1) Tax to be deducted at the time of payment or credit to the supplier of taxable goods or services
a. Since the Act is silence on the point of time
b. We can consider earliest of both.
2) This shall be deducted at 2% of Transaction Value
a. For intrastate transactions it would be
i. 1% CGST
ii. 1% SGST
b. For interstate transactions it would be 2% IGST
3) This 2% has to be deducted on the NET amount payable to the contractor
4) For the purpose of deduction of tax specified above, the value of supply shall be taken as the amount excluding the Central tax, State tax, Union territory tax, Integrated tax and cess indicated in the invoice.
5) For instance, suppose
a. a supplier makes a supply worth Rs. 10,00,000/- to a Govt Recipient and the GST @ rate of 18% is required to be paid i.e. 1,80,000/-.
b. So Total value of the transaction is 11,80,000/-
c. The recipient, while making the payment of Rs. 11,80,000/- to the supplier, shall deduct 1% CGST on Rs.10,00,000/- i.e. Rs. 10,000/- as TDS.
d. The value for TDS purpose shall not include 18% GST.
6) Transition Provisions
a. There are no Transition provisions set in the Act about TDS
b. Going by the applicability we can say the provisions comes into effect from 1st Oct 2018
c. Point of Taxation can be reckoned as Payment or Credit whichever is earlier.
d. Let has have some FAQ’s in understanding the provision of timing.
Q: Contract awarded before 30th Sept, work completed after 30th September
Ans: TDS is applicable since Bill submitted after 1st Oct 2018
Q: Contract awarded before 30th Sept, work completed before 30th September bill submitted after 1st Oct 2018
Ans: TDS is applicable since Bill submitted after 1st Oct 2018
Q: Contract awarded before 30th Sept, work completed before 30th September bill submitted before 30th Sept 2018, but approved and processed for payment after 1st Oct 2018
Ans: TDS is applicable since credit given by the Govt agency is after 1st Oct 2018
Q: Contract awarded before 30th Sept, work completed before 30th September bill submitted before 30th Sept 2018, approved and processed for payment before 30th Sept 2018, but payment is made after 1st Oct 2018
Ans: TDS is NOT Applicable since credit of this transaction recognised by the Govt party before 30th Sept 2018
Q: Contract awarded before 30th Sept, 50% Mobilisation advance paid before 30th Sept 2018, work completed after 30th September
Ans: TDS is applicable only to the portion of 50% of the Transaction value, since credit and payment of the balance 50% is happening after 1 st Oct 2018