2. DEDUCTOR AND DEDUCTEE
The person who is making the payment is responsible for deducting the tax and
depositing the same with government. This person is known as 'deductor'.
On the other hand, the person who receives the payment after the tax deduction is
3. TAX DEDUCTED AT SOURCE
TDS stands for 'Tax Deducted at Source'.
It was introduced to collect tax at the source from where an individual's
income is generated.
The government uses TDS as a tool to collect tax in order to minimize tax
evasion by taxing the income (partially or wholly) at the time it is generated
rather than at a later date.
TDS is applicable on various incomes such as salaries, interest received,
commission received, dividends etc.
The provision pertaining to TDS under GST is given under Section 51 of
the CGST Act to be read with CGST Rule 66.
4. Rates For Tax Deduction At Source
There are different rates for TDS described in the different sections of the Act,
depending on the nature of the payments.
The government with effect from May 14, 2020 has reduced the TDS rates by
25% on non-salaried payments such as rent, interest received from fixed
deposits, dividends etc. However one must remember that no changes have
been made with regards to TDS on salaries. Therefore, tax on salaries will be
deducted at the tax rates applicable to your income (inclusive of cess at 4%).
Also, one must remember that the reduced TDS rate on the non-salaried
payments will be applicable till March 31, 2021.
5. TDS And GST
Who could be liable to deduct TDS under GST law?
• A department or an establishment of the Central Government or State Government;
• Local authority; or
• Governmental agencies; or
• Such persons or category of persons as may be notified by the Government.
As per the latest Notification dated 13th September 2018, the following entities also
need to deduct TDS-
• 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
• 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.
6. When and to whom should the TDS be paid?
TDS shall be paid within 10 days from the end of the month in which tax is deducted.
The payment shall be made to the appropriate government which means:
• The Central Government in case of the IGST and the CGST
• The State government in case of the SGST
What are the provisions relating to the issue of TDS certificates under the GST
Similar to the Income Tax Law, the person deducting tax under GST has to issue the
TDS certificate in form GSTR-7A to the concerned person within 5 days of depositing
the tax to the government. However, GST portal will automatically make GSTR-7A
available to the deductee on the basis of GSTR-7 filed.
7. How is Refund of TDS possible under GST?
If any excess amount is deducted and paid to the government, a refund can be
claimed as this is not the tax amount that the government has a right on.
However, if the deducted amount is already added to the electronic cash ledger of the
supplier, the amount so added cannot be got back as a refund by the deductor.
Deductee can claim a refund of tax subject to refund provisions of the act.
Which form is required to file the TDS return?
The person deducting tax is required to file a TDS return in form GSTR-7 within 10
days from the end of the month. When GSTIN of the unregistered supplier is not
available, their name can be mentioned. The robustness of the system reflects these
filled-in details in the electronic ledger of the supplier.
8. Tax collected at source (TCS) is the tax payable by a seller which he collects from the
buyer at the time of sale. Section 206C of the Income-tax act governs the goods on
which the seller has to collect tax from the purchasers.
Tax Collected at Source (TCS) is an income tax, collected by the seller of specified
goods, from the buyer. TCS is a concept where a person selling specific items is liable
to collect tax from a buyer at a prescribed rate and deposit the same with the
Let’s take an example to understand the concept of TCS:
Ram purchases jewelry from Yash of Rs. 7,00,000. Here, as per the provisions of
TCS Ram would be liable to pay Rs. 7,07,000 to Yash ( Rs. 7,00,000 for jewelry
and Rs. 7,000 as TCS at the rate of 1%).
TAX COLLECTED AT SOURCE
10. TCS And GST
Who is liable to collect TCS under GST?
Certain operators who own, operate and manage e-commerce platforms are liable to
collect TCS. TCS applies only if the operators collect the consideration from the
customers on behalf of vendors or suppliers. In other words, when the e-commerce
operators pay the consideration collected to the vendors they have to deduct an
amount as TCS and pay the net amount.
Here are few exceptions to the TCS provisions for the services provided by an e-
a. Hotel accommodation/clubs (unregistered suppliers)
b. Transportation of passengers – radio taxi, motor cab or motorcycle
c. Housekeeping services like plumbing, carpentry etc. (unregistered suppliers)
11. What is the rate applicable under TCS?
The dealers or traders supplying goods and/or services through e-commerce operators
will receive payment after deduction of TCS @ 1%. The rate is notified by the CBIC
in Notification no. 52/2018 under CGST Act and 02/2018 under IGST Act. This means
for an intra-state supply TCS at 1% will be collected, i.e 0.5 % under CGST and 0.5%
under SGST. Similarly, for a transaction between the states, the TCS rate will be 1%,
i.e under the IGST Act.
Due date for depositing TCS
TCS will be deducted during the month in which the supply is made. It will be
deposited within 10 days from the end of the month of supply to the credit of the
government. Payment of the tax collected will be made in the following manner :
a. IGST & CGST will be paid to the central government
b. SGST to respective state governments
12. How to compute taxable value of the supplies for TCS?
• The value for the collection of the tax will be the ‘Net Value Of Taxable Supplies.’
This net taxable value will be calculated as under :
• The total value of taxable supplies of goods and/or services (other than notified
services under GST law by all registered persons)
Less: Taxable supplies returned to the suppliers through the e-commerce operator
=Net value of Taxable Supplies
Which form can one use to file TCS returns?
E-commerce operators have to file GSTR-8 by 10th of the next month in which the
tax was collected. This return will only be filed once the tax collected has been
deposited to the respective credit of the government. For instance, the due date for
GSTR-8 for September 2018 is on the 10th of October 2018.
13. Difference between TDS and TCS
TDS is roughly based on the concept
of paying as you earn, hence deducted
from any income or collection.
TCS is an additional payment, hence collected over
and above any amount paid/ payable.
TDS is deducted when the recipient of
goods or services make some payment
under a contract.
TCS refers to the tax which is collected by ECO
when the supplier supplies some goods/ services
through its portal & payment for that supply is
collected by ECO.
It acts as a powerful instrument to prevent tax evasion & expand the tax base as it provides
for the creation of an audit trail. It also helps to track and cross-verify business transactions
and ensures correct reporting.
Basic Difference Between TDS & TCS