TAX DEDUCTED AT SOURCE (TDS)

AND TAX COLLECTED AT SOURCE (TCS)

C.A. (Dr.) Pramod Kumar Pandey

(Associate Professor)
 Philosophies behind TDS
• It acts as a powerful instrument to prevent tax evasion and
expands the tax net, as it provides for the creation of an
audit trail

• It also ensures regular inflow of cash resources to the

Government

• Under the GST regime, section 51 of the CGST Act, 2017

prescribes the authority and procedure for ‘Tax Deduction
at Source.
 TDS : Liability
• Who are liable: A department or establishment of
Central or State Government, local authorities and
Government agencies and other specified category
of persons are liable to deduct tax source if the value
of supply of goods and or services exceeds Rs. 2.5
lakhs.

• Thus, individual supplies may be less than Rs.

2,50,000/-, but if contract value is more than Rs.
2,50,000/-, TDS will have to be deducted
NATIONAL INSSTITUTE OF FINANCIAL
MANAGEMENT, FARIDABAD
 TDS : Rate
• The rate of TDS shall be 1% CGST and 1% SGST for
intra-state supplies and 2% IGST for inter-state supplies

• For the purpose of deduction of tax specified above,

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

• However other charges like transportation will be

included

NATIONAL INSSTITUTE OF FINANCIAL

MANAGEMENT, FARIDABAD
 One illustration
• Selling price of 10 computers @ Rs 30,000 Rs. 3,00,000.00, If the rate of
GST on computer is 10% and it is a case of intra-state supply

• CGST @ 5%: Rs. 15,000.00

• SGST @ 5%: Rs. 15,000.00

• Total Invoice value Rs. 3,30,000.00

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• In this illustration , for TDS will have to deduct CGST @1% & 1% SGST
• Amount of tax to be deducted =
CGST 1% on Rs. 3,00,000 = Rs. 3,000.00
SGST 1% on Rs 3,00,000 = Rs 3,000.00
Final payment to supplier = 330,000 – 6000 = 3,24,000

NATIONAL INSSTITUTE OF FINANCIAL

MANAGEMENT, FARIDABAD
 TDS: Registration & Return
• Any person who is liable to deduct at source requires obtaining
compulsory registration under GST law irrespective of threshold limit

• The deductor has a privilege of obtaining registration under GST without

requiring PAN. He can obtain registration using his Tax Deduction and
Collection Account Number (TAN) issued under the Income Tax Act, 1961.

• Return for TDS should be filed within 10 days after the end of month in
which deductions are made in form GSTR-7

• If the supplier is unregistered, name of the supplier rather than GSTIN

shall be mentioned in the return

• (Thus, if date of deduction is 12 July, return should be filed by 10th

August)

NATIONAL INSSTITUTE OF FINANCIAL

MANAGEMENT, FARIDABAD
 TDS: Other requirements
• The amount so deducted is to be credited to the Government
account within 10 days of the succeeding month

• The deductor would be liable to pay interest if the tax deducted is

not deposited within the prescribed time limit.

• The deductor is also required to issue certificate of deduction in

form GSTR-7A within 5 days of amount being credited to Govt. to
the deductee

• The amount so deducted shall be reflected in electronic cash ledger

of the deductee, which may be used by him for paying taxes,
interest, penalty or other charges in this Act.

NATIONAL INSSTITUTE OF FINANCIAL

MANAGEMENT, FARIDABAD
 TDS: Refund
• Any excess or erroneous amount deducted and paid
to the Government account shall be dealt for refund
under section 54 of the CGST Act, 2017

• However, if the deducted amount is already credited

to the electronic cash ledger of the supplier, the
same shall not be refunded
 Interest & Penalty
Instances Interest & Penalty
TDS not deducted Interest to be paid along with the TDS
amount
TDS certificate not issued or delayed Late fee of Rs. 100/- per day subject
beyond the prescribed period of five to a maximum of Rs. 5000/-
days
TDS deducted but not paid to the Interest to be paid along with the TDS
Government or paid later than 10th amount
of the succeeding month
Late filing of TDS returns Late fee of Rs. 100/- for every day
during which such failure continues,
subject to a maximum amount of five
thousand rupees
 No deduction of TDS required

