ICAI Notes: Tax Deduction at Source and Collection of Tax at Source | Taxation for CA Intermediate PDF Download

 Page 1


    
 
CHAPTER 
14 
 
 
 
LEARNING OUTCOMES 
 
  
 
  
TAX DEDUCTION 
AT SOURCE 
AND COLLECTION 
OF TAX AT SOURCE 
 
The section numbers referred to in the Chapter pertain to the CGST Act, 2017, unless 
otherwise specified. Examples/Illustrations/Questions and Answers given in the Chapter 
are based on the position of GST law existing as on 30.04.2023. 
 
  
After studying this chapter, you will be able to – 
? understand and analyse the provisions relating to TDS, i.e. tax 
deduction at source including the list of deductors, standard 
rate of deduction, value of supply. 
? explain the remittance period and the time within which the 
TDS certificate is to be issued. 
? describe and analyse the TCS i.e. tax collection at source 
provisions relating to collection, payment and reporting of 
tax by electronic commerce operator. 
 
Page 2


    
 
CHAPTER 
14 
 
 
 
LEARNING OUTCOMES 
 
  
 
  
TAX DEDUCTION 
AT SOURCE 
AND COLLECTION 
OF TAX AT SOURCE 
 
The section numbers referred to in the Chapter pertain to the CGST Act, 2017, unless 
otherwise specified. Examples/Illustrations/Questions and Answers given in the Chapter 
are based on the position of GST law existing as on 30.04.2023. 
 
  
After studying this chapter, you will be able to – 
? understand and analyse the provisions relating to TDS, i.e. tax 
deduction at source including the list of deductors, standard 
rate of deduction, value of supply. 
? explain the remittance period and the time within which the 
TDS certificate is to be issued. 
? describe and analyse the TCS i.e. tax collection at source 
provisions relating to collection, payment and reporting of 
tax by electronic commerce operator. 
 
  
 
 
14.2 
 
GOODS AND SERVICES TAX 
 
 
 
 
1. INTRODUCTION 
TDS stands for Tax Deduction at Source (TDS). Tax Deduction at Source (TDS) is a 
system, initially introduced by the Income Tax Department. It is one of the 
modes/methods to collect tax, under which, certain percentage of amount is 
deducted by a recipient at the time of making payment to the supplier. It facilitates 
sharing of responsibility of tax collection between the 
deductor and the tax administrator. This concept of TDS 
ensures regular inflow of tax collection to the Government. 
This mechanism acts as a powerful instrument to prevent tax 
evasion and expands the tax net, as it provides for the creation of an audit trail. 
Also, with the integration of data furnished by the Supplier and Buyer on the GST 
common portal, there exists an audit trail to ensure for harmony of taxes paid by 
the supplier. 
Tax deducted at source and 
collection of tax at source
Deductors of Tax at Source 
Categories of persons not liable to deduct TDS
Situation where TDS is not to deducted
Person liable to collect TCS
Monthly & annual statements by ECO
CHAPTER OVERVIEW 
Page 3


    
 
CHAPTER 
14 
 
 
 
LEARNING OUTCOMES 
 
  
 
  
TAX DEDUCTION 
AT SOURCE 
AND COLLECTION 
OF TAX AT SOURCE 
 
The section numbers referred to in the Chapter pertain to the CGST Act, 2017, unless 
otherwise specified. Examples/Illustrations/Questions and Answers given in the Chapter 
are based on the position of GST law existing as on 30.04.2023. 
 
  
After studying this chapter, you will be able to – 
? understand and analyse the provisions relating to TDS, i.e. tax 
deduction at source including the list of deductors, standard 
rate of deduction, value of supply. 
? explain the remittance period and the time within which the 
TDS certificate is to be issued. 
? describe and analyse the TCS i.e. tax collection at source 
provisions relating to collection, payment and reporting of 
tax by electronic commerce operator. 
 
  
 
 
14.2 
 
GOODS AND SERVICES TAX 
 
 
 
 
1. INTRODUCTION 
TDS stands for Tax Deduction at Source (TDS). Tax Deduction at Source (TDS) is a 
system, initially introduced by the Income Tax Department. It is one of the 
modes/methods to collect tax, under which, certain percentage of amount is 
deducted by a recipient at the time of making payment to the supplier. It facilitates 
sharing of responsibility of tax collection between the 
deductor and the tax administrator. This concept of TDS 
ensures regular inflow of tax collection to the Government. 
This mechanism acts as a powerful instrument to prevent tax 
evasion and expands the tax net, as it provides for the creation of an audit trail. 
Also, with the integration of data furnished by the Supplier and Buyer on the GST 
common portal, there exists an audit trail to ensure for harmony of taxes paid by 
the supplier. 
Tax deducted at source and 
collection of tax at source
Deductors of Tax at Source 
Categories of persons not liable to deduct TDS
Situation where TDS is not to deducted
Person liable to collect TCS
Monthly & annual statements by ECO
CHAPTER OVERVIEW 
 
    
 
14.3 
 
              
 
TAX DEDUCTION AT SOURCE AND COLLECTION 
OF TAX AT SOURCE 
Section 51
1
 of CGST Act, 2017 provides for deduction of tax at source in certain 
circumstances. This Section specifically lists out the deductor’s who are mandated 
by the Central Government to deduct tax at source, the rate of tax deduction and 
the procedure for remittance of the tax deducted.  
On the other hand, Tax Collection at Source (TCS) has similarities with TDS, as well 
as a few distinctive features. TDS refers to the tax which is 
deducted when the recipient of goods or services make 
payment to or credits a supplier’s account under a contract etc., 
while TCS refers to the tax which is collected by the electronic 
commerce operator, when a supplier supplies some goods or services through its 
portal and the payment for that supply is collected by the electronic commerce 
operator.  
Section 52
2
 of CGST Act, 2017 provides for collection of tax at source in certain 
circumstances. The Section specifically lists out the tax collecting persons who are 
mandated by the Central Government to collect tax at source, the rate of tax 
collection and the procedure for remittance of the tax collected. 
The amount of tax deducted/collected is reflected in the Electronic Cash Ledger of 
the deductee/supplier respectively. 
Provisions of TDS and TCS under CGST Act have also been made applicable to 
IGST Act vide section 20 of the IGST Act. 
2. RELEVANT DEFINITIONS 
? Local authority means 
(a) a “Panchayat” as defined in clause (d) of article 243 of the Constitution; 
(b)  a “Municipality” as defined in clause (e) of article 243P of the 
Constitution; 
 
 
1
 Students may refer “Standard Operating Procedure on TDS” issued by CBIC from CBIC website. 
2
Students may refer “Frequently Asked Questions on TCS” issued by CBIC from CBIC website. 
Page 4


    
 
CHAPTER 
14 
 
 
 
LEARNING OUTCOMES 
 
  
 
  
TAX DEDUCTION 
AT SOURCE 
AND COLLECTION 
OF TAX AT SOURCE 
 
The section numbers referred to in the Chapter pertain to the CGST Act, 2017, unless 
otherwise specified. Examples/Illustrations/Questions and Answers given in the Chapter 
are based on the position of GST law existing as on 30.04.2023. 
 
  
After studying this chapter, you will be able to – 
? understand and analyse the provisions relating to TDS, i.e. tax 
deduction at source including the list of deductors, standard 
rate of deduction, value of supply. 
? explain the remittance period and the time within which the 
TDS certificate is to be issued. 
? describe and analyse the TCS i.e. tax collection at source 
provisions relating to collection, payment and reporting of 
tax by electronic commerce operator. 
 
  
 
 
14.2 
 
GOODS AND SERVICES TAX 
 
 
 
 
1. INTRODUCTION 
TDS stands for Tax Deduction at Source (TDS). Tax Deduction at Source (TDS) is a 
system, initially introduced by the Income Tax Department. It is one of the 
modes/methods to collect tax, under which, certain percentage of amount is 
deducted by a recipient at the time of making payment to the supplier. It facilitates 
sharing of responsibility of tax collection between the 
deductor and the tax administrator. This concept of TDS 
ensures regular inflow of tax collection to the Government. 
This mechanism acts as a powerful instrument to prevent tax 
evasion and expands the tax net, as it provides for the creation of an audit trail. 
Also, with the integration of data furnished by the Supplier and Buyer on the GST 
common portal, there exists an audit trail to ensure for harmony of taxes paid by 
the supplier. 
Tax deducted at source and 
collection of tax at source
Deductors of Tax at Source 
Categories of persons not liable to deduct TDS
Situation where TDS is not to deducted
Person liable to collect TCS
Monthly & annual statements by ECO
CHAPTER OVERVIEW 
 
    
 
14.3 
 
              
 
