How to deduct TDS on GST bill (2023)

Tax Deduction at Source (TDS) is a way of collecting taxes directly from the source of income. This fact implies that employers are required to deduct tax at source from their employees’ salaries and submit it to the central government’s account.

Are you struggling to pay TDS? Are you wondering to know about the TDS deduction on the GST bill? Then this article is for you.

In this article, we will explore how to deduct TDS from the GST bill. 

Let’s get started. 

What is the TDS in GST?

TDS stands for Tax Deducted Source. In the TDS system, those who are responsible for paying for specific services, such as commission, brokerage, professional consultancy, etc., are required to deduct a set percentage from the payment.

The deductee (the person providing the services) must pay TDS to the government on behalf of the deductor (the person who collects the tax), who can then claim the TDS as income tax paid when filing his income tax return.

What are GST TDS provisions?

TDS shall be deducted from payments to suppliers of taxable goods and/or services where the total contract for such supply exceeds Rs. For TDS, the shipping price excludes central, state, integrated, and state taxes that appear on the invoice.

The tax deductor must create the challan online on the common portal FORM GST PMT-06 and make the payment to the bank via electronic payment, net banking/debit credit card/NEFT/RTGS, or bank.

If the deducted TDS is not payable to the government within 10 days after the end of the month in which it was deducted, 18% interest will be paid on top of the deducted tax.

The deductor is liable to pay a fine of Rs 10,000 or tax not deducted or deducted or deducted but not paid to the government, whichever is greater. Tax deductor must file form GSTR-7 within 10 days after the end of such month.

The deductible must provide a TDS certificate in GSTR-7A format stating the contract amount, deductible rate, deductible amount, amount paid to the government and other relevant items within 5 days of the government crediting the amount. 

If the deductor does not submit TDS certificate within 5 days, the deductor is liable to pay a late fee of Rs. (maximum Rs 5,000 for him)  from the day after the expiry of such five day period until the failure is rectified.

What is the formula to calculate TDS?

The GST law mandates that 2% of any payments or credits made to suppliers of taxable goods and services be withheld and deposited, at a rate that may be determined by the central or state governments in accordance with the GST Council’s recommendations.

How is TDS calculated on GST with example?

The following example will help you better understand the GST’s TDS provisions:

How is 194q in TDS calculated with example?

Suppose Mr. Kalpit purchases goods worth INR 50 lakhs on 30.5.2022. He purchases goods worth INR 50 lakhs on 1.7.2022. His turnover in the previous financial year 2021-22 was 15 crores.

TDS applicability will be as follows:

Since the turnover of Mr. Kalpit exceeds INR 10 Crores in the previous FY 2021-22 & the value of goods purchased by him in the current FY 2022-23, exceeds INR 50 Lakhs (50 Lakhs plus 50 Lakhs = 1 crore). So, Mr. Kalpit is liable to deduct TDS at 0.1% u/s 194Q of INR 5000 on purchases of INR 50 Lakhs. 

Is TDS deducted on invoice or payment?

TDS is deducted from the purchase order, the vendor’s invoice, or any advance payments you make to the vendor.

What is the rule of TDS and TCS in GST?

TDS

According to GST law, TDS must be withheld at a rate of 1% from payments made to suppliers of taxable goods and/or services when the total value of such supply, under a single contract, exceeds INR 2,50,000.

It must be noted that no tax reduction is necessary when the supplier’s and the supply’s locations are different from the state where the recipient is registered.

TCS

Any dealer or trader who makes online sales of products or services will get paid following the deduction of 2% TCS.

Under GST, the main TCS deductors are the e-commerce aggregators, who are made responsible for deducting and depositing TCS at the rate of 2% from each transaction.

FAQs: How to deduct TDS on GST bill

1. What is the TDS rate for Bill?

While making a payment to an individual or HUF, the payer must deduct TDS at 1%; when making a payment to anyone else, the payer must deduct TDS at 2%.

2. Is TDS 194Q applicable to GST?

Section 194Q of the Income-tax Act, 1961, deals with Tax Deducted at Source (TDS) on the purchase of products and not the provision of services.

3. Is TDS deducted on invoice or payment?

TDS is deducted from the purchase order, the vendor’s invoice, or any advance payments you make to the vendor.

4. Can we deduct TDS on GST amount?

According to Section 51(1), the receiver must deduct TDS from any value that does not include CGST, SGST, or UTGST. So, as stated in the invoice or other document, the TDS must be applied to a value that excludes GST.

5. Is TDS 0.75% or 1 %?

The purchaser will deduct TDS at a rate of 1% of the entire sale amount.

Conclusion

This is a comprehensive article on how to deduct TDS from GST bill. We hope you found this article insightful. For any further queries or assistance, you can contact our expert team. We are available to help you.

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