GST TDS applicability on payment made to composition dealers

Answer : Yes, TDS needs to be deducted by the specified Tax deductor under Section 51 of CGST Act 2017 if payment is made to Composition Scheme dealer and Contract value exceeds Rs 2.5 Lakh

Relevant Portion of Section 51 of CGST Act 2017 : 

…………. 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:

As per Section 2(105) of CGST Act 2017 : 

“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;

Example

Supplier ZA is a person registered under the composition scheme in Jharkhand who makes taxable supply worth Rs. 10,000/- to a Local Authority of Jharkhand where value of taxable supply under the contract is for Rs.2, 55,000/-

Following payment is being made by the Local Authority of Jharkhand to ZA: Rs.10, 000/-

Value of taxable supply under the contract is Rs.2, 55, 000/- which is more than Rs.2.5 Lakh and hence deduction of tax is required.

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