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TDS refund Eligible or not?

Jay Raj (40 Points)

16 June 2023

A dealer has made exemt supply to govt department of more than 2.5 lacs and the Govt dept deducted 2% Tds from the payment to be made to the supplier and also showed in their GSTR-7 and issued Tds certificate in 7-A format. The dealer who supplied exemted goods accepted the Tds credit in his 2-A and hence it is trsnsferred to his cash ledger. Supplier has made refund application on the grounds of excess balance in cash ledger. Is he eligible for refund? As per Section 51, Tds is to be deducted on taxable supply but here the supply is exempt. Please offer your comments. Thanks

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4 Replies

CA Mohd Firoz Khan (Chartered Accountant) (108 Points)
Replied 16 June 2023

Legal Position :

TDS is to be deducted at the rate of 2% on payments made to the supplier of taxable goods and/or services, where the total value of such supply, under an individual contract, exceeds Rs.2,50,000. No deduction of Tax is required when the location of supplier and place of supply is different from the State of the registration of the recipient.

Conclusion :

Yes, there is remedy. Any excess or erroneous amount deducted and paid to the Government account shall be dealt for refund under section 54 of the CGST Act, 2017. However, if the deducted amount is already credited to the electronic cash ledger of the supplier, the same shall not be refunded.

Best Regards,

CA Mohd. Firoz Khan

ca.mfkhan @ gmail.com

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Jay Raj (40 Points)
Replied 16 June 2023

Thanks for your response,Sir. the question is: can the supplier claim the refund? Because as per 54(8), the deductor is not eligible for such erroneously deducted refund if the supplier has accepted the same and transferred to his cash ledger. the section 54(8) is binding only for the deductor?