TDS and TCS Provisions are notified under GST

Narendra Kumar

17 Mar, 2023

TDS and TCS Provisions – Recently, The Ministry of Finance, vide Notification No. 50/2018 and 51/2018-Central Tax dated 13 September 2018, stated that on upcoming 1^st October provisions regarding the Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) under Section 51 and Section 52 respectively of the CGST Act will come into force.

Now let’s Discuss the Aforesaid Statutory Provisions:

TDS Provisions:

As per section 51 of the CGST Act, it is mandatory to deduct TDS at the rate of 1% of the value of supply for certain specified entities which are closely concerned with the government at the time of making payment to the supplier in case of intra-state supply of goods or services value exceeding Rs. 2.5 Lakhs.

Above mentioned provision is the same under SGST, therefore, the cumulative deduction will be 2% of the value of the supply.

The following below Mentioned Entities will have to Deduct TDS with effect from 1^st October 2018:

1. Central Government or State Government department or establishment;
2. Local authority;
3. Governmental agency;
4. An authority/board / any other body,

• Which is established through an Act of Parliament or a State Legislature or any Government,
• In order to carry out operations having the participation of 51% or more by way of equity or control;

1. Any Society established under the Societies Registration l Act, 1860 by the Central Government or the State Government;
2. Public sector undertakings.

TDS and TCS Provisions:

As per Section 52 of the CGST Act, consideration received by an e-commerce operator in relation to supply of goods or services is required to be deposited with the Government an amount equivalent to 1% of the net aggregate value of the supply.

SGST contains the same provision as mentioned above, under which the total deduction will be equivalent to 2% of the net aggregate value of the supply.

Conclusion

TDS provisions assist the government in monitoring the transactions involving substantial consideration and which helps in ensuring GST compliance therein. There will be a wider impact of TCS provisions on e-commerce operators whose turnover is less than Rs.20 lakhs operating on a collect model. Now they will have to compulsorily discharge the TCS obligations and seek registration under the CGST Act^[1] with effect from 1^st October 2018. As the other entities which do not fall under the threshold are not required to apply for GST registration thus provisions regarding TCS can be challenged on the ground of differential treatment in the writ courts.

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