TDS refers to tax deducted at source. The concept under Goods and Service Tax is similar as given under the Income Tax Act. Individuals or industries who make payments for services and goods are liable to deduct tax at source when the payment meets a certain threshold limit. The Form GSTR-7 is all about Tax deducted at source (TDS) under GST.
Every eligible taxable person who deducts TDS needs to file GSTR-7. Every person who deducts TDS shall file the return by 10th of the following month from a certain tax period. GSTR-1 must get filed irrespective of the filing requirement of Form GSTR-7.
TDS includes a total value of services and goods that exceeds Rs 2.5 Lakhs annually. The deduction rate of TDS is 2% is associated with CGST 1% + SGST 1% and 2 % of IGST of interstate supplies. Taxpayers also need to note that TDS must not get deducted if the location of the supplier and the place of supply are different from the place of registration of the receiver.
1. Who Is Liable to Deduct TDS Under GST?
According to section 51, here are the liabilities of the deductors who can deduct TDS under GST:
- Department of state government or central government
- Local authority
- Government agencies
- An authority or a board or any other party,-
- Set up by an Act of Parliament or a State Legislature; or
- Established by any Government,
with fifty-one per cent. or more participation by way of equity or control, to carry out any function; or
- A society established by the Central Government or the State Government or a Local Authority under the Societies Registration Act, 1860 (21 of1860); or
- public sector undertakings.
2. When One Can Deduct TDS?
The deductors who we talked about in the above section are able to deduct TDS from the amount they pay to their suppliers. These recipients can only deduct the TDS tax if the total value of the taxable goods and/or services meets Rs 2.50 Lakhs. Also, For Intra-state supplies, TDS @ 2% is deductible where 1% represents CGST and 1% represents SGST. However, in the case of Inter-state supplies, 2% represents IGST.
Moreover, TDS is also deductible at the time of making payment regardless of the type of payment mode used.
3. Situations for TDS Deductors
The deductors can deduct TDS from the payment made to the supplier under the following conditions-
- The total amount paid to a single contract should be over Rs 2.50 Lakhs. However, this is a taxable value and therefore, it should not include any taxes.
- Service provider and the receiver should be in the same state or in a union territory. Moreover, this also relates to intra-state supplies where the TDS rate should be 2% to be deducted by the deductor for IGST/CGST/SGST.
- The deductor needs to deduct 2% TDS if the location between the recipient and the service provider is different.
4. Exemption From Deduction of TDS
In the case where “Location of Supplier” and “Place of Supply” is different from the state of registration of recipient of goods/services then the recipient is not required to deduct TDS while making payment.
Understand this case with the following example:
|Nature of Supply||Location of Supplier of Goods/service (A)||Location of Recipient of Goods/service (B)||Place of Supply||Liability of TDS|
|Supply of Goods||Delhi||same||same||‘B’ is liable to deduct TDS (CGST & SGST) @ 2%|
|Supply of Goods||Delhi||Haryana||Haryana||Person ‘B’ is liable to deduct TDS (IGST) @ 2%|
|Construction Supply of Immovable Property in the state of Delhi||Delhi||same||same||‘B’ is liable to deduct TDS (CGST & SGST) @ 2%|
|Supply of Construction of Immovable Property in the state of Delhi||Delhi||Haryana||Delhi||B is not liable to deduct TDS as the location of the supplier and place of supply and is different from the location of the recipient.|
5. Details Regarding Form GSTR-7
The GSTR-7 is a monthly tax return which is mandatory to file by every person who is liable to deduct TDS under GST. This return should contain these details-
- Details of the tax deducted at source
- Tax deducted at source and paid
- Amendments to details of tax deducted at source in respect of any earlier tax period
- Interest, late fees, payable and paid
- Refund claimed from electronic cash ledger
- Debit entries in electronic cash ledger for TDS/interest payment [to be populated after payment of tax and submissions of return]
Form GSTR-7 is all about TDS payable and paid in a particular month. The deductees should be able to access all the information in the common GST portal. After the person deducts the TDS, he/she have to file the return within 10 days from the end of the month in which TDS is deducted and submit it to the government.
6. Due Date of Form GSTR-7
Every deductor should file the Form GSTR-7 within 10 days from the end of the month of TDS deduction. For example, if you deduct TDS in August 2020, you have to file the return on September 10th, 2020.
7. ISSUE TDS CERTIFICATE IN FORM GSTR-7A TO DEDUCTEE
The TDS certificate gets generated in the GSTR-7A return and it is furnished on the basis of details provided by the deductor in the GSTR-7 form.
Penalties for non-submission of TDS certificate under GST
In case the deductor fails to submit TDS certificate to.deductee will have to pay the following penalties.
- 100 rupee per day from the date of the end of 5 days till the default continues. Subject to a maximum of Rs. 5000
8. What if Form GSTR-7 is Due?
The deductor is responsible to provide fees, penalties, and other payable amounts if a late occurs. So in that case, the below details will be applicable-
- If the deductor does not deduct TDS from the service provider, he has to pay 18% interest as well as the TDS amount.
- If the deductor fails to generate the TDS Certificate within 5 days of filing the return, he will pay Rs 200 per day and that could lead to max Rs 5,000.
- So, the deductor has to pay a late fee along with interest and 18% per annum. The taxpayer will calculate the amount and that should be paid within the given deadline.
9. Details to be provided in Form GSTR-7
The return is comprised of a total of 8 sections that need to be proper and valid-
GSTIN: a GSTIN is a PAN-based 15-digit Goods and Services Taxpayer Identification Number which will be provided to all taxpayers. While filing the return, the taxpayers will be able to find the auto-populated GSTIN number on the return.
The original name of the TDS deductor: The name of the deductor will come auto-populated in the GSTR-7 Return.
Details regarding TDS deducted: Here each of the taxpayers needs to provide details which include the GSTIN of the person who is deducting TDS under GST, along with the total amount of TDS deducted.
Corrections of details provided in the earlier tax period: If any correction needed for the data submitted in the previous form can be corrected here in this section. Based on this modification, the TDS certificate (GSTR-7A) will also be changed.
TDS paid: Here the taxable persons need to provide all the details regarding the TDS deducted by the deductee along with the information of tax paid to the central government.
Payable and paid fees and interest: In case of any late fees or interest needs to be added in the total TDS amount, the taxpayers need to include details regarding the same in this section.
Refund details about electronic cash ledger: The taxpayers need to include refund details of TDS deducted from an electronic cash ledger. Here the taxable person also provides the bank account details where the refund should be credited.
Interest payments in electronic cash ledger: This section comes auto-populated after the taxpayers file the return.
All the auto-populated information in various sections of the Form GSTR-7 is not changeable and for that, taxpayers can use the modification section. However, the information you provide manually should be correct in fact, you also need to sign a declaration before furnishing the return.