GST not to be added for TDS computation

• The Central Board of Direct Taxes (CBDT) has clarified that where the recipient of a service is required to deduct tax at source (TDS) when making a payment to the supplier, the amount of TDS shall be computed without grossing up for the goods and service tax (GST) component, which is also part of the bill.
• To enable TDS to be computed exclusive of the GST component, the component of ‘GST on Services’ comprised in the amount payable to a resident is indicated separately.
• It is also clarified that this circular will also apply to existing contracts entered into before July 1, when GST was introduced.

To illustrate, if the payment under a works contract is Rs. 50 lakh, GST will be Rs. 9 lakh. The issue posed to the CBDT was whether the TDS would be on Rs. 59 lakh or Rs. 50 lakh. If the GST component is indicated separately, CBDT clarifies that TDS will be against Rs 50 lakh which is the income of the service provider. In other words, Rs. 5 lakh will be the TDS component.
Circular no. 23/2017 dated 19^th July 2017

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