• No TDS is required to be deducted where

location of supplier and place of supply both
are in a State which is different from the
registration State of recipient (Government
Entity)

NATIONAL INSSTITUTE OF FINANCIAL

MANAGEMENT, FARIDABAD
 Case -1
STATE -1
1. State of Registration of
Recipient (Govt.)
2. State of Registration of
supplier
3. Place of Supply

Intra- State supply and

CGST + SGST shall be
levied and TDS to be made
NATIONAL INSSTITUTE OF FINANCIAL
MANAGEMENT, FARIDABAD
 Case -2
STATE -1 STATE -2
1. State of Registration of 3. State of Registration of
Recipient (Govt.) supplier
2. Place of Supply

Inter- State supply and

IGST shall be levied and
TDS to be made

NATIONAL INSSTITUTE OF FINANCIAL

MANAGEMENT, FARIDABAD
 Case -3
STATE -1 STATE -2
State of Registration of Recipient
(Govt.)
Place of Supply
State of Registration of supplier

Inter- State supply and IGST shall

be levied and TDS to be made

NATIONAL INSSTITUTE OF FINANCIAL

MANAGEMENT, FARIDABAD
 Case -4
STATE -1 STATE -2
1. State of Registration of supplier
State of Registration of Recipient
2. Place of Supply
(Govt.)

No TDS to be made because it will

be difficult to transfer the amount
of TDS to the cash ledger of
recipient

NATIONAL INSSTITUTE OF FINANCIAL

MANAGEMENT, FARIDABAD
 TDS: Position till now
• The provisions of Tax Deduction at Source (Section
51 of the CGST / SGST Act 2017) will be brought into
force from a date which will be communicated later

• Persons who will be liable to deduct or collect tax at

source will be required to take registration, but the
liability to deduct or collect tax will arise from the
date the respective sections are brought in force

• This step has been taken to provide more time for

persons liable to deduct tax at source
 Tax Collected at Source
• What is TCS under GST?
Tax Collected at Source (TCS) under GST means
the tax collected by an e-commerce operator
from the consideration received by it on behalf
of the supplier of goods, or services who makes
supplies through operator’s online platform. TCS
will be charged as a percentage on the net
taxable supplies
 Who is liable to collect TCS under
GST?
• Certain operators who own, operate and manage e-commerce
platforms are liable to collect TCS. TCS applies only if the operators
collect the consideration from the customers on behalf of vendors
or suppliers. In other words, when the e-commerce operators pay
the consideration collected to the vendors they have to deduct an
amount as TCS and pay the net amount.
• Here are few exceptions to the TCS provisions for the services
provided by an e-commerce platform:
• a. Hotel accommodation/clubs (unregistered suppliers)
• b. Transportation of passengers – radio taxi, motor cab or
motorcycle
• c. Housekeeping services like plumbing, carpentry etc. (unregistered
suppliers)
 When will the liability of collecting
TCS arise?
• TCS will be collected by e-commerce operators
while making a payment to the vendor. This
payment will be the consideration collected
on the vendor’s behalf for the supplies made
by him via the online portal. This tax will be
collected on the net value of taxable supplies
 What is the rate applicable under
TCS?
• The dealers or traders supplying goods and/or
services through e-commerce operators will
receive payment after deduction of TCS @ 1%.
The rate is notified by the CBIC in Notification
no. 52/2018under CGST Act and 02/2018 under
IGST Act. This means for an intra-state supply TCS
at 1% will be collected, i.e 0.5 % under CGST and
0.5% under SGST. Similarly, for a transaction
between the states, the TCS rate will be 1%, i.e
under the IGST Act.
How to compute taxable value of the
supplies for TCS?
• The total value of taxable supplies of goods
and/or services (other than notified services
under GST law by all registered persons)
• Less: Taxable supplies returned to the
suppliers through the e-commerce operator
• =Net value of Taxable Supplies
END OF THIS PART