Is Government SEZ Authority required to deducts TDS

[CASeetharaman KC]

Is a Government SEZ Authority formed by Act of parliament required to deduct TDS or would it be excluded under the proviso to Section 51 '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.'

[DR.MARIAPPAN GOVINDARAJAN]

In my view it is not required.

[CASeetharaman KC]

Sir I subscribe to your view and wish it is correct but there are some areas which may be looked at

1. CGST Act Section 51 read with Section 20 of IGST Act TDS would be applicable to both intra and inter state transactions

2. The proviso says the the no deduction is required if location of the supplier and place of supply is in a different state than the state of registration of the recepient.

So if the SEZ is registered in UP and the supplier is also registeredin UP and the place of Supply is also UP the TDS would be deductible

As per IGST ActSection 7 any supply to or by a SEZ is interstate sale.but the proviso speaks about the location of the supplier and the place of supply being in a different state than that of the registration of the recepient

There could be instances where the above conditions are satisfied.

[Alkesh Jani]

Dear Sir,

In this regards, my point of view is that, Section 51 of the CGST Act,2017 states that if supply is inter-state, CGST and SGST is not applicable and IGST comes in to force. Further, No deduction of CGST and SGST shall be made.

Moreover, Section 20 of IGST Act,2017 clearly states that the provisions of TDS shall be applicable as if it is enacted under IGST Act, therefore, If the supplies are inter-state TDS is to be deducted as IGST Tax.

The fliers issued by the Board also clarifies the same and relevant portion is reproduced below:-

“Registration of TDS deductors: A TDS deductor hasto compulsorily register without any threshold limit. Thedeductor has a privilege of obtaining registration underGST without having required to obtain PAN. He canobtain registration using his Tax Deduction and CollectionAccount Number (TAN) issued under the Income Tax Act,1961.

........This can be explained in the following situations.

a) Supplier, place of supply and recipient are in thesame state. It would be intra-state supply and TDS(Central plus State tax) shall be deducted. It wouldbe possible for the supplier (i.e. the deductee) totake credit of TDS in his electronic cash ledger.

b) Supplier as well as place of supply are in differentstates. In such cases, integrated tax would be levied.TDS to be deducted would be TDS (Integratedtax) and it would be possible for the supplier (i.e.the deductee) to take credit of TDS in his electroniccash ledger.

c) Supplier as well as place of supply are in StateA and recipient is located in State B. The supplywould be intra-State supply and Central tax andState tax would be levied. In such case, transfer ofTDS (Central tax + State tax State B) to the cashledger of the supplier (Central tax + State tax ofState A) would be difficult. So in such cases, TDSwould not be deducted.

Thus, when both the supplier as well as place of supply aredifferent from that of recipient, no tax deduction at sourcewould be made.”

Hope this reply will clear your doubts.

Thanks

[CASeetharaman KC]

Thank You Sir for your comments which have explained the concept behind the TDS, however there are still the following areas of concern

1. In case of an SEZ the goods or services supplied to or by an SEZ is termed as interstate sale and would be subject to IGST. So even if the TDS deduction is made as IGST the credit for the same can be taken by the local supplier to pay CGST and SGST so even if the TDS is deducted the input can be availed by the supplier

2. The question which arises here is that by virtue of Section 7 (5) of the IGST Act all supplies to SEZ units are interstate transactions - Does this mean that the Location of the Supplier and the Place of Supply is in a different state from the state of registration of the recepient ?

Request your thoughts on these two points which would be very helpful

[Alkesh Jani]

Sir,

I acknowledge your concern. In this regards, as far as my knowledge permits me, I have following comments to offer:-

In terms of Section 51 of CGST Act, 2017, the notified person is required to obtain registration as TDS. Normally, the TDS registration will be based on TAN, although holding PAN. Some Govt. Department such as Railway and postal department are example of holding PAN as well as TAN. TDS is required to deduct Tax if the contract value is more than ₹ 2,50,000/-.

With regards to the query the SEZ authority formed by the Act of the parliament can be termed as SEZ unit (or Developer, if such activities are undertaken) if the said Authority is holding PAN and is registered as SEZ unit or SEZ Developer. The said authority is also required to register himself as TDS on the basis of TAN and any supplies to the said registration based on TAN cannot be termed as supplies to SEZ unit or SEZ Developer. The works order or contracts are given by the TAN based authority and Invoices are also raised in the name of TAN based registration. Therefore, TAN based and PAN based of the same authority can be considered as distinct person.

Thanks,

With Due regards,

AI Summary

Debate on SEZ Authority's TDS Obligations Under GST: Interpreting Section 51 of CGST and Section 20 of IGST Acts. A discussion on whether a Government SEZ Authority is required to deduct TDS under GST laws highlights differing interpretations of Section 51 of the CGST Act and Section 20 of the IGST Act. One view suggests that TDS is not required if the supplier and place of supply are in the same state as the recipient's registration. However, supplies to or by SEZs are considered interstate, potentially requiring TDS as IGST. The debate includes considerations of registration requirements, such as using TAN for TDS registration, and how these apply to SEZ authorities. The discussion seeks clarity on these legal nuances.