The Central Board of Indirect Taxation and Customs (CBIC) announced TDS and TCS under GST to be applicable from the 1st of July, 2018. However, as a measure to give a relaxation period, CBIC extended the date to 1st October 2018. The board also declared the tax rates for net supplies. Read on to find out. Before, that for simplification let’s clear out what TDS and TCS actually are and how the new rules will affect traders.

What is TDS?

TDS stands for Tax Deducted at Source and it is basically a procedure of collecting tax on the amount the receiver has to pay for goods, based on certain set percentages. The tax which is obtained from TDS contributes towards the revenue for the government.

What is TCS?

TCS stands for Tax Collected at Source and simply put, it is a tax which a seller has to pay and it is the same tax which he recollects from his consumers at the time of sale. TCS follows the regulations laid down in section 206 of Income Tax, 1961.

TDS and TCS under GST

The TDS regime under GST will help clear up a lot of confusion and discontent among traders and will also help achieve transparency in government contracts and tax compliances. The decision will also impact e-commerce retailers through the country with many E-commerce companies set to deduct 1% TCS from 1 October 2018.

Here we will look at the new provisions by looking at the following

  1. Who will become eligible to deduct TDS under GST?
  2. What are the rates of TDS and TCS under GST?
  3. A limit for deducting TDS.
  4. Time Limit for payment of TDS
  5. Impact of TDS on Government Contractors
  6. TCS Compliances for e-commerce Aggregators

Who can collect TDS?

According to the new provisions of TDS and TCS under GST, either following entities will be responsible for collecting taxes.

  • An establishment/department of a Central or State Government.
  • Local Authorities
  • Governmental Agencies
  • Persons/ Category of persons notified by the Central or State governments backed by recommendations from the GST Council.

It should also be added that to be a TDS deductor, it is mandatory for a proposed deductor to have a TAN number.

Rates of TDS and TCS under GST

Under GST regulations, The maximum rate of TDS is 2%  as well as 2% for TCS for e-commerce operators.For a whole list of Tax Rates, Head on over to : TCS Rates and TDS Rates.

Upper Limit for TDS and TCS deduction

If the quantity of total supply under a contract is Rs 2.5 lakhs or more,  respective person/ entity will deduct TDS.

Time Limit/ Due Date for paying TDS

TDS has to be paid on or before the 10th of the subsequent month and TCS has to be paid by 7th of the subsequent  month of the corresponding quarter.
For eg. If TDS was charged on 5th September , 2018 then TDS payment has to be made by 10th of October, 2018. Similarly, if TCS is for the quarter of April, May, June then the due dates of payementof TCS are 7th May, 7th June and 7th July respectively.

TDS Impact on Government Contractors

Civil contracts are an integral part to the mainainence and construction of highways, buildings etc. Annuly, the Government of India issues 10,000 civil contracts  with costs nearing the humongous range of Rs. 100 Crores. These contracts are then undertaken by big construction companies. These companies outsource their work to a smaller construction firm who in turn might end up outsourcing the contract to a local vendor. This cycle of outsourcing will face troubles under GST due to TDS liability. In this system, many local contractors and vuilders were not registered under the VAT regime. These contractors will now have to register under the GST laws if they wish to claim ITC(Input Tax Credit).This brings a kind of stability and transparency to the system. The TDS clause was introduced  to help secure tax compliance from an unorganized construction sector.

TCS Complaince for e-Commerce  Aggregators

Under the GST laws,  a special clause has been added with regards to e-commerce retailers. E-commerce operators have to shoulder the responsibility of deducting and depositin tax at the prescribed rate of 1% from each transaction. Thus, all dealers/traders/services selling goods online would get paid after the deduction of 1% tax. This measure will be extremely helpful with deploying tax compliance and ease of administration for the online aggregators.
Regardless of the turnover , all  traders using online services for sale of goods have to be registered under GST to claim tax deducted by e-commerce operators.

LegalRaasta understands legislations and rule changes can be tough to keep up with. Follow our TDS blog to stay up to date on the latest on TDS and TDS Return.

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