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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 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:

The selling price of 5 Typewriters @ Rs. 10,000/- per typewriter Rs. 50,000
If the rate of tax (CGST) on Typewriter is 28% 
CGST @ 14%Rs. 7,000
SGST @ 14 %Rs. 7000
Total Invoice ValueRs. 64,000
How to deduct TDS from the GST bill given above?TDS to be calculated on the base (taxable value) = Rs. 50,000/-TDS rate in GST = 1% (CGST) and 1% (SGST)Calculation to be made excluding the tax amount (Rs. 64,000 (-) Rs. 14,000)In the example, TDS calculation would work out to beRs. 50,000 x 1% = Rs. 500 (CGST)Rs. 50,000 x 1%. = Rs. 500 (SGST) 

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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