What is TDS under GST and Income Tax?

• TDS under GST: Applicable when payments to a supplier exceed a specified threshold (e.g., ₹2,50,000), requiring the deduction of 2% on the taxable value of goods/services.
• TDS under Income Tax: Deducted as per applicable rates based on the type of transaction, typically 1% or 2% for payments to contractors or professionals.

Accounting Entries for TDS under GST and Income Tax

1. In the Books of the Buyer

At the time of booking the expense/invoice:

At the time of depositing TDS under Income Tax:

At the time of depositing TDS under GST:

When TDS under GST is reflected in the Cash Ledger:

2. In the Books of the Seller

At the time of booking the sale:

When TDS under Income Tax is deducted by the buyer:

When TDS under GST is deducted by the buyer:

When TDS under GST is reflected in the Cash Ledger:

Example: Accounting for a Transaction with Dual TDS

Transaction Details:

• Transaction Value (excluding GST): ₹1,00,000
• GST Rate: 18% (CGST 9% + SGST 9%)
• TDS under Income Tax: 1% (₹1,000)
• TDS under GST: 2% on taxable value (₹2,000)

Key Takeaways

1. Separate TDS Payable Accounts: Always maintain distinct accounts for TDS under GST and Income Tax to avoid reconciliation issues.
2. Timely Deposit: Ensure timely deposit of both TDS amounts to comply with legal requirements and avoid penalties.
3. Clear Communication: Inform the seller about TDS deductions and provide necessary certificates (e.g., Form 16A for Income Tax TDS).