The integration of Tax Deducted at Source (TDS) under the Goods and Services Tax (GST) framework marks a significant shift in how transactions and taxes are managed in the business ecosystem. This system aims to enhance transparency and compliance across business operations, including procurement and services. Understanding TDS under GST is crucial for businesses and securing a business loan can be a strategic move to ensure compliance and smooth business operations.
What is TDS under GST?
TDS under GST is a mechanism where the tax is deducted at the time of payment or credit to the supplier for taxable goods and/or services. The deducted amount is then deposited with the government. This mechanism ensures that tax is collected at multiple stages and helps in reducing tax evasion.
TDS Under GST With Example
To illustrate, consider a scenario where a company (the recipient) contracts a supplier for services worth Rs. 1,00,000. With a TDS rate of 2%, the company will deduct Rs. 2,000 as TDS and pay Rs. 98,000 to the supplier. This Rs. 2,000 is then deposited as TDS under GST. To simplify such calculations, businesses can use a GST Calculator to ensure accuracy and compliance.
Transaction |
Amount (Rs.) |
TDS (Rs.) |
Amount Paid (Rs.) |
Service Contract |
1,00,000 |
2,000 (2%) |
98,000 |
Who is Liable to Deduct TDS under GST Law?
Entities liable to deduct TDS under GST include:
- Government departments and local authorities
- Public sector undertakings
- Specified categories of private sector participants under GST law
Liability to Deduct TDS under GST and TDS Rate
The applicability of TDS rates under GST varies significantly based on the location of the supplier, the place of supply, and the location of the recipient. Here is a table that simplifies this concept using an example:
Scenario |
Supplier Location |
Place of Supply |
Recipient Location |
Applicable GST |
TDS Rate |
1 |
Mumbai |
Mumbai |
Mumbai |
1% CGST + 1% SGST |
|
2 |
Mumbai |
Ahmedabad |
Mumbai |
2% IGST |
|
3 |
Mumbai |
Ahmedabad |
Hyderabad |
IGST |
2% IGST |
4 |
Mumbai |
Mumbai |
Ahmedabad |
CGST + SGST |
N/A |
Provisions Relating to the Issue of TDS Certificates under GST Law
Under GST law, the deductor is obliged to furnish TDS certificates to the deductee within five days of crediting the amount to the government, failing which the deductor faces penalties.
Penalties for Not Complying with TDS Provisions under GST
This table illustrates the penalties associated with various aspects of non-compliance regarding TDS under GST, emphasising the financial and legal consequences of failing to adhere to the stipulated regulations.
Non-compliance Issue |
Penalty Details |
Interest/Penalty Rate |
Maximum Cap (if any) |
TDS Not Deducted |
Interest on the TDS amount that was supposed to be deducted and deposited. |
18% per annum. |
N/A |
Delay in Issuance of TDS Certificate |
Penalty of Rs. 100 per day for the delay in issuing the TDS certificate to the deductee. |
Rs. 100 per day |
Rs. 5,000 |
TDS Deduction but Non-Payment |
Interest for the period from the day after the deduction was supposed to be deposited until the actual date of deposit. Possible legal action for non-deposit. |
18% per annum. |
N/A |
Late Filing of TDS Return |
Penalty for not filing the TDS return within the prescribed timeline. |
Rs. 100 per day |
Rs. 5,000 |
How to Get TDS Refund under GST?
If a higher amount is deducted as TDS or TDS is deducted erroneously, the entity can claim a refund from the GST portal. However, the process requires documentary evidence proving the excess or erroneous deduction.
Conclusion
Understanding TDS under GST is essential for all business operators to ensure compliance and streamline their tax payments. While the process might seem daunting, it is an integral part of the GST framework aimed at enhancing tax compliance and transparency. For businesses, especially those concerned with maintaining cash flow and compliance, a business loan can provide the necessary financial support to manage GST TDS effectively. By staying informed and prepared, businesses can navigate GST TDS requirements efficiently, contributing to a more compliant and transparent business environment. Explore more about GST and its implications for your business.
