Situations when tax is required and not required to be deducted in GST: The Government has notified October 1 as the date for implementing the tax deducted at source (TDS) and tax collected at source (TCS) provisions under GST laws. As per the Central GST (CGST) Act, the notified entities are required to collect TDS at 1 percent on payments to goods or services suppliers in excess of Rs 2,50,000. Also, states will levy 1 percent TDS under state laws. check out more details.
Situations when tax is required to be deducted in GST
Is there any threshold exceeding which tax is required to be deducted?
Yes. Tax is required to be deducted from the payment made/credited to a supplier, if the value of supply under a contract in respect of supply of taxable goods or services or both, exceeds Rs. 2,50,000/- (Rupees two lakh and fifty thousand).
This value shall exclude the taxes leviable under GST (i.e. ‘Central tax’, ‘State tax’, ‘UT tax’, ‘Integrated tax’ & ‘Cess’).
Mr. B, a DDO of ABC Office of the Government West Bengal needs to buy stationeries for his office from supplier Mr. C. Should Mr B deduct tax under GST while making payment to Mr C?
Yes, Mr B is required to deduct tax while making / crediting payment to Mr C if value of taxable supply under a contract exceeds Rs 2.5 lakh.
Situations when Tax is not required to be deducted in GST
Is there any threshold up to which GST needs not to be deducted?
Yes, GST need not to be deducted where the value of taxable supply under a contract does not exceed Rs 2.5 lakh
As a deductor am I supposed to deduct GST where the taxable value of the contract entered with supplier Mr A is Rs 2.5 Lakh?
No. As the total value of taxable supply under the contract does not exceed Rs 2.5 Lakh the deductor is not liable to deduct tax under GST.
I have entered into a contract worth Rs. 10 lakh with a supplier XYZ prior to 01.10.2018. Now, I am making a payment of Rs.1.5 Lakh in respect of an invoice dated 25.10.2018 submitted by the supplier. Should I deduct tax while making payment of Rs.1.5 Lakh?
Yes. Tax is required to be deducted since the payment is being made after the effective date.
I have entered into a contract worth Rs. 10 Lakh with a supplier XYZ prior to 01.10.2018. I have made a payment of Rs. 3 Lakhs to him prior to 01.10.2018. Now, I am making payment of the balance amount of Rs.7 Lakh after 01.10.2018. Should I deduct tax on Rs.10 Lakh?
No. Tax cannot be deducted for any payment made prior to 01.10.2018. So deduction will be made only in respect of Rs. 7 Lakh
I enter into a contract with a supplier ABC where the value of taxable supply is Rs.2 Lakh and payment of Rs.1 Lakh has been made on 15.10.2018. Now, on 20.10.2018 the contract value is revised from Rs.2 Lakh to Rs.6 Lakh. Am I liable to deduct any tax and if so, on which amount?
Yes, TDS shall have to be deducted on entire amount i.e. Rs. 6 lakhs while making remaining payment of Rs.5 Lakh. In other words, 12,000/- would be deducted when remaining payment of Rs.5 Lakh is made.
Mr A. Roy, a DDO has purchased goods during May, 2018. He could not make payment for such purchase due to shortage of allotment. He is expected to receive allotment only in October, 2018. Is he liable to deduct TDS while making payment in the month of October considering that the purchase was made before October?
The tax payer is required to adjust the TDS amount to his liability relating to such invoices in the month in which goods are supplied. Therefore, TDS cannot be made for the amount paid in October but goods or services supplied before 30.09.2018.
When should I not deduct tax under GST?
No deduction is required in respect of payment against–
- all services which are exempted as per principal notification No.12/2017 – Central Tax (Rate) as amended from time to time;
- all goods which are exempted as per principal notification No.2/2017 – Central Tax (Rate) as amended from time to time;
- When the goods and services are supplied prior to 30.09.2018 and payments are being made after 01.10.2018.
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