TDS on GST amount is a matter of confusion as a confusion always arises as to whether TDS on GST is liable to be deducted or the TDS on GST is not liable to be deducted. The confusion about whether it is liable or not will be solved by this article.

The Central Board of Direct Taxes (the Board) had earlier issued Circular No. 112014 dated 13.01.2014 clarifying that wherever in terms of the agreement or contract between the payer and the payee, the Service Tax component comprised in the amount payable to a resident is indicated separately, tax shall be deducted at source under Chapter XVII-B of the Income tax Aet, 1961 (the Act) on the amount paid or payable without including such Service Tax component.

According to the Indian Tax Laws, the receiver of service is required to do two things at the time of making any payment:

  1. Pay GST on the services received.
  2. Calculate TDS and deduct it from the payment made.

TDS on GST

TDS is liable to be deducted from the income of the recipient. Service tax was  never considered to the income of the service provider as the service provider collects service tax from the service receiver and deposits this amount with the government.

Thus, GST which is collected is not an income of the service provider and the service provider is the agent of the government.So logically, TDS is not required to be deducted from the amount that is inclusive of Income Tax and should be deducted from the amount that is exclusive of theGST.

But if GST amount has not been disclosed separately in the invoice, then TDS in such case would be deducted from the total amount ie the amount that is inclusive of GST.

Old Rule

Earlier TDS on Service tax was to be deducted from the amount that was inclusive of the service tax for all the payments except rent. But Govt Circular no. 1/2014 dated 13th Jan 2014 lays that TDS should be deducted from the amount that is exclusive of service tax if the service tax amount is shown separately. Same applies to in the case of TDS on GST as Circular No. 23/2017 states that any reference to ‘service tax ‘ in an existing agreement or contract which was entered prior to 01.07 .2017 shall be treated as ‘GST on services’ with respect to the period from 01.07.20 17 onward till the expiry of such agreement or contract.

In case you are confused about TDS Return Filing as a deductor, feel free to consult the experts at LegalRaasta. You can get comprehensive assistance with our TDS Return Filing Software which supports TDS on Salary payments (Form 24Q), Rent, Interest, Commission and other Non-salary transactions (Form 26Q), NRI (Form 27Q)and TCS (Form 27EQ).