-.

1.      A department or establishment of the Central Government or State Government; or
2.      Local authority; or
3.      Governmental agencies; or
4.      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

5.      A society established by the Central Government or the State Government or a Local Authority under the Societies Registration Act, 1860 (21 of1860); or
6.      Public sector undertakings.

When tax deduction is required to be made under GST
Total value of Taxable Supply (excluding tax & cess) > Rs 2,50,000.

Clarifications
1.      Contract is made for both taxable supply and exempted supply, deduction will be made if the total value of taxable supply in the contract > Rs.2.5 Lakh

2.      When advance is paid to a supplier on or after 01.10.2018 to a supplier for supply of taxable goods or services or both, TDS is required to be deducted.

When tax deduction is not required to be made under GST
1.      Total value of taxable supply ≤ Rs. 2.5 Lakh under a contract.
2.      Contract value > Rs. 2.5 Lakh for both taxable supply and exempted supply, but the value of taxable supply under the said contract ≤ Rs. 2.5 Lakh.
3.      Receipt of services 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.
4.      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.

5.      Goods on which GST is not leviable. For example petrol, diesel, petroleum crude, natural gas, aviation turbine fuel (ATF) and alcohol for human consumption.

6.      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

7.      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].

8.      All activities or transactions specified in Schedule III of the CGST/SGST Acts 2017, irrespective of the value

9.      Where the payment relates to a tax invoice that has been issued before 01.10.2018

10.  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

11.  Where the tax is to be paid on reverse charge by the recipient i.e. the deductee.

12.  Where the payment is made to an unregistered supplier.

13.  Where the payment relates to “Cess” component.

Rate Of Deduction
Rate of such deduction is @ 2% [i.e. 1% each on CGST & SGST/UTGST component] on the amount paid/credited in respect of intra-State supply & @ 2% [as IGST] on the amount paid/credited in respect of inter-State supply.