Under GST, the concept of Tax Deducted at Source (TDS) was introduced, which is similar to the existing TDS provisions under the Income Tax Act. The TDS mechanism is designed to ensure that the government receives the tax revenue in a timely and efficient manner. In this context, GSTR 7 is a crucial return that needs to be filed by persons who are required to deduct TDS under GST. This article will provide a detailed overview of GSTR 7 and TDS under GST, including the applicability, due dates, and compliance requirements.
What is GSTR 7?
GSTR 7 is a return to be filed by the taxpayers who are required to deduct Tax deducted at source (TDS) under GST.
What is TDS?
When it comes to Indirect Taxation, one item that forms an important part of the team’s job is filing TDS or Tax Deducted at Source. The government mandates institutions to collect tax at the time of income generation itself rather than at a later date hence it is called Tax Deducted at Source. The same is then deposited with the government.
TDS is applicable to various incomes such as salaries, interest received, the commission received etc.
The person responsible for deducting the tax before passing on the benefits is liable to deposit it with the authorities and is called as deductor. While the person who receives the payment after deduction is termed as deductee.
Conceptually, TDS under GST is similar to TDS under income tax. In the GST regime, the deductor is supposed to declare the TDS deposits through a form – GSTR-7.
The provisions of TDS are effective from 1st Oct 2018. Here are 5 questions you should know as a tax deductor:
What is the Applicability of TDS?
As per section 51 of CSGT Act, the TDS is to be deducted by the specified persons where the total value of contract exceeds Rs. 2.5 lakhs. The total value here is exclusive of taxes.
Who is Liable to Deduct TDS?
As per GST law, the TDS is deducted by the Individuals/Entities mentioned below:
- a department or establishment of the Central or State Government
- local authority
- governmental agencies
- An authority or a board or any other body which has been set up by Parliament or a State Legislature or by a government, with 51% equity (control) owned by the government.
- A society established by the Central or any State Government or a Local Authority and the society is registered under the Societies Registration Act, 1860.
- Public sector undertakings.
- Any such persons or category of persons as may be notified, by the Central or a State Government on the recommendations of the Council.
What is the Registration Requirements for TDS Deductors?
Persons liable to deduct TDS need to get a separate registration for this purpose. The TDS registration under GST is based on the existing Tax Deduction and Collection Account Number (TAN) issued under the Income Tax Act of the said person. Thus, unless you have TAN you cannot opt for GST registration for TDS.
It should be noted that for persons who already have regular GST registration, TDS will be an additional registration for them if applicable. In such cases, due care should be taken that appropriate GSTIN are used while generating and reporting supply invoices and while deducting TDS.
How is TDS to be deducted (Rate) and reported (Form GSTR 7)?
TDS is to be deducted at the rate of 2 percent (i.e. 1% CGST and 1% SGST and 2% For IGST) on payments made to the supplier of taxable goods and/or services. It needs to be deposited as per guidelines provided in circular 65. The TDS (Tax Deducted at source) transactions need to be reported to the government through form GSTR 7.
Why should you file GSTR 7?
GSTR 7 consists of details regarding TDS deducted, the amount of TDS paid & payable, and any refund of TDS claimed. Based on form GSTR 7, the Tax Deduction Certificate will be made available for the deductee on the common portal in Form GSTR-7A. The deductee can then only claim the input credit of such TDS deducted and utilize for the payment of output tax liability.
When is the due date to file GSTR 7?
A taxpayer is required to file his/her GSTR 7 for the given month by the 10th day of the succeeding month.
A TDS certificate i.e. GSTR 7A needs to be issued within 5 days of depositing the tax to the government.
What are the penal provisions for non-compliance to GSTR-7?
Failure to file form GSTR-7 on or before the given due date can lead to a ‘per day penalty’ of Rs 100 under CGST & Rs 100 under SGST. The total late fee shall be calculated along with an 18% interest applicable from the day following the due date to the date of payment.
Key points
- The amount of fine liable cannot exceed Rs. 5000.
- There is no late fee for the late filing of IGST.
What are the Exceptions to TDS deduction?
There are certain cases where TDS is not to be deducted. Transactions when the location of supplier and place of supply is different from the State of the registration of the recipient, the provisions of TDS do not apply.
| Sr. No. | Supplier State | Receiver State | Place of Supply | Condition Satisfied | Transaction Type | TDS to be Deducted |
|---|---|---|---|---|---|---|
| 1 | Maharashtra | Maharashtra | Maharashtra | Yes | Intra-State | 1% CGST 1% SGST |
| 2 | Maharashtra | Delhi | Delhi | Yes | Inter-State | 2% IGST |
| 3 | Maharashtra | Delhi | Maharashtra | No | Intra-State | No TDS |
| 4 | Maharashtra | Maharashtra | Delhi | No | Inter-State | No TDS |
Can there be cases of TDS Refund under GST
If any excess amount is deducted and paid to the government, a refund can be claimed by deductor. But there is one condition for refund. The said deposited TDS cannot claim by the deductor if it is already added by government to the electronic cash ledger of deductee. So, in this case, the deductee can claim the refund for extra tax deducted subject to refund provisions of the act.
While the above provisions are for persons liable to deduct TDS, if you are the supplier to such persons, keep in view the following points:
- Be careful about stating the appropriate GSTIN in your supply invoice and while reporting in GSTR-1. This is important in the cases where your recipient beholds both regular and TDS registration.
- TDS deducted for you, will be available as part of auto-drafted GSTR 2A. This TDS you can use to settle the tax liability while filing GSTR-3B.
- Please ensure to check the details in the TDS certificate and details in GSTR 2A.
How to revise GSTR-7?
Apparently, the taxpayer cannot revise form GSTR 7 in the current month once the return has been filed. For any mistake identified, the taxpayer has to wait until the following month’s filings to rectify the error. For instance, for an error while filing GSTR 7 in the month of March, rectification can be made in the month of April or the later months as and when the error or omission (if any) is identified.
Along with form GSTR 7, IRIS GST Software also provides supports all the major forms like GSTR 1, GSTR 3B, GSTR6, GSTR 8, GSTR 9 and ITC 04.[/vc_column_text]
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very well written..thanks for sharing