TAX DEDUCTION AT SOURCE AND COLLECTION 
OF TAX AT SOURCE 
Section 51
1
 of CGST Act, 2017 provides for deduction of tax at source in certain 
circumstances. This Section specifically lists out the deductor’s who are mandated 
by the Central Government to deduct tax at source, the rate of tax deduction and 
the procedure for remittance of the tax deducted.  
On the other hand, Tax Collection at Source (TCS) has similarities with TDS, as well 
as a few distinctive features. TDS refers to the tax which is 
deducted when the recipient of goods or services make 
payment to or credits a supplier’s account under a contract etc., 
while TCS refers to the tax which is collected by the electronic 
commerce operator, when a supplier supplies some goods or services through its 
portal and the payment for that supply is collected by the electronic commerce 
operator.  
Section 52
2
 of CGST Act, 2017 provides for collection of tax at source in certain 
circumstances. The Section specifically lists out the tax collecting persons who are 
mandated by the Central Government to collect tax at source, the rate of tax 
collection and the procedure for remittance of the tax collected. 
The amount of tax deducted/collected is reflected in the Electronic Cash Ledger of 
the deductee/supplier respectively. 
Provisions of TDS and TCS under CGST Act have also been made applicable to 
IGST Act vide section 20 of the IGST Act. 
2. RELEVANT DEFINITIONS 
? Local authority means 
(a) a “Panchayat” as defined in clause (d) of article 243 of the Constitution; 
(b)  a “Municipality” as defined in clause (e) of article 243P of the 
Constitution; 
 
 
1
 Students may refer “Standard Operating Procedure on TDS” issued by CBIC from CBIC website. 
2
Students may refer “Frequently Asked Questions on TCS” issued by CBIC from CBIC website. 
  
 
 
14.4 
 
GOODS AND SERVICES TAX 
(c)  a Municipal Committee, a Zilla Parishad, a District Board, and any other 
authority legally entitled to, or entrusted by the Central Government or 
any State Government with the control or management of a municipal 
or local fund; 
(d)  a Cantonment Board as defined in section 3 of the Cantonments Act, 
2006; 
(e)  a Regional Council or a District Council constituted under the Sixth 
Schedule to the Constitution; 
(f)  a Development Board constituted under article 371 and article 371J of 
the Constitution; or 
(g)  a Regional Council constituted under article 371A of the Constitution; 
[Section 2(69)] 
? Cess shall have the same meaning as assigned to it in the Goods and Services 
Tax (Compensation to States) Act [Section 2(22)]. 
? Electronic Commerce means the supply of goods or services or both, 
including digital products over digital or electronic network [Section 2(44)]. 
? Electronic Commerce Operator means any person who owns, operates or 
manages digital or electronic facility or platform for electronic commerce 
[Section 2(45)]. 
? Taxable supply means a supply of goods or services or both which is leviable 
to tax under this Act [Section 2(108)]. 
? Supplier in relation to any goods or services or both, shall mean the person 
supplying the said goods or services or both and shall include an agent acting 
as such on behalf of such supplier in relation to the goods or services or both 
supplied; [Section 2((105)] 
? Notification means a notification published in the official gazette and the 
expressions “notify” and “notified” shall be constructed accordingly. 
 
 
Page 5


    
 
CHAPTER 
14 
 
 
 
LEARNING OUTCOMES 
 
  
 
  
TAX DEDUCTION 
AT SOURCE 
AND COLLECTION 
OF TAX AT SOURCE 
 
The section numbers referred to in the Chapter pertain to the CGST Act, 2017, unless 
otherwise specified. Examples/Illustrations/Questions and Answers given in the Chapter 
are based on the position of GST law existing as on 30.04.2023. 
 
  
After studying this chapter, you will be able to – 
? understand and analyse the provisions relating to TDS, i.e. tax 
deduction at source including the list of deductors, standard 
rate of deduction, value of supply. 
? explain the remittance period and the time within which the 
TDS certificate is to be issued. 
? describe and analyse the TCS i.e. tax collection at source 
provisions relating to collection, payment and reporting of 
tax by electronic commerce operator. 
 
  
 
 
14.2 
 
GOODS AND SERVICES TAX 
 
 
 
 
1. INTRODUCTION 
TDS stands for Tax Deduction at Source (TDS). Tax Deduction at Source (TDS) is a 
system, initially introduced by the Income Tax Department. It is one of the 
modes/methods to collect tax, under which, certain percentage of amount is 
deducted by a recipient at the time of making payment to the supplier. It facilitates 
sharing of responsibility of tax collection between the 
deductor and the tax administrator. This concept of TDS 
ensures regular inflow of tax collection to the Government. 
This mechanism acts as a powerful instrument to prevent tax 
evasion and expands the tax net, as it provides for the creation of an audit trail. 
Also, with the integration of data furnished by the Supplier and Buyer on the GST 
common portal, there exists an audit trail to ensure for harmony of taxes paid by 
the supplier. 
Tax deducted at source and 
collection of tax at source
Deductors of Tax at Source 
Categories of persons not liable to deduct TDS
Situation where TDS is not to deducted
Person liable to collect TCS
Monthly & annual statements by ECO
CHAPTER OVERVIEW 
 
    
 
14.3 
 
              
 
TAX DEDUCTION AT SOURCE AND COLLECTION 
OF TAX AT SOURCE 
Section 51
1
 of CGST Act, 2017 provides for deduction of tax at source in certain 
circumstances. This Section specifically lists out the deductor’s who are mandated 
by the Central Government to deduct tax at source, the rate of tax deduction and 
the procedure for remittance of the tax deducted.  
On the other hand, Tax Collection at Source (TCS) has similarities with TDS, as well 
as a few distinctive features. TDS refers to the tax which is 
deducted when the recipient of goods or services make 
payment to or credits a supplier’s account under a contract etc., 
while TCS refers to the tax which is collected by the electronic 
commerce operator, when a supplier supplies some goods or services through its 
portal and the payment for that supply is collected by the electronic commerce 
operator.  
Section 52
2
 of CGST Act, 2017 provides for collection of tax at source in certain 
circumstances. The Section specifically lists out the tax collecting persons who are 
mandated by the Central Government to collect tax at source, the rate of tax 
collection and the procedure for remittance of the tax collected. 
The amount of tax deducted/collected is reflected in the Electronic Cash Ledger of 
the deductee/supplier respectively. 
Provisions of TDS and TCS under CGST Act have also been made applicable to 
IGST Act vide section 20 of the IGST Act. 
2. RELEVANT DEFINITIONS 
? Local authority means 
(a) a “Panchayat” as defined in clause (d) of article 243 of the Constitution; 
(b)  a “Municipality” as defined in clause (e) of article 243P of the 
Constitution; 
 
 
1
 Students may refer “Standard Operating Procedure on TDS” issued by CBIC from CBIC website. 
2
Students may refer “Frequently Asked Questions on TCS” issued by CBIC from CBIC website. 
  
 
 
14.4 
 
GOODS AND SERVICES TAX 
(c)  a Municipal Committee, a Zilla Parishad, a District Board, and any other 
authority legally entitled to, or entrusted by the Central Government or 
any State Government with the control or management of a municipal 
or local fund; 
(d)  a Cantonment Board as defined in section 3 of the Cantonments Act, 
2006; 
(e)  a Regional Council or a District Council constituted under the Sixth 
Schedule to the Constitution; 
(f)  a Development Board constituted under article 371 and article 371J of 
the Constitution; or 
(g)  a Regional Council constituted under article 371A of the Constitution; 
[Section 2(69)] 
? Cess shall have the same meaning as assigned to it in the Goods and Services 
Tax (Compensation to States) Act [Section 2(22)]. 
? Electronic Commerce means the supply of goods or services or both, 
including digital products over digital or electronic network [Section 2(44)]. 
? Electronic Commerce Operator means any person who owns, operates or 
manages digital or electronic facility or platform for electronic commerce 
[Section 2(45)]. 
? Taxable supply means a supply of goods or services or both which is leviable 
to tax under this Act [Section 2(108)]. 
? Supplier in relation to any goods or services or both, shall mean the person 
supplying the said goods or services or both and shall include an agent acting 
as such on behalf of such supplier in relation to the goods or services or both 
supplied; [Section 2((105)] 
? Notification means a notification published in the official gazette and the 
expressions “notify” and “notified” shall be constructed accordingly. 
 
 
 
    
 
14.5 
 
              
 
TAX DEDUCTION AT SOURCE AND COLLECTION 
OF TAX AT SOURCE 
3. TAX DEDUCTION AT SOURCE [SECTION 51 OF 
CGST ACT] 
 
STATUTORY PROVISIONS 
Section 51 Tax deduction at source 
Sub-Section Clause Particulars 
(1) Notwithstanding anything to the contrary contained in this Act, the 
Government may mandate, — 
(a) a department or establishment of the Central Government 
or State Government; or 
(b) local authority; or 
(c) Governmental agencies; or 
(d) such persons or category of persons as may be notified by 
the Government on the recommendations of the Council, 
(hereafter in this section referred to as “the deductor”), to deduct 
tax at the rate of one per cent from the payment made or credited 
to the supplier (hereafter in this section referred to as “the 
deductee”) of taxable goods or services or both, where the total 
value of such supply, under a contract, exceeds two lakh and fifty 
thousand rupees : 
Provided that no deduction shall be made if the location of the 
supplier and the place of supply is in a State or Union territory 
which is different from the State or as the case may be, Union 
territory of registration of the recipient. 
Explanation 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.