Latest Query & Reply

Please provide information or circular regarding deduction of TDS by govt. department if supplies received from a person whose turnover in below tax slab limit and not eligible to take GST registration?


As per FAQ published by CBIC in this regard, no TDS is required to be deducted if supplier of service is not registered in GST. Such FAQ is as follows:

Question— Whether TDS provisions is applicable to taxable supplies received from unregistered suppliers?

Answer— As per provisions of section 51 of CGST Act, 2017 read with Section 20 of IGST Act, 2017, deductor is required to deduct TDS at prescribed rates as CGST and SGST/UTGST (in case of intra-state) and as IGST (in case of inter-state) on the payment made or credited to supplier w.r.t. procurement of taxable goods or services.

In terms of provisions of section 22 of CGST Act read with notification issued under IGST Act, the person, who is making intra / inter-state taxable supply and having an aggregate turnover upto prescribed limit computed on PAN India basis, has been exempted from obtaining registration.

Further, on conjoint reading of Section 2(78) and 2(47) of CGST Act, 2017, supply made by aforesaid person would accordingly construe as non-taxable supply and same would be considered as exempt supply.

In view of the above provisions, it can be said that the TDS provisions will not be applicable on exempt supply i.e. procurement made from unregistered supplier.

In addition, as per GSTR FORM -07 (TDS return), GSTIN of deductee is required to be provided since tax deducted would reflect into the electronic cash ledger of said deductee onto GSTN Portal. However, in case of unregistered supplier, the said mechanism would not work and there may unnecessarily accumulation for such small dealers which would have to be claimed as refund by them. This would seem to be against the policy intention of the Government.

On a conspectus of the above, it may be reasonably construed that TDS provisions will not be applicable either on intra-state or inter-state procurement made from unregistered supplier.