Section 51 prescribes the authority and procedure for ‘tax deduction at source’

Section 51(1)

Notwithstanding anything to the contrary contained in this Act,

the Government may mandate following person (deductor) to deduct TDS @1%

(a) a department or establishment of the Central Government or State Government; or

(b) local authority; or

(c) Governmental agencies; or

(d) such persons or category of persons as may be notified by the Government

Following person were notified vide Notification No. 50/2018-Central Tax dt. 13-09-2018 amended from time to time

(a) an authority or a board or any other body, -

(i) set up by an Act of Parliament or a State Legislature; or

(ii) established by any Government,

with 51% or more participation by way of equity or control with government, to carry out any function;

(b) society established by the CG or the SG or a Local Authority under the Societies Registration Act, 1860 (21 of 1860);

(c) public sector undertakings:

Para 4 of Circular No. 76/50/2018 - GST dated 31-12-2018

1. A doubt has arisen about the applicability of long line mentioned in clause (a) of notification No. 50/2018- Central Tax dated 13.09.2018.

2. It is clarified that the long line written in clause (a) in notification No. 50/2018- Central Tax dated 13.09.2018 is applicable to both the items (i) and (ii) of clause (a) of the said notification. Thus, an authority or a board or any other body whether set up by an Act of Parliament or a State Legislature or established by any Government with 51% or more participation by way of equity or control, to carry out any function would only be liable to deduct tax at source.

3. In other words, the provisions of section 51 of the CGST Act are applicable only to such authority or a board or any other body set up by an Act of parliament or a State legislature or established by any Government in which 51% or more participation by way of equity or control is with the Government.

Notification No. 50/2018-Central Tax dt. 13-09-2018, shall not apply to

[1][1^st Proviso

with respect to persons specified u/s 51(1)(a), the authorities under the Ministry of Defence, other than the authorities specified in the Annexure-A and their offices]

[2][2^nd Proviso

supply of goods and/or services from a PSU to another PSU, whether or not a distinct person]

[3][3^rd Proviso

supply of goods and/or services which takes place between one person to another person specified u/c (a), (b), (c) and (d) of section 51(1).]

For Annexure-A, you may refer above notification

Section 51(1)

TDS to be deducted from the payment made or credited to the supplier (“the deductee”) of taxable goods and/or services,

where total value of such supply, under a contract > Rs.2,50,000

If individual supply is less than Rs.2,50,000 but value of contract is more than Rs.2,50,000, then TDS must be deducted.

Supply must be taxable

Question & Answer

Explanation to section 51(1)

For the purpose of TDS,

the value of supply shall be taken as the amount excluding the central tax, State tax, Union territory tax, integrated tax and cess indicated in the invoice.

Question & Answer

Proviso to Section 51(1)

No deduction shall be made

if the location of the supplier (LoS) and the place of supply (PoS) is in a State/UT

which is different from the State/UT of registration of the recipient (RoR)

Ex

Supplier as well as the place of supply are in State A and the recipient is located in State B.

The supply would be intra-State supply and Central tax and State tax would be levied. In such case, transfer of TDS (Central tax + State tax of State B) to the cash ledger of the supplier (Central tax + State tax of State A) would be difficult. So, in such cases, TDS would not be deducted

Thus, when both the supplier as well as the place of supply are different from that of the recipient, no tax deduction at source would be made.

Question & Answer

Section 51(1)

CGST 1% + SGST 1% or

IGST = 2%

Question & Answer

Section 51(2)

TDS deducted shall be paid to the Government by the deductor

within 10 days after the end of the month in which such deduction is made,

in such manner as may be prescribed.

Section 39(3) read with Rule 66(1)

RP (Deductor) required to deduct tax u/s 51

shall furnish, a return in GSTR-7 and manner as may be prescribed,

for the month in which such deductions have been made

within 10 days after the end of such month.

Question & Answer

[4][Section 51(3) read with Rule 66(3)

TDS certificate shall be issued electronically to the deductee on the common portal in GSTR-7A

on the basis of the return furnished in GSTR-7

Question & Answer

Section 51(5) read with Rule 66(2)

The details furnished by the deductor in GSTR-7

shall be made available electronically to each of [5][deductees] on the common portal

after filing of GSTR-7

[6][for claiming the amount of tax deducted in his electronic cash ledger after validation]

Section 51(6)

If any deductor fails to pay TDS to the Government,

he shall pay interest as per section 50(1) in addition to the amount of tax deducted.

Section 51(7)

The determination of the amount in default under this section shall be made in the manner specified in section 73 or 74.

Question & Answer

Section 51(8)

The refund to the deductor or the deductee arising on account of excess or erroneous deduction shall be dealt with as per section 54:

Provided that no refund to the deductor shall be granted, if the amount deducted has been credited to the electronic cash ledger of the deductee.

[7][Section 51(4)

If any deductor fails to furnish to the deductee the certificate, after deducting TDS,

within 5 days of crediting the amount so deducted to the Government,

the deductor shall pay, by way of a late fee, of Rs.100 per day from the day after the expiry of such 5 days period until the failure is rectified, subject to a maximum amount of Rs.5,000