Friday, January 18, 2019

GST and TDS Computation Underneath Income Tax Act


When it comes to the calculation of the taxes, there are various heads or factors taken or considered while arriving at the final taxable amount. Concerning the same, even GST and TDS also forms a major portion of the heads. 

However, if you don’t know how to calculate tax on your taