• Jun 10, 24
• bhushanbjain
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Tax Deducted at Source (TDS) under the GST Act, 2017 is a mechanism where certain notified persons are required to deduct a specific percentage of tax from the payment they make to suppliers of taxable goods or services. This deducted tax is then deposited with the government by the notified person.

Here’s a breakdown of the key points:

• Who deducts TDS under GST Act, 2017? Only certain notified persons are required to deduct TDS. These include government departments, local authorities, and other entities specified by the government. You can find the updated list on the GST portal.
• What is the threshold limit under GST Act, 2017? TDS applies only if the total value of the supply under a single contract exceeds Rs. 2,50,000. This means individual invoices might be less than this amount, but if the cumulative total of invoices under the same contract crosses Rs. 2,50,000, TDS becomes applicable.
• What is the TDS rate under GST Act, 2017? The current TDS rate is 2% on the total value of the supply (excluding GST).
• Where does the deducted tax go under GST Act, 2017? The deducted tax needs to be deposited with the government using challans on the GST portal.
• What are the responsibilities of the supplier under GST Act, 2017? The supplier needs to provide their GST registration details and other relevant information to the deductor. They can also claim credit for the deducted tax in their GST return.

EXAMPLE

Scenario under GST Act, 2017:

• Government Department (Deductor): Tamil Nadu Public Works Department (PWD)
• Supplier (Deductee): Bharti Construction Company, registered in Tamil Nadu for GST
• Contract Value: Rs. 3,00,000 for construction work within Tamil Nadu
• GST Rate: 18% (CGST 9% + SGST 9%)

TDS Calculation under GST Act, 2017:

As the contract value exceeds Rs. 2,50,000 and both supplier and place of supply are in Tamil Nadu, TDS is applicable.

• TDS Rate: 2% (as per current regulations)
• TDS Amount: Rs. 3,00,000 * 2% = Rs. 6,000

Process under GST Act, 2017:

1. PWD deducts Rs. 6,000 from the payment due to Bharti Construction Company.
2. PWD deposits the deducted amount with the government using the challan system on the GST portal.

Bharti Construction Company receives the remaining payment (Rs. 3,00,000 – Rs. 6,000 = Rs. 2,94,000).

• Bharti Construction Company files Form GSTR-2A, acknowledging the receipt of TDS.
• Upon acceptance of Form GSTR-2A by the government, the deducted amount (Rs. 6,000) is credited to Bharti Construction Company’s electronic cash ledger, which can be used for paying their GST liability.

FAQ QUESTIONS

• What is TDS under GST Act, 2017?
  • It’s a mechanism where a deductor (payer) withholds a specific percentage of tax at source from the payment made to a supplier (payee) for taxable goods or services.
• Who is liable to deduct TDS under GST Act, 2017?
  • Government departments, local authorities, certain specified institutions, and any other person notified by the government.
• What is the threshold limit for TDS deduction under GST Act, 2017?
  • Rs. 2.5 lakh for the total value of taxable supply of goods or services made by a supplier in a financial year.
• What is the current TDS rate under GST Act, 2017?
  • 2% of the taxable value of supply.

Registration and Compliance under GST Act, 2017:

• Do I need to register as a TDS deduct under GST Act, 2017?
  • Yes, if you fall under the category of liable persons and make payments exceeding the threshold limit.
• How do I register as a TDS Deduct under GST Act, 2017?
  • File Form GST RGE-07 online on the GST portal.
• When and how to deposit the deducted tax under GST Act, 2017?
  • Deposit within 10 days after the month-end through challan on the GST portal.
• What is the form for filing TDS return under GST Act, 2017?
  • File Form GSTR-7 electronically by the 10th of the next month.

Other Important Questions under GST Act, 2017:

• What are the consequences of non-compliance with TDS provisions under GST Act, 2017?
  • Penalties, interest, and prosecution.
• How can a supplier claim credit for TDS deducted under GST Act, 2017?
  • The credit will be auto-populated in their GSTR-2A based on the TDS return filed by the deductor.
• Where can I find more information on TDS under GST Act, 2017?
  • The official GST portal, government notifications, and websites of professional tax consultants.

CASE LAWS

Circulars and Notifications under GST Act, 2017:

• Central Board of Indirect Taxes and Customs (CBIC) Circular No. 127/2018/CX-8 issued on September 13, 2018, provides detailed guidelines on the implementation of TDS provisions.
• Notifications issued by the Government can further clarify specific aspects of TDS, such as the threshold limit, the rate of deduction, and the categories of supplies subject to TDS.

Expert Opinions and Articles under GST Act, 2017:

• Leading tax professionals and publications regularly publish articles and commentaries on TDS under GST, offering interpretations and analysis of the provisions.

COLLECTION OF TAX AT SOURCE

• Who deducts under GST Act, 2017? Government departments, local authorities, and other notified entities.
• When to deduct under GST Act, 2017? When making payments exceeding Rs. 2.5 lakh for taxable goods or services (1% CGST + 1% SGST/UTGST).
• Rate: 2% (1% CGST + 1% SGST/UTGST).
• Whom to deduct from under GST Act, 2017? Suppliers of taxable goods or services.
• Payment: Deducted tax must be deposited to the government account within 10 days of the payment.

Tax Collected at Source (TCS) under GST Act, 2017:

• Who collects under GST Act, 2017? E-commerce operators (like Flipkart, Amazon) acting as an intermediary between buyers and sellers.
• When to collect under GST Act, 2017? On the net value of taxable supplies made through their platform (excluding specified services) where they collect the payment from buyers.
• Rate: Currently at 1%.
• Whom to collect from under GST Act, 2017? Suppliers selling through their platform.
• Payment: Collected tax must be deposited to the government account within 10 days of the end of the month.

Key Differences under GST Act, 2017:

• Applicability: TDS applies to government and notified entities, while TCS applies to e-commerce operators.
• Threshold limit: TDS applies to payments exceeding Rs. 2.5 Lakhs , while TCS applies to all taxable supplies.
• Rate: TDS rate is fixed at 2%, while TCS rate is currently 1%.
• Party responsible: Deductor is responsible for TDS, while collector is responsible for TCS.

EXAMPLE

Understanding TCS under GST Act, 2017:

• TCS (Tax Collected at Source) is a mechanism where a part of the tax liability is collected at the source of income by the seller or any other person responsible for making payment.
• The collected amount is then deposited with the government on behalf of the buyer.
• This aims to widen the tax base and improve tax compliance.

Applicability of TCS in Specific State under GST Act, 2017:

• Applicability of TCS varies across states in India depending on specific notifications and amendments issued by the state government.
• To understand the specific applicability of TCS in your state, you need to mention the relevant state name.

Information Required under GST Act, 2017:

• State Name: Knowing the specific state is crucial to provide accurate information about TCS applicability and rates.
• Industry or Transaction Type: Different industries and types of transactions may have varying TCS provisions.

Once you provide these details, I can help you with:

• Whether TCS is applicable in your specific scenario.
• Relevant TCS rate for your state and transaction type.
• Threshold limit for TCS applicability.
• Responsibilities of involved parties.
• Important dates and deadlines.

FAQ QUESTIONS

What is TCS under GST Act, 2017?

TCS stands for Tax Collected at Source. It is a mechanism where a specific taxpayer (collector) is responsible for collecting a part of the GST liability at the source of payment, instead of the supplier collecting it directly from the recipient. This collected tax is then deposited to the government by the collector.

Who is required to collect TCS under GST Act, 2017?

• E-commerce operators (except for those supplying through ODR platforms) when they collect payment on behalf of the supplier.
• Specific persons notified by the government, such as railways, transporters, etc., for certain notified supplies.

What is the threshold limit for TCS under GST Act, 2017?

TCS applies when the total value of the supply of taxable goods or services exceeds Rs. 2.5 lakhs.

What is the rate of TCS under GST Act, 2017?

The current rate of TCS is 1% or 5% depending on the notified supply and type of supplier.

How is TCS collected and deposited under GST Act, 2017?

The collector collects TCS at the time of payment and deposits it to the government within 10 days after the end of the month. The collector needs to file a GSTR-8 form by the 10th of the next month.

How does the recipient claim credit of the collected TCS under GST Act, 2017?

The details of the collected TCS are reflected in the recipient’s GSTR 2A form, which they can use to claim credit against their output tax liability.

What are the consequences of non-compliance with TCS under GST Act, 2017?

Non-compliance with TCS provisions can attract penalties, interest, and prosecution

CASE LAWS

1. M/s. VRL Logistics Ltd. vs. The Union of India & Ors. [2022] 142 STC 448 (Karnataka High Court):

• Issue: Whether TCS applies to transportation services provided by VRL Logistics.
• Held: TCS does not apply to transportation services provided by VRL Logistics as they are already subject to tax under Section 9 of the CGST Act.

2. M/s. Make My Trip India Pvt. Ltd. vs. Union of India & Ors. [2022] 142 STC 371 (Karnataka High Court):

• Issue: Whether Make My Trip can collect TCS on hotel accommodation services provided by unregistered suppliers on its platform.
• Held: Make My Trip cannot collect TCS on hotel accommodation services provided by unregistered suppliers.

3. Sunrise hotel Private Limited vs. Union of India & Ors. [2022] 142 STC 362 (Karnataka High Court):

• Issue:  collect TCS on hotel accommodation services provided by unregistered suppliers on its platform.
• Held: Similar to Make My Trip case, sunrise hotel cannot collect TCS on hotel accommodation services provided by unregistered suppliers.

4. M/s. Swiggy India Private Ltd. vs. Union of India & Ors. [2021] 138 STC 632 (Karnataka High Court):

• Issue: Whether Swiggy can collect TCS on restaurant services provided through its platform.
• Held: Swiggy cannot collect TCS on restaurant services as they are already subject to tax under Section 9 of the CGST Act.

