TDS & TCS in GST

The concepts of Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) are widely recognized within the domain of business and commercial obligations, particularly under the Income Tax Act. However, these concepts are also present in the Goods and Services Tax (GST) framework. Are you aware of the application of TDS and TCS within GST?

Let us discuss TDS in GST

When we provide Goods or Services or Both under a Contract, to notified Government regulatory establishments, of amount more than Rs. 250000, we attract the compliance of TDS @1% of Value of Supply, this TDS is deducted by recipient i.e. Notified Government Establishments and the same shall pay to Government within 10 days of the month following month of deduction.

And as a supplier we are eligible to claim credit of the same in our Electronic Cash Ledger which is reflected in the return furnished by recipient.

Let us discuss TCS in GST

When we supply Goods or Services or Both to any person through E-commerce Operator being as mediatory to this Supply, E-commerce Operator are required to retain TCS @1% from the amount collected from recipient, before making payment to the supplier.

For the purpose of supplier, he is allowed to claim credit in his Electronic Cash Ledger for the amount of TDS which is reflected in return filed by E-commerce Operator.

Let us summarize in table below:

Did you have any contracts with notified Government entities in which the Tax is deducted at source by recipient or a transaction in which E-commerce Operator has collected the Tax at Source? if yes, did you claim the credit for the same?

Let’s Map the process to claim credit:

Step 1. Login to GST Portal and Follow the Tabs  SERVICES” > “RETURNS” > “RETURNS DASHBOARD”

Step 2. You will be shown an Auto-drafted Table with header “TDS and TCS Credit Received” with a tab “Prepare Online”

Step 3. Four Tables will appear on the page namely “Auto-Drafted TDS/TCS Details”:

1. TDS credit received

2. Amendments to TDS credit received

3. TCS credit received

4. Amendments to TCS credit received

Step 4. Supplier is required to take action for Acceptance/ Rejection of Credit

Step 5. Preview, cross-verify the draft form and proceed to file the details. After filling in the details, click on “PREVIEW DRAFT TDS AND TCS CREDIT RECEIVED” Tab.

Step 6. Further “Proceed To File” Tab will show, click it to continue submission.

Step 7. Submit the form either using the Digital signature or the Electronic Verification Code. The status of the submission turns to ‘Filed’.

Once this process is completed, the amount will be added to your cash ledger. It is also essential to ensure proper accounting in the books of accounts to maintain a balance that matches the portal. Furthermore, the balance in the cash ledger can be utilized for any GST payments or you can apply for a refund if the amount is in excess. This ensures financial accuracy and compliance with tax regulations.

Disclaimer: This material and the information contained herein is intended for clients and other Chartered Accountants to provide updates and is not an exhaustive treatment of such subject. We are not, by means of this material, rendering any professional advice or services. It should not be relied upon as the sole basis for any decision which may affect you or your business.