Section 51 of GST Act A Comprehensive Guide to TDS Provisions under GST

Posted: 4 weeks ago

Introduction:
Section 51 of the Goods and Services Tax (GST) Act, 2017, deals with the provisions related to Tax Deducted at Source (TDS) under the GST regime. TDS is a mechanism to collect tax at the source of income, ensuring timely collection and reducing the possibility of tax evasion. This section mandates certain specified entities to deduct tax at a prescribed rate before making payment to the supplier for goods or services.

Applicability of TDS under GST:

1. Specified Entities: TDS provisions under Section 51 apply to:

• Departments or establishments of the Central or State Government.
• Local authorities.
• Governmental agencies.
• Such other persons or categories of persons as may be notified by the Government on the recommendations of the GST Council.

1. Threshold Limit: TDS is applicable only if the total value of the supply under a contract exceeds ₹2.5 lakh (excluding the amount of GST).

2. Rate of TDS: The rate of TDS is 2% (1% CGST + 1% SGST/UTGST) or 2% IGST, as applicable.

Key Provisions of Section 51:

1. Deduction of Tax:

• The deductor (specified entity) is required to deduct tax at the time of making payment to the supplier (deductee) for taxable supplies of goods or services.
• The tax is deducted on the total payment made to the supplier, excluding the GST amount.

1. Deposit of TDS:

• The deductor must deposit the deducted TDS amount to the Government within 10 days from the end of the month in which the deduction is made.
• The payment is made through the electronic cash ledger.

1. Filing of TDS Returns:

• The deductor is required to file a TDS return in Form GSTR-7 within 10 days from the end of the month in which the deduction is made.
• The return contains details of the TDS deducted, the amount paid to the Government, and the TDS certificate issued to the deductee.

1. Issuance of TDS Certificate:

• The deductor must issue a TDS certificate in Form GSTR-7A to the deductee within 5 days of filing the TDS return.
• The certificate contains details of the TDS deducted and deposited.
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• Claiming TDS Credit:

• The deductee can claim the TDS amount as a credit in their electronic cash ledger.

• The credit can be utilized for payment of output tax liability.

Compliance and Penalties:

1. Late Deduction:

   • If the deductor fails to deduct TDS or deducts less than the required amount, they are liable to pay interest at the rate of 18% per annum from the date the tax was deductible until the date it is actually deducted.

2. Late Payment:

   • If the deductor deducts TDS but fails to deposit it within the prescribed time, they are liable to pay interest at the rate of 18% per annum from the date the tax was deducted until the date it is actually deposited.

3. Late Filing of Returns:

   • Late filing of TDS returns attracts a late fee of ₹100 per day (₹50 CGST + ₹50 SGST/UTGST) subject to a maximum of ₹5,000.

4. Non-Issuance of TDS Certificate:

   • Failure to issue the TDS certificate within the prescribed time may attract a penalty of ₹100 per day (₹50 CGST + ₹50 SGST/UTGST) subject to a maximum of ₹5,000.

Conclusion:
Section 51 of the GST Act plays a crucial role in ensuring the timely collection of taxes and reducing the possibility of tax evasion. Specified entities must comply with the TDS provisions, including timely deduction, deposit, filing of returns, and issuance of TDS certificates. Non-compliance may result in penalties and interest, making it essential for deductors to adhere to the provisions of Section 51.

Note: The information provided in this guide is based on the GST Act and rules as of the latest update. It is advisable to refer to the latest notifications and circulars issued by the GST Council or consult a tax professional for specific cases.