51.2.1 TDS to be deducted only if Value of taxable supply under a contract > Rs.2,50,000

Question-1 [ICSI-E-D19-O-100-1]

What is the monetary limit for total value of supply of taxable goods in order to attract deduction of tax at source by Government under GST?

(A) Rs.5 lakhs; (B) Rs.2.5 lakhs; (C) Rs.2 lakhs; (D) Rs.50,000

51.2.1.1 Value of supply exclude Tax

Question-1 [ICMAI-F-J19-1(ii)-2]

Mr. Ram registered in Chennai has supplied goods to Kochi Fisheries Department, for a total contract value of Rs.2,65,000 inclusive of 18% IGST. The tax to be deducted at source is

(A) Nil; (B) Rs.2,650; (C) Rs.5,300; (D) Non of These

Answer

1) Statutory Provision

a) Explanation to section 51(1) - For the purpose of TDS, the value of supply shall exclude the central tax, State tax, Union territory tax, integrated tax and cess indicated in the invoice

Value of supply for TDS purpose = 2,65,000/1.18 = Rs.2,24.576

b) Section 51(1) - TDS to be deducted where total value of such supply, under a contract > Rs.2,50,000

2) Conclusion

Since, value of supply if less than Rs.2,50,000, hence No TDS to be deducted.

51.2.2 TDS not to be deducted if LoS & PoS in same state but RoR is in different state

Example-1

51.2.3 TDS Rate

Question-1 [ICSI-E-D18-O-96-1]

Section 51 of the CGST Act, 2017 mandates deduction of tax at source (TDS) at a specified percentage by the Government or Local Authorities from the payments made or credited to the supplier where the value of supply under a contract exceeds specified limit. State the specified percentage of TDS and the threshold limit of taxable goods or services or both under the contract .........

(A) 0.50% & Rs.1,00,000

(B) 0.75% & Rs.1,50,000

(C) 2% & Rs.5,00,000

(D) 1% & Rs.2,50,000

Question-2 [ICAI-F-Ch12-U2-Q4]

Manihar Enterprises, registered in Delhi, is engaged in supply of various goods and services exclusively to Government departments, agencies etc. and persons notified u/s 51. It has provided the information relating to the supplies made, their contract values and the payment due against each of them in the month of October, respectively as under:

You are required to determine amount of tax, if any, to be deducted from each of the receivable given above assuming the rate of CGST, SGST and IGST as 9%, 9% and 18% respectively.

Will your answer be different, if Manihar Enterprises is registered under composition scheme?

Answer

a) Provision of Section 51(1)

b) Provision of Value of Supply

Since in the given case, Manihaar Enterprises is supplying goods and services exclusively to Government departments, agencies etc. and persons notified u/s 51, applicability of TDS provisions on its various receivables is examined in accordance with the above-mentioned provisions as under:

LoS = Delhi

Point 7

Composite supply of goods and services in which the value of supply of goods constitutes not more than 25% of the value of the said composite supply provided to, inter alia, local authority by way of any activity in relation to any function entrusted to a Municipality under article 243W of the Constitution is exempt from GST. Thus, maintenance of street lights (an activity in relation to a function entrusted to a Municipality) in Municipal area of East Delhi involving replacement of defunct lights and other spares where the value of supply of goods is not more than 25% of the value of composite supply is a service exempt from GST. Since tax is liable to be deducted from the payment made or credited to the supplier of taxable goods or services or both, no tax is required to be deducted in the given case as the supply is exempt.

The answer will remain unchanged even if Manihar Enterprises is registered under composition scheme. Tax will be deducted in all cases where it is required to be deducted u/s 51 including the scenarios when the supplier is registered under composition scheme.

Question-3 [ICAI-F-M19-O-4(a)-5]

Yash Shoppe, a registered supplier of Jaipur, is engaged in supply of various goods and services exclusively to Government departments, agencies, local authority and persons notified under section 51 of the CGST Act, 2017.

You are required to briefly explain the provisions relating to tax deduction at source under section 51 of the CGST Act, 2017 and also determine the amount of tax, if any, to be deducted from each of the receivables given below (independent cases) assuming that the payments as per the contract values are made on 31.10.2018. The rates of CGST, SGST and IGST may be assumed to be 6%, 6% and 12% respectively.

(1) Supply of computer stationery to Public Sector Undertaking (PSU) located in Mumbai. Total contract value is Rs.2,72,000 (inclusive of GST)

(2) Supply of air conditioner to GST department located in Delhi. Total contract value is Rs.2,55,000 (exclusive of GST)

(3) Supply of generator renting service to Municipal Corporation of Jaipur. Total contract value is Rs.3,50 ,000 (inclusive of GST)

Answer

As per section 51 of the CGST Act, 2017, Government departments, agencies, local authority and notified persons are required to deduct tax @ 2% (1% CGST + 1% SGST /UT GST ) or IGST @ 2% from payment made to the supplier of taxable goods and/or services where the total value of such supply [excluding tax and compensation cess indicated in the invoice], under a contract, exceeds Rs.2,50,000.

Since in the given case, Yash Shoppe is supplying goods and services exclusively to Government departments, agencies, local authority and persons notified under section 51 of the CGST Act, 2017, applicability of TDS provisions on its various receivables is examined in accordance with the above-mentioned provisions as under:

Question-4 [ICAI-F-N22-4(a)-5]

BSA Corporation is a Public Sector Undertaking registered in Karnataka. For entertainment events in Bengaluru and at Mumbai, BSA has given contract to Mr. A, a renowned artist, registered person in Maharashtra, to perform on contemporary Bollywood songs. BSA Corporation agreed to pay Rs.12,39,000 and Rs.18,29,000, inclusive of GST, for Mumbai and Bengaluru events respectively. BSA Corporation seeks your advice regarding amount of TDS to be deducted assuming GST rate @ 18% (CGST @ 9%, SGST @ 9%, IGST @l8%).

