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Ultimate Guide to Tax Deducted at Source in GST

Ultimate Guide to Tax Deducted at Source in GST

TDS is a process that allows for the collection of a particular percentage of tax at the source of income. 

Specific government departments, local governments, agencies, and public-sector undertakings must withhold GST TDS. 

TDS is an effective method for reducing tax evasion.

This article is the ultimate guide to Tax Deducted at Source (TDS) in the GST regime

Without further delay, let’s get started!

What is GST TDS and TCS?

TDS, or tax deducted at source, is the tax that is deducted from payments made under a business contract through buyers of goods or services, such as government entities. 

TCS, or tax collected at source, refers to the tax that the electronic commerce operator collects when a seller makes a sale of goods or services via its website and the operator also collects the payment for that sale.

Who is liable to deduct TDS under the GST?

  • A division or organization of the central government, 
  • A state government, 
  • A local government, 
  • A government agency, or
  • Such individuals or that group of individuals, as announced by the government.
  • Public sector businesses or
  • A society created by the Central Government, a State Government, or a Local Authority, and the society is registered under the Societies Registration Act, 1860, or
  • An organization with 51% of the equity (control) owned by the government and that has been established by the government, a state legislature, or either of those.

How is TDS on GST calculated?

TDS is calculated at 2% (1% CGST + 1% SGST or 2% IGST) on payments made to the seller of taxable goods or services.

Why TDS on GST is deducted?

TDS primarily helps in bringing the unorganized sectors into compliance with tax laws and helps to prevent fraud. 

Once the deductor files his/her returns via the TDS system, there will automatically be a reflection in the deductee’s or supplier’s electronic ledger. The deductee can, at his discretion, claim credit for this tax in his electronic cash ledger and use it to pay other taxes.

Where TDS on GST is not applicable?

There are some exceptions to this rule, and in the following circumstances, TDS will not be deducted even if the payment is made by the people listed above:-

  1. The contract value cannot be more than Rs. 2.5 Lakhs
  1. The location of the recipient varies from the locations of the supplier and the place of supply

What is the limit of GST TDS?

A person or entity is required to withhold TDS if the total value of the supplies made under a contract exceeds Rs 2.5 lakh.

What are the registration requirements for TDS deductors?

There is no threshold requirement for registering as a person who must deduct TDS. 

You can register for GST without providing a PAN by using the Tax Deduction and Collection Account Number (TAN) that was recently issued in accordance with the Income Tax Act. Therefore, the TAN is required.

Who is exempted from TDS?

In the following 2 scenarios, TDS is exempt: 

  • When the receiver certifies on Form 15G/15H that he made the necessary investments,
  • When the Assessing Officer issues a certificate of exemption.

What is TCS 1%?

If the tax collector fails to collect the tax or, after collecting it, fails to deposit it with the government according to the deadlines, he will be required to pay interest at the rate of 1% each month, or a portion of a month.

What is difference between TDS and TCS in GST?

PointsTax Deducted at Source (TDS)Tax Collected at Source (TCS) 
MeaningIf the payment exceeds the threshold specified in the relevant section, TDS will deduct tax from the company or individual making the payment. TCS is a tax collected by the seller at the point of sale.
Transaction CoveredTDS applies to a variety of expenses including rent, interest, salaries, brokerage fees, professional fees and commissions.The TCS applies to the sale of timber, scrap metal, minerals, alcoholic beverages, tendu leaves, forest products, motor vehicles and tolls.  
LimitsIf the purchase price is over Rs. 50 lakhs, TDS is required under section 194Q.If the selling price exceeds Rs. 50 lakhs, TCS applies per Section 206C(1H).
RatesThe TDS rate for the purchase of goods is 0.1% on amounts over Rs. 50 lakhs.For sales of products over Rs. 50 lakhs, the Collected Tax Rate (TCS) is 0.1%.
Time of Deduction/CollectionTDS will be deducted on the due date or actual payment, whichever comes first.Sellers receive the TCS at the point of sale. 
Person ResponsibleThe person (or company) making the payment must deduct TDS.TCS must be paid by the person (or company) selling the specified product.
Due DateTDS earnings must be submitted quarterly and deposits are due on the 7th of each month.Upon delivery, TCS will be deducted from the price. At the end of the month of supply, it will be credited to the government balance within 10 days.
Filing of Quarterly StatementsForms 24Q (for salary), 26Q (for non-salary) and 27Q (for TDS) are three different returns that must be filed (payment to NRI).Form 27EQ for withholding tax has a quarterly statement (TCS). 

FAQs: Ultimate Guide to Tax Deducted at Source in GST

1. Can we claim a GST TDS refund?

Yes, you can claim a GST TDS refund. 

2. Is the GST limit 40 lakhs?

The online registration threshold has been raised to Rs. 40 lakhs under the new GST law, which applies to those who are engaged in the supply of goods. 

On the other hand, the GST registration threshold for service providers remains at Rs. 20 lakh and at Rs. 10 lakh for the special category states.

3. Does TDS on GST reflect in 26AS?

Yes, the tax deducted at source (TDS) for the salaried class and the taxes paid for the financial year is both included on Form 26AS (in the case of self-employed or businessmen).

4. What is the rule for TDS?

According to this TDS regulation, a person (deductor) who is required to make a payment of a specific nature to another person (deductee) must withhold tax at source and submit the amount to the Central Government.

5. What are the two types of TDS?

The two types of TDS are as follows: 

  1. Form 16 
  2. FORM 16A


We hope the article about tax deducted at source on GST is helpful for you. If you have any other queries, do let us know in the comment section below. Also, feel free to reach out to us if you need any kind of help. We are happy to help you.

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