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GST TDS Explained: When to Deduct, How Much, and When to Pay

 

Understanding GST TDS Under Section 51 of the CGST Act

Did you know that the Goods and Services Tax (GST) also uses the Tax Deducted at Source (TDS) mechanism in addition to income tax?

Certain entities, including government departments, local authorities, and other notified bodies, must deduct TDS under Section 51 of the CGST Act when they pay suppliers of taxable goods or services. This regulation promotes better compliance and transparency in the GST system.

So, under GST, who must deduct TDS? When should they deduct it? How much should they deduct? And above all, how and when should they make the payment?

 Real-World Scenario to Understand GST TDS

Contract Value (excluding GST): ₹2,60,000
Let’s assume a vendor has entered into a contract worth ₹2.6 lakhs with a government department.

The vendor issues two invoices over the contract period:

  • Invoice 1: ₹2,40,000 (Issued in April)
  • Invoice 2: ₹20,000 (Issued in December)

Now, let’s evaluate TDS applicability.

 Is TDS Applicable in This Case?

The threshold for TDS under GST is ₹2,50,000 per contract (excluding GST). Since the total contract value is ₹2,60,000, TDS is applicable—even though each invoice alone is less than ₹2.5 lakh.

Important Note:
TDS under GST is applied per contract, not per invoice or vendor.

 TDS Calculation Breakdown

Let’s calculate the TDS deduction on both invoices.

 Invoice 1 (April)

  • Taxable Value: ₹2,40,000
  • TDS Rate: 2% (1% CGST + 1% SGST or 2% IGST as applicable)
  • TDS Amount: ₹4,800
  • Due Date to Pay TDS: 10th May

Invoice 2 (December)

  • Taxable Value: ₹20,000
  • TDS Rate: 2%
  • TDS Amount: ₹400
  • Due Date to Pay TDS: 10th January

When Should You Deduct TDS Under GST?

TDS must be deducted at the time of payment to the supplier or when the invoice is booked, whichever is earlier.

This is crucial for staying compliant, as delays or incorrect deductions can attract interest and penalties.

Key Compliance Tips for GST TDS

Here’s what every deductor should keep in mind:

  1. Applicability:
    • TDS applies only if the contract value (excluding GST) exceeds ₹2.5 lakh.
    • It applies per contract, not per invoice or per vendor.
  2. Rate of TDS:
    • 2% of the taxable value (excluding GST).
    • If supply is intra-state, TDS is split as 1% CGST + 1% SGST.
    • If inter-state, then 2% IGST is deducted.
  3. Deposit Timeline:
    • Deducted TDS must be deposited with the government by the 10th of the following month.
  4. Interest on Late Payment:
    • If TDS is not deposited within the due date, interest at 18% per annum applies.
  5. Filing and Certificates:
    • Deductors must file Form GSTR-7 monthly.
    • TDS certificates must be issued to suppliers in Form GSTR-7A.

What If You Miss a TDS Deadline?

If you delay depositing the deducted TDS or fail to issue TDS certificates on time:

  • Interest @ 18% per annum will be levied from the due date till actual payment.
  • The deductee (supplier) might not receive credit for the deducted amount until the deductor files GSTR-7 and issues the TDS certificate.
  • Non-compliance can also lead to penalties and legal proceedings under GST law.

Quick Summary: GST TDS Compliance Checklist

 Requirement Action
Threshold TDS applies if contract exceeds ₹2.5 lakh (excluding GST)
Rate 2% on taxable value
Deduction Timing At payment or invoice booking (whichever is earlier)
Deposit Due Date 10th of next month
Return Filing GSTR-7 monthly
TDS Certificate GSTR-7A to be issued to vendor
Interest on Late Payment 18% per annum

 

 Final Thoughts

Particularly for notified entities and government agencies, TDS is a GST compliance requirement. Although it might appear technical, correctly adhering to the regulations guarantees that vendors receive accurate credits and that neither party faces penalties.

Review your contract values carefully, make sure that deductions are made on time, and file returns right away if you are involved in contracts with such entities that exceed ₹2.5 lakh.

Is GST required for Trademark?

Is GST required for a PVT Ltd company?

 

In India, the implementation of the Goods and Services Tax (GST) has brought about a significant shift in the indirect taxation landscape. Businesses, including private limited companies, need to understand the intricacies of GST to ensure compliance and optimize their tax strategies. This article explores whether GST is required for a private limited company, the benefits of GST registration, the process involved, and the compliance requirements.

What is GST?

GST is a comprehensive, destination-based tax that is levied on every value addition. It is a single tax that has replaced various indirect taxes previously levied by the central and state governments, such as service tax, VAT, excise duty, and more. GST is categorized into three types:

  • CGST (Central GST): CGST is levied by the central government on intra-state supplies of services and goods.
  • SGST (State GST): Levied by the state government on intra-state supplies.
  • IGST (Integrated GST): Levied by the central government on inter-state supplies of goods and services.

