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TDS and TCS under GST

TDS and TCS which comes under GST is an acronym for tax deduction at source and tax collection at source. These both terms are even present under the Income Tax law. TDS and TCS under GST came into impact from 1st October 2018. TDS denotes to the tax which is deducted when the buyer of goods or services, such as government departments, makes payments under a business contract. On the another hand, TCS refers to the tax which is collected by the electronic commerce operator when a seller supplies some goods or services via its website and the payment for the same deliverable is collected by the electronic commerce operator.

TDS under GST: Basics and Applicability
Who is liable to deduct TDS under GST?

  1. A branch or an establishment of the Central Government or State Government; or
  2. Local authority; or
  3. Governmental agencies; or
  4. Those persons or category of persons, who are notified by the Government.
  5. Public sector undertakings, or
  6. society established by the Central or any State Government or a Local Authority and that society is registered under the Societies Registration under Act 1860, or
  7. An authority or a board or any other body which has been set up by Parliament or a State Legislature or by a government, with 51% equity (control) owned by the government.

What is the TDS rate which is to be deducted under GST?
The rate of TDS notified under the GST laws is 2% (1% CGST+1% SGST or 2% IGST) on the payments made to the seller of taxable goods or services

Is there any limit for deducting TDS under?
If the total value of supply under a contract exceeds Rs 2.5 lakhs then the person/entity would be liable to deduct TDS.

What should be the time limit for payment of TDS?
The person who deduct, will be liable to make the payment of TDS by the 10th day of the next month in the form of GSTR-7.

Impact of TDS under GST on Government Civil Contractors
The Indian government, on average, gives out more than 10,000 civil contracts each year throughout the country. The agreement for constructing/repairing the national highways average is more than Rs.100 crores. These agreements are assimilated by big construction companies and then sub-contracted to smaller firms and then again further sub-agreement to another small firm. This coil will face problems due to GST and in specific due to the TDS liability. The government will require to deduct TDS from the contractor which would ensure tax compliance by the contractors and all the other sub-contractors. Presently, many small civil/labour contractors do not fulfil tax compliance. Under GST it will be authoritative for them to get registered and fulfil tax compliance.

TCS in GST for the e-Commerce Sector: Compliance in Gist
Section 52 has been introduced under the CGST law for all e-commerce aggregators to fetch TCS in GST. e-commerce aggregators are answerable under the GST law for deducting and depositing tax at the rate of 1% from each transaction. Any suppliers or traders selling goods or services online would get the payment after deduction of 1% tax (0.5% CGST+ 0.5% SGST or 1% IGST). It is a significant change that has improved the compliance and administration cost for online aggregators like Flipkart, Snapdeal, Amazon, etc. It is vital to deposit the tax deducted by the 10th day of the next month in form GSTR-8. All the suppliers or dealers selling goods or services online would need to get registered under GST for claiming the tax deducted by e-commerce operators, even if their turnover is less than the beginning turnover limit notified for GST registration.

Benefits of TDS and TCS under GST
TDS and TCS under GST have abundant benefits. Both TDS and TCS under GST were announced by the government for establishment of regulation on tax evaders. Under Sections 51 and 52 of the CGST Act correspondingly covers the provisions of TDS and TCS under GST. From a deductee or supplier’s perspective, there will a programmed reflection in his electronic ledger once the deductor files his/her returns under the TDS system. The deductee can claim credit in his electronic cash ledger of this tax deducted and use it for payments of other taxes, at his expediency. TDS helps in bringing the unorganised sectors to comply with the tax provisions and keeps frauds at bay. Similarly, TCS in GST regulates the online sellers, keeps a check on the transactions and ensures timely deposit of tax with the government.

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