GST Tax Deduction – Rules and Regulations TDS or Tax Deduction at Source is a means of indirect tax collection, wherein a tax “deductor” is made responsible for the collection and deposit of tax while completing a notified transaction. Tax deduction at source helps the government consolidate the number of persons responsible for remitting tax and increases tax collection. In this article, we look at the Tax Deduction at Source for GST. Section 46 of GST – Tax Deduction at Source Section 46 deals with Tax Deduction at Source under the GST regime. As per Section 46 of GST Model Law, the Central or a State Government could mandate the following types of entities to be deemed as a “Tax Deductor”: Department or establishment of the Central or State Government, or Local authority, or Governmental agencies, or Such persons or category of persons as may be notified, by the Central or a State Government on the recommendations of the GST Council. As per GST Model Law, a Tax Deductor can be required to deduct tax at the rate of one percent from the payment made or credited to the supplier of taxable goods and/or services, notified by the Central or a State Government on the recommendations of the Council, where the total value of such supply, under a contract, exceeds five lakh rupees. While deducting tax as per GST regulations, the deductor is required to furnish to the deductee a certificate mentioning the contract value, rate of deduction, amount deducted, amount paid to the appropriate Government and other particulars as prescribed by the Government, from time to time. Remittance of GST Tax Deducted The tax deducted under GST, should be paid to the account of the appropriate Government by the deductor within ten days after the end of the month in which such deduction is made. Claiming Credit for GST Tax Remitted As per the GST Model Law, once a deductor deducts tax, remits the amount with the appropriate Government authority, issues a tax deduction certificate under GST, he deductor could claim credit of the tax deducted and reflected in the return of the deductor. Penalties for Improper GST Tax Deduction at Source If a deductor fails to furnish to the deductee the tax deduction certificate under GST, after deducting the tax at source, within five days of crediting the amount so deducted to the appropriate Government. Then the deductor shall be liable to pay, by way of a late fee, Rs.100 per day from the day after the expiry of the five day period until the failure is rectified. The maximum penalty payable under this section cannot exceed Rs.5000. If a deductor fails to pay to the account of the appropriate Government the amount deducted as tax, then the deductor would be liable to pay interest in addition to the amount of tax deducted.
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