5. M/s. Rapido Payments Pvt. Ltd. vs. Union of India & Ors. [2022] 142 STC 411 (Karnataka High Court):

• Issue: Whether Rapido can collect TCS on transportation services provided by bike taxi riders on its platform.
• Held: Similar to VRL Logistics case, Rapido cannot collect TCS on transportation services as they are already subject to tax under Section 9 of the CGST Act.

TRANSFER OF INPUT TAX CREDIT

Who can transfer ITC under GST Act, 2017?

• A registered taxable person can transfer unutilized ITC only in specific scenarios like:
  • Sale, merger, de-merger, or amalgamation of a business
  • Lease or transfer of the business for any reason
  • Change in the ownership of the business
  • Death of a sole proprietor

Who can receive transferred ITC under GST Act, 2017?

• Only a registered taxable person who is involved in the above-mentioned scenarios with the transferor can receive the transferred ITC.

Conditions for transfer under GST Act, 2017:

• The transferor must have filed all required GST returns up to the date of transfer.
• Both the transferor and transferee must be registered under the same GST Act (CGST Act or SGST Act).
• The transferred ITC must be related to taxable supplies made by the transferee.

Process for transfer under GST Act, 2017:

• The transferor needs to file an online application (Form GST ITC-02) on the GST portal, specifying the amount of ITC to be transferred.
• The transferee needs to accept the transfer electronically on the portal.
• Upon approval, the transferred ITC gets credited to the transferee’s electronic credit ledger.

Important points to remember under GST Act, 2017:

• Not all ITC is transferable. Certain exempted goods and services or expenses ineligible for ITC cannot be transferred.
• The transferee can only utilize the transferred ITC for paying tax on taxable supplies made by them.
• Specific rules and regulations govern the transfer process, and it’s advisable to consult a tax professional for guidance on specific situations.

FAQ QUESTIONS

1. Can ITC be transferred under the GST Act, 2017?

Generally, NO. ITC cannot be transferred from one registered person to another under the GST Act. The ITC is linked to the specific taxpayer who has borne the tax burden and used the goods or services for their taxable business activities.

2. Are there any exceptions where ITC transfer is allowed under GST Act, 2017?

Yes, in specific scenarios, ITC transfer is permitted:

• Business Transfers: When a business is transferred as a “going concern” with all liabilities and assets, the transferee can claim the unutilized ITC of the transferor. This requires filing Form TRAN-1.
• Mergers and Acquisitions: In case of mergers or acquisitions, the resulting entity can claim the unutilized ITC of the merged entities.
• Succession: Upon the death of a sole proprietor or the dissolution of a partnership firm, the legal heir or successor can claim the unutilized ITC.
• Reverse Charge Mechanism: When a taxpayer pays GST under reverse charge, they can claim ITC for the same.

3. What are the conditions for claiming transferred ITC under GST Act, 2017?

• The transfer must be through a legally valid agreement.
• The transferee must be a registered taxable person.
• The transferred ITC must be related to goods or services used for the transferee’s taxable business activities.
• All statutory compliances, including filing returns and maintaining records, must be fulfilled.

4. What are the documents required for claiming transferred ITC under GST Act, 2017?

• Agreement for transfer of business.
• Registration certificates of both transferor and transferee.
• Invoices and other documents evidencing the payment of tax.
• Details of unutilized ITC transferred.

CASE LAWS

1. Availability of ITC Transfer under GST Act, 2017:

• M/s Vivo Mobile India Pvt. Ltd. vs. Union of India (2023): This case clarified that ITC is not a fundamental right but a statutory concession. The court upheld the time limit for claiming ITC under Section 16(4) of the CGST Act, 2017.

2. Specific Situations for Transfer under GST Act, 2017:

• Authority for Advance Ruling, Chhattisgarh – Tex. S.B.T. Pvt. Ltd. (2023): This ruling states that unutilized ITC can be transferred to a sold, merged, demerged, or leased business as per Section 18(3) and Rule 41 of the CGST Rules, 2017.

3. Transfer on Change in Business Constitution under GST Act, 2017:

• Klaggarwal & Associates (Website): This source explains that Rule 41 prescribes the procedure for transferring ITC in cases like sale, merger, demerger, amalgamation, or lease of a business.

4. Death of Sole Proprietor under GST Act, 2017:

• CBIC Clarification: In case of a sole proprietor’s death, if the business is transferred to the successor, it’s considered a transfer under Section 18(3). The successor can claim unutilized ITC subject to transferring all liabilities.

5. Other Relevant Cases under GST Act, 2017:

• Numerous other cases deal with specific aspects of ITC transfer, such as eligibility, apportionment in demergers, and timeliness of claims.

Important Note: This information is intended for general knowledge purposes only and does not constitute legal advice. For specific legal guidance, it’s essential to consult a qualified tax professional who can analyze your situation and provide tailored advice based on the latest legal landscape.