Applicability of GST to Private Limited Companies

Private limited companies, like other business entities, are subject to GST with GST Registration in Hyderabad if their annual turnover exceeds a certain threshold. As of now, the turnover thresholds are:

  • For goods suppliers: Rs. 40 lakhs
  • For service providers: Rs. 20 lakhs

These thresholds may vary for special category states. Even if a private limited company’s turnover is below these limits, it may choose to register voluntarily for GST to avail benefits such as input tax credit and to enhance business credibility.

Benefits of GST Registration for Private Limited Companies

  1. Legal Compliance: Ensuring GST registration is critical for complying with Indian tax laws. Non-compliance can lead to penalties, legal issues, and a tarnished business reputation.
  2. Input Tax Credit: One of the most significant advantages of GST registration is the ability to claim input tax credit (ITC) on the GST paid on purchases.
  3. Simplified Taxation: GST has replaced multiple indirect taxes with a single tax regime, simplifying the tax structure and compliance process for businesses.
  4. Competitive Edge: GST Registration in Hyderabad enhances the credibility and trustworthiness of a business. It allows companies to engage in interstate trade without restrictions, broadening their market reach.
  5. Ease of Business Operations: Registered businesses can seamlessly transact with other GST-registered entities, ensuring smooth business operations and compliance.
  6. Reduced Tax Burden: By eliminating the cascading effect of taxes, GST reduces the overall tax burden on businesses. This leads to lower production costs and increased profitability.

Step-by-Step Guide to GST Registration

  1. Prerequisites for Registration:
    • PAN of the Company: The Company’s Permanent Account Number is mandatory for GST registration.
    • Proof of Business Registration: Certificate of incorporation, Memorandum of Association (MoA), Articles of Association (AoA).
    • Identity and Address Proof of Directors: PAN, Aadhaar, passport, or voter ID of the directors.
    • Business Address Proof: Electricity bill, property tax receipt, or rent agreement.
    • Bank Account Details: Bank statement, cancelled cheque, or passbook.
    • Digital Signature Certificate (DSC): Required for electronic signing of the application.
  2. Access the GST Portal: Pvt ltd Company with Private limited company registration in Bangalore can get GST. So Visit the GST portal. Select the ‘Services’ > ‘Registration’ > ‘New Registration’ option.
  3. Part A – Application:
    • Fill in details such as PAN, mobile number, and email address.
    • Verify the details through the OTP sent to the registered mobile number and email.
  4. Part B – Detailed Application:
    • Provide additional details about the business, including business address, bank account details, and the principal place of business.
    • Upload the required documents.
    • Use the DSC to sign and submit the application electronically.
  5. Verification and ARN Generation:
    • After submission, an Application Reference Number (ARN) is generated.
    • The application is reviewed by the GST officer, who may request additional information or documents if required.
  6. GST Certificate Issuance:
    • If the application is approved, a GST registration certificate containing the GSTIN (GST Identification Number) is issued.
    • The company can now start issuing GST-compliant invoices and file GST returns.

Compliance Requirements for GST-Registered Private Limited Companies

For Pvt ltd companies, with Private limited company registration in Coimbatore, following compliances are required.

Regular Filing of GST Returns

  1. GSTR-1: Monthly or quarterly return for outward supplies.
  2. GSTR-3B: Monthly summary return for inward and outward supplies.
  3. GSTR-9: Annual return that consolidates the monthly/quarterly returns filed during the year.

Maintaining Proper Records

Businesses with GST Registration in Hyderabad must maintain accurate records of all transactions, including sales, purchases, input tax credit availed, and tax paid. These records must be maintained for at least six years from the due date of filing the annual return for the relevant year.

Complying with E-Way Bill Requirements: For transporting goods valued at over Rs. 50,000, an e-way bill must be generated. This ensures that the movement of goods is properly documented and tax compliant.

Responding to Notices and Communications

Businesses need to respond promptly to any notices or communications from the GST authorities. This may include requests for additional information, audits, or discrepancies identified in the returns filed.

Common Challenges and Solutions

Understanding GST Provisions

Many companies with Private limited company registration in Coimbatore face challenges in understanding and interpreting the various provisions of GST. It is advisable to engage a professional tax consultant or accountant who can provide expert guidance and ensure compliance.

Managing Multiple Registrations

For companies operating in multiple states, obtaining and managing multiple GST with GST Registration in Hyderabad can be complex. A centralized GST compliance system or professional assistance can help streamline this process.

Timely Filing of Returns

Timely filing of GST returns is important. This GST filing is important as to avoid penalties and interest. Companies should set up a robust internal system to ensure deadlines are met consistently.

Addressing Technical Issues

Technical glitches on the GST portal can hinder the registration and return filing process. Keeping updated with portal maintenance schedules and seeking help from GST support services can mitigate these issues. So, Pvt ltd companies with Pvt ltd company registration in Bangalore, must consult, a leading service provider, like Shoplegal to get the work done.

Conclusion

GST registration is not just a legal requirement for private limited companies meeting the turnover thresholds but also a strategic move that offers numerous benefits. From availing input tax credit to enhancing business credibility and ensuring compliance, GST registration plays a pivotal role in modern business operations.

By understanding the registration process, compliance requirements, and addressing common challenges, private limited companies can leverage GST to optimize their tax strategies and drive business growth.

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