Requirement of TDS under GST on supply from unregistered person

GST or Goods and Services Tax, a unified tax regime introduced in India in 2017, has revolutionized the way businesses operate in the country. One of the major changes that it brought with itself was the introduction of Tax Deducted at Source or TDS on supply from unregistered persons.

Under the GST regime, all businesses with an annual turnover of over Rs. 40 lakhs (Rs. 20 lakhs for businesses in North Eastern states) are required to register themselves with the GST portal. However, there are some businesses that fall under the exemptions and are not required to register under GST. These businesses are known as unregistered persons.

As per the GST provisions, if a registered person purchases goods or services from an unregistered person, he is required to deduct TDS at the rate of 2% (1% CGST and 1% SGST/UTGST) on the total value of the supply. The TDS amount deducted needs to be paid by the registered person to the government within 10 days from the end of the month in which the deduction was made.

The introduction of TDS under GST on supply from unregistered persons was done with the aim of bringing more businesses under the GST ambit and to reduce tax evasion. By deducting TDS on purchases from unregistered persons, the government aims to create a trail of transactions and to ensure that the unregistered persons are also contributing to the tax revenues of the country.

However, there are certain exemptions to the TDS provision under GST.

The following transactions are exempt from TDS deduction:

When the value of the supply is less than Rs. 2.5 lakhs (excluding GST)
When the supplier is a registered person or a composition dealer
When the goods or services are used for personal use and not for business purposes
When the supply is made by an e-commerce operator who is required to collect TCS under GST

The TDS provision under GST has been a subject of debate among businesses, especially small and medium enterprises. Many businesses have raised concerns over the burden of compliance and the additional cost of deducting TDS. However, it is important to understand that the TDS provision under GST is a step towards creating a more transparent and compliant business environment in the country.

Businesses can avoid the burden of TDS compliance by ensuring that they only purchase from registered persons or composition dealers. Additionally, businesses can also consider registering themselves under GST if they fall under the threshold limit to avoid the burden of TDS compliance.

Conclusion:

In conclusion, the requirement of TDS under GST on supply from unregistered persons is a significant step towards bringing more businesses under the GST ambit and to create a more transparent and compliant business environment in the country. While the provision may seem burdensome to some businesses, it is important to understand that it is a step towards a better and more equitable tax system in the country.