Answer

A Public Sector Undertaking is required to deduct tax @ 2% (on inter-State supplies) from payment made to the supplier of taxable services where the total value of such supply, excluding tax indicated in the invoice, under a contract, exceeds Rs.2,50,000.

Value of supplies excluding tax are Rs.10,50,000 (Rs.12,39,000 × 100/118) and Rs.15,50,000 (Rs.18,39,000 × 100/118)

Location of supplier of Mr A = Maharashtra

Place of supply of services provided by Mr. A to BSA Corporation is the location of recipient, viz. Karnataka, for said services provided at both Mumbai and Bengaluru events are inter-State supplies.

Accordingly, in the given case, BSA Corporation is required to deduct tax as follows:

(i) Rs.10,50,000 × 2% = Rs.21,000 (IGST)

(ii) Rs.15,50,000 × 2% = Rs.31,000 (IGST)

51.3.1 Deposit of TDS with government within 10 days of next month in GSTR-7 return

Quesiton-1 [ICSI-P-J21-2A(i)(d)-1]

TDS under section 51 of CGST Act should be paid to the Government by the deductor within 15 days after the end of the month in which the deduction is made. [T/F]

Quesiton-2 [ICSI-P-J18-5(d)(ii)-1]

State the Form Number and the due date for its filing under CGST Act, 2017 of the return by a registered person deducting tax at source.

51.3.2 TDS Certificate in GSTR-7A to deductee

Question-1 [ICSI-P-J21-O-6(d)-5]

The Public Works Department of Tamil Nadu makes a net payment of Rs.3,70,000 to a supplier of cement in Andhra Pradesh on 22nd of February, 2021. This supply is subject to 18% GST.

(i) Calculate the amount to be deducted as TDS.

(ii) When and where the TDS should be deposited ?

(iii) What is the time limit to issue TDS certificate.

(iv) If the total value of the supply under the contract is Rs.2,10,000, what should be the amount of TDS? Why?

Answer

Section 51 of CGST Act, 2017

(i) Rate of TDS is 1% of the net payment. Similarly 1% under the State GST laws. However if it is Interstate supply than @ 2%, Therefore, it is Rs. 3,70,000 x 2/100= Rs. 7,400/ - as in the present case,it is an inter state supply.

(ii) The TDS should be deposited by 10th of the succeeding month i.e., 10th March, 2021. The TDS amount should be deposited in the Government account.

(iii) The time limit to issue TDS certificate is within 5 days from the date of remittance to Government.

(iv) If the total value of the supply under the contract is Rs. 2,10,000 i.e., less than Rs.2,50,000, there is no need for TDS.

51.3.5 Default under this section shall be determined as per section 73 or 74

Question-1 [ICAI-F-N20-4(b)-4]

(i) A Central Government Department located at Uttar Pradesh is registered with the Commercial Tax Department UP State for deducting GST. It enters into a contract with a Public Sector Undertaking (PSU), registered under GST in the State of Delhi, for supplying goods valued Rs.3,50,000. The PSU argues that no tax is deductible on this supply by the Central Government Department as it is located outside the State of Uttar Pradesh and therefore not liable to tax under CGST and SGST as it is a local levy and IGST tax deduction is not applicable if it is located in another State, other than the State in which the Department is registered. You are required to comment on this.

(ii) Would there be any difference, if instead of the PSU if it was an entity in the private sector? Applicable tax rate for deduction is 1% CGST, 1% SGST and 2% IGST.

(iii) If the private sector entity undertakes works contract, for the above Department in New Delhi. What would be the position of tax deduction when the contract value is Rs.5,00,000?

(iv) The disbursing officer has not paid the tax deducted in the month of February 2019, amounting to Rs.2,00,000 under CGST and 2,00,000 under SGST to the Government's account on the relevant due date, but has paid it on 14th May, 2019. Further, return for that month is also filed on that date and the certificate is also issued simultaneously. What are the consequences, on such failures, to the disbursing officer under the GST law?

Answer

(i) Certain specified persons are required to deduct tax from the payment made to the supplier of taxable goods and/or services, where the total value of such supply [excluding GST] under a contract, exceeds Rs.2,50,000.

However, the tax is not liable to be deducted at source when supply of goods and/or services has taken place between one specified person to another specified person. Since both Central Government Department and PSU are the specified persons, tax is not deductible in case of supply of goods between them.

(ii) Central Government Department is mandatorily required to deduct IGST @ 2% since a private entity is not the specified person.

(iii) Since, in the given case, the location of supplier and place of supply is in the same State, i.e., Delhi and location of recipient is in UP, Central Government Department is not required to deduct TDS although the total value of supply under the contract is more than Rs.2,50,000.

(iv) Failure to deposit TDS with the Government and failure to furnish TDS return within the stipulated time period will result in following consequences:

(A) Interest @ 18% p.a. on the amount of tax deducted shall be payable.

(B) Late fee of Rs.100 per day for the period of delay in furnishing return, or Rs.5,000, whichever is lower, shall be payable. Equal amount of late fee will be payable under the respective State law.

(C) Applicable penalty will also be levied.