The Goods & Services Tax (GST) is an indirect tax system implemented in India to replace other indirect taxes and simplify the tax structure. Tax Deducted at Source (TDS) is a mechanism under the GST regime that shifts the obligation to pay tax from the beneficiary to the deductor.

The deductor is obligated to deduct tax & deposit it with the government at the time of payment to the supplier.

SOP for TDS under GST

The CBIC issues SOP for TDS under GST to clarify different areas of application and process surrounding tax deduction at source under GST.

The GST Law compels some registered persons to deduct tax from payments to suppliers and deposit it with the government. Every registered person deducting TDS under GST must file a Form GSTR-7 return.

GST Supply Concept and Taxable Supply Value

According to Section 7 of The CGST Act, SOP for TDS under GST includes products and services to government agencies and others mentioned under 'persons liable to deduct TDS under GST legislation'.

If the entire supply value under a specific contract for the delivery of taxable goods or services exceeds Rs.2,50,000, the designated people are obligated to deduct TDS. This amount does not include Central Tax, State Tax, UT Tax, Integrated Tax, or Cess.

Conditions Required to be Fulfilled

The SOP for TDS under GST stipulates that tax must be deducted if all of the following requirements are met:

• The entire taxable value of taxable supply in a single contract exceeds Rs.2,50,000, excluding Central tax, State tax, UT tax, Integrated tax, and Cess.
• Suppose a contract contains taxable and exempted supplies. In that case, the deduction will be applied only to the entire amount of the taxable supplies (if the contract value of taxable supply is more than Rs.2.5 lakh).
• The tax must be deducted from any advance payment made to a supplier on or after October 1, 2018, to provide taxable goods or services.

Process of SOP for TDS under GST

Step 1: Identifying the Supplier

The deductor must identify the supplier and assess whether the provider qualifies to deduct TDS. This may be accomplished by analysing the supplier's GST registration and determining whether or not they have a valid GSTIN number.

Step 2: Determine TDS Liability

The deductor must compute the amount of TDS liability derived as a percentage of the supply's value. The TDS rate for goods is 2%, and the rate for services is 1%.

Step 3: TDS deduction

The TDS must be deducted from the amount payable to the supplier and set aside by the deductor. TDS must be credited to the government's account within 10 days after the month's end if it was deducted.

Step 4:  Issuing TDS Certificate

The deductor must provide the supplier with a TDS certificate as confirmation of the TDS deduction. The following details must be present on the certificate:

• The deductor's name and address
• Supplier's name and address
• The supplier's GSTIN
• TDS amount deducted
• Quantity of supply
• TDS deduction date

Step 5: TDS Payment to The Government

The TDS must be deposited with the government through the Electronic Cash Ledger by the deductor. The TDS deposit must be accompanied by a challan, which is a tax deposit form.

Step 6: TDS Return Filing

The deductor is required to file a TDS return with the government, which is a statement that includes information on the TDS deposited and the TDS certificates issued. The return must be filed within 10 days after the end of each month.

Non-applicability of TDS under GST

The SOP for TDS under GST elaborates on the situations in which TDS under GST is not required to be deducted.

• The supply's taxable value is less than or equivalent to Rs.2,50,000.
• Receipt of exempted goods or services as per notification nos. 12/2017 and 2/2017 dated 28.06.2017, as modified from time to time.
• GST is not levied on some goods. For example, gasoline, diesel, petroleum crude, natural gas, etc.
• Any actions, regardless of value, are not classified as a supply of goods or services under Schedule III of the CGST/SGST Acts 2017.
• In circumstances where the payment is for a tax invoice submitted before October 1st, 2018.
• Where the recipient, i.e. the deductee, is required to pay the tax on reverse charge.
• Unregistered vendors get payments.
• Payments paid for the 'Cess' section.
• Situations in which the deductor's state/UT differs from the location of the supplier & place of supply.
• To the extent of advance payment, when the sum was paid before October 1st, 2018, and the tax invoice was issued on or after that date.

Advantages of TDS under GST

The following are the advantages of Tax Deducted at Source (TDS) under the Goods and Services Tax (GST) regime:

• Increased Compliance:

TDS encourages GST compliance by shifting the obligation to pay Tax from the recipient to the deductor. However, to ensure timely compliance, the deductor must deduct tax at the moment of payment to the supplier and deposit it with the government.

• Tax Evasion is Reduced:

Because the deductor is responsible for deducting tax at the source and depositing it with the government, TDS helps to reduce tax evasion. This makes it more difficult for suppliers to avoid paying taxes, which improves overall compliance with tax regulations.

• Increased Cash Flow:

TDS aids the government's cash flow by guaranteeing that tax is collected at the moment of payment to the provider. This aids in the reduction of tax arrears and the increase of government income.

• Compliance Ease:

The TDS regulations under GST are intended to be user-friendly, with a clear and simple method for deductors to follow. This makes it simple for deductors to comply with TDS regulations, lowering the administrative load.

• Decreased Recipient Burden:

The GST TDS provisions shift the obligation to pay tax from the recipient to the deductor. This decreases the recipient's tax burden and makes it easier for them to yield with tax rules.

• More Transparency:

TDS guarantees that tax is collected at the moment of payment to the supplier, improving tax transparency. This aids in the reduction of corruption and the improvement of accountability in tax administration.

TDS Submission & Its Return

The SOP for TDS under GST gives information about the GST GSTR-7 return.

Refund Policy and Time Limit:

Every registered TDS deductor must file an electronic return in FORM GSTR-7 by the 10th of the month following the month in which deductions were made. It can be submitted online or offline. Deductions made on or after October 1, 2018, but before the registration date, must be included in the first return filed following registration.

Challan Payment:

Tax paid via challan would be credited to the deductor's computerised cash ledger. Therefore, the deductor must fulfil his obligation by debiting his electronic cash ledger.

Certificate Issuance:

The deductor must give the deductee a system-generated certificate in FORM GSTR-7A detailing the contract value, rate of deduction, the amount deducted, the amount paid to the government, and so on. This certificate must be submitted within five days after crediting the amount thus deducted to the government, i.e. within five days of filing a FORM GSTR-7 return.

Deductee Credit Claim:

Upon filing Form GSTR-7, the amount deducted will be available in the registered deductee's Form GSTR-2A/4A and recorded in the electronic cash ledger. This cash can be used to pay down the deductee's tax responsibilities.

Late Fee, Interest, & Penalty as per SOP for TDS under GST

According to the SOP for TDS under GST, two scenarios generate late costs under TDS:

• If the deductor forgets to file the return in Form GSTR-7 within ten days of the month following the month in which the deduction was made, the deductor will be charged a late fee of Rs.100 under the CGST Act and the SGST/UTGST Act separately for the duration of the failure.
• Suppose the deductor fails to submit the TDS certificate to the deductee within 5 days of crediting the amount so reduced to the government. In that case, there will be a late fee of Rs.100 per day under the CGST Act and separately under the SGST/UTGST Act after five days of crediting the amount until the period such failure occurs.

Conclusion
The SOP for TDS under GST provides a clear and straightforward approach for deductors to follow to comply with the TDS regulations under the GST system.

To avoid fines & ensure compliance with tax rules, deductors must understand and execute the SOP. By following the SOP, deductors may make the TDS process easier, faster, and less stressful.