The GST Law states the following, “Notwithstanding anything contained to the contrary in this Act, the Central or a State Government may mandate, - (a) a department or establishment of the Central or State Government, or (b) Local authority, or (c) Governmental agencies, or (d) such persons or category of persons as may be notified, by the Central or a State Government on the recommendations of the Council, [hereinafter referred to in this section as “the deductor”], to deduct tax at the rate of one percent from the payment made or credited to the supplier [hereinafter referred to in this section as “the deductee”] of taxable goods and/or services, notified by the Central or a State Government on the recommendations of the Council, where the total value of such supply, under a contract, exceeds rupees ten lakh. Explanation. – For the purpose of deduction of tax specified above, the value of supply shall be taken as the amount excluding the tax indicated in the invoice.”
Accounting of Tax Deducted at Source under GST
The sum of money subtracted as tax under GST will be paid to the appropriate government’s (state or central) credit by the deductor. The time taken to make the payment will be within the first 10 days following the end of the month in which there has been a deduction.
Contents of TDS Certificate under GST
The deductor under the GST law will submit a certificate to the deductee. This certificate will have information such as the rate of deduction, the sum of money deducted, the contract value, the sum of money paid to the relevant government, etc.
Treatment of Failure to Issue TDS Certificate under GST
The GST Act states that in case a deductor does not submit the certificate to the deductee, following the deduction of tax at source within a period of five days from when the amount was deducted to the relevant government, the deductor will have to make a payment towards late fees. This payment will be Rs.100 per day, starting from the day on which the five-day period expires until the date on which the failure is corrected. The maximum limit of fee payable, however, cannot be in excess of Rs.5000.
Claiming TDS on GST for Deductees
Credit can be claimed by a deductee in his/her electronic cash ledger. This credit will be of the tax subtracted and reflected in the deductor’s return filed under sub-section (5) of Section 27.
Treatment of Failure to Create TDS on GST Amount with the Relevant Government
In case a deductor does not make credit payment to the relevant government, the amount subtracted under sub-section (1), he/she will become liable to make an interest payment according to the provisions of Section 36, as well as the amount of tax subtracted.
Treatment of Erroneous or Excess Deduction of TDS on GST
The GST law states that the refund to the deductee or the deductor arising due to erroneous or excess deduction will be dealt with according to the provisions of Section 38. However, it has to be ensured that no refund to the deductor is granted in case the amount subtracted has been credited to the deductee’s electronic cash ledger.
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