TDS/TCS on GST, Provisions Effective 1st October 2018

The GST Council has recently notified Notification 50 and 51 both on 13th September 2018 which enabled the application of Sections 51 & 52 of the CGST Act with effect from 1st October 2018.

TDS on GST

Section 51 relates to the requirement of TDS while making payments to suppliers by persons as prescribed. As per the CGST Act, notified entities are required to collect 1% of the payment towards supply of goods or services where the amount of supply exceeds Rs. 2,50,000/-. A similar amount is to be collected as SGST. Presently the following persons are specified (in summarized form):

1. Any department or establishment of the State or Central Government
2. Local Authority
3. Board or Authority set up by a State or Central Act, or established by any government where 51% control is with the government.
4. Society established by an Act or a local authority and registered under the Societies Act
5. Public Sector Undertaking

TDS is required to be paid within 10 days of from the end of the month during which it is deducted. A return in Form GSTR-7 is also to be filed within 10 days from the end of the month in which the TDS has been deducted.

A certificate in Form GSTR-7A must be issued within 5 days from the date of deposit. Failure will make a person liable for late fee of Rs. 100/- per day up to a maximum of Rs. 5000/-.

The greatest impact of these provisions is presently on those entities which supply to government.

TCS on GST

TCS Provisions under Section 52 of the Act are applicable to e-commerce aggregators. These companies have to collect 2% of GST while making payments to suppliers. All traders/dealers supplying goods or services will get their payments after the aggregator deducts 2% from their payout. As is the case with TDS, TCS will also have to be deposited into the government account within 10 days from the end of the month in which collected.

In both the cases, presently unregistered suppliers will have to compulsorily get registered in order to claim the GST deducted/collected and fulfill tax compliance, even if their turnover is below 20 Lakhs. These provisions are intended to increase transparency in government contracts and bring more supplier into the GST fold. E-commerce aggregators will have to make changes in their payout systems to comply with the new TCS provisions.