GSTR 7: Eligibility, Key Points, Components & Penalties

GSTR 7 is all about Tax deducted at TDS under the Goods and Services Tax Regime. It is a monthly return filed by individuals. GSTR 7 filing ensures transparency and smooth flow of Input Tax Credits to suppliers. Every GST Registered individual who deduct TDS, must file this form. It helps businesses complying GST Regulations. Read the blog to know more.

What is GSTR 7?

GSTR 7 is a return filed by taxpayers who deduct Tax Deducted at Source (TDS) under the GST Act. This is a return that reports the TDS a business or entity has deducted. The government mandates certain categories of businesses to deduct tax at source. This is like Tax Deducted at Source (TDS) under the Income Tax law. It ensures the collection and tracking of taxes at different stages.

Key Points:

• It is a monthly return.
• Businesses/entities that deduct TDS under GST file it.
• The tax deducted is then given to the government. This return filing reports all the details.
• GSTR 7 is applicable for taxpayers who have a GST TDS liability.
• 10th of the subsequent month is the due date for filing GSTR 7.

Who Needs to File GSTR 7?

Only certain taxpayers need to file it. These include:

1. Government Departments or Agencies

Government department or establishment must file GSTR 7. They need it for making a payment to a supplier for goods or services at a rate specified under the GST law.

2. Local Authorities

Local authorities, such as municipalities or other government bodies must file GSTR 7. They have involvement in the procurement of goods or services. It required deduction of TDS.

3. Specified Persons or Entities

This include persons specified by the government for TDS deduction. It applies to large-scale contractors, public sector undertakings (PSUs) and certain government-linked companies.

Note: Businesses not involved in the activities listed above not required to file GSTR 7.

What is the Role of TDS in GST?

TDS under GST is a mechanism for collecting tax from the source of income itself. The concept is not new; it is like TDS under income tax law. The only difference is it focuses on the payments made for goods and services, not income.

In the section below we have discussed how TDS works under GST:

1. Who Deducts TDS?

Government bodies, e-commerce operators, and certain other specified persons deduct TDS.

2. When is TDS Deducted?

Under GST, TDS is deducted at the time of payment, not after.

3. Rate of TDS

The rate of TDS under GST is 2% on the supply value (1% each for CGST and SGST, or 2% for IGST in inter-state transactions). This rate varies as per government notification for certain categories of taxpayers.

4. Payment of TDS

The deductor remit the tax to the government after TDS deduction. You can do this through the GST portal and filing the GSTR 7 return.

5. TDS Certificate

After deduction, the deductor must issue a TDS certificate (in Form GSTR 7A). He should give it to the supplier. This certificate mentions the deduction amount of TDS. The supplier can use this certificate to claim the deducted amount as a credit.

Components of GSTR 7

GSTR 7 is a return to file and it is important to understand its components for ensuring compliance. The form consists of several sections, and each has a specific purpose:

1. Basic Details

• GSTIN: The taxpayer’s GST Identification Number.
• Legal Name of the Deductor: Name of the business deducting TDS.
• Period of Filing: Month for the return filling.

2. TDS Details

This section mention the details of TDS deducted during the return period.

• TDS Deducted: The amount of tax deducted during the period.
• GSTIN of the Supplier: The GSTIN of the business from whom the goods or services were procured.
• Amount on which TDS is Deducted: It is the taxable value of the transaction.
• Amount of TDS: The actual amount of TDS deducted.
• GSTIN of the Deductee: The GSTIN of the supplier who are receiving the payment.

3. Tax Paid

• Amount of Tax Paid: The tax that deposited with the government.
• This includes both the Central and State taxes (CGST/SGST or IGST).

4. Summary of TDS Transactions

• This part of the form summarise the total TDS deductions for the month. It includes the total TDS deducted and paid.

5. Other Details

• Details related to the tax deducted and any penalties or fines imposed.

How to File GSTR 7?

The filling process is simple. In the section below we have discussed the steps. Check it:

• Log In to the GST Portal: First step log in to the GST portal, using your credentials (GSTIN and password).
• Navigate to the GSTR 7 Section: Go to the 'Returns Dashboard' and click on 'GSTR 7' under the 'Return Filing' section.
• Select the Relevant Period: Choose the specific month for which you are filing the return.
• Fill in the TDS Details: Enter all the details about TDS deductions for the month. This includes the amount deducted, the GSTIN of the suppliers, and the tax paid.
• Review the Data: Make sure to check all the information entered before proceeding. Errors do not automatically cause penalties. They may cause mismatch, Delay credit to the supplier, require amendment in the next month (since GSTR-7 has no separate amendment form), Penalties arise only for non-filing or late filing.
• Submit the Return: After you rechecking the details, click on ‘Submit’ to file the return.
• Payment of TDS: After submission, pay the TDS amount via the GST portal if not paid.
• Acknowledgment: After filling of the return, you will receive an acknowledgment.

Consequences of Non-Filing or Late Filing of GSTR 7

Filing this form is a mandatory requirement for those businesses liable to deduct TDS under GST. Failing to file GSTR 7 on time can result in penalties, fines, and interest. Here are some consequences of non-compliance:

Late Fee

There is a late fee applicable for not filing the return on time. The fee is Rs. 50 per day (Rs. 25 for CGST and Rs. 25 for SGST).

Interest on Late Payment

There is interest if the TDS amount is not paid on time. The interest is usually charged at 18% per annum.

Ineligibility to Claim Credit

If GSTR 7 is not filed suppliers cannot claim input tax credit (ITC). This can affect the working capital of your suppliers.

Legal Actions

Continued non-compliance will lead to stricter actions. It includes show-cause notices, penalties, and cancellation of the GST registration.

Conclusion

GSTR 7 plays a crucial role in ensuring that the TDS system under GST is operating in a proper way. It ensures that the government is collecting tax at the source. This return filling improve compliance and tracking of tax payments. Businesses and entities must maintain accurate records of TDS deductions to avoid penalties. GSTR 7 filing requirements is essential for smooth operations and tax compliance.

 FAQ

Q1. Is it mandatory to file GSTR 7?

Yes, it is compulsory for taxpayers registered under GST who are liable for Tax Deducted at Source.

Q2. How Can I Download GSTR 7 Certificate?

You can download the Certificate by following these steps:

Log into GST Portal

Enter all Details

Click on the TDS Certificate

Enter details like financial year, GSTIN and click on search.

Then download the certificate

Q3. What is the significance of the form GSTR 7?

The Tax deduction certificate will be available to the deductee on basis of this form.

Q4. What happens if I delay filling GSTR 7?

Late fee is applicable for not filling GSTR 7 on time. The chargeable fees are Maximum: Rs. 2,000 per return (Rs. 1,000 + Rs. 1,000). No late fee under IGST.

Q5. What is the turnover limit for GSTR 7?

There is no fixed turnover limit for GSTR 7. Any business or entity required to deduct TDS under GST laws should file GSTR 7.

Disclaimer: This article is for informational purposes only and does not constitute legal advice. Online Legal India is a digital platform. If you require legal assistance, we strongly recommend consulting a qualified lawyer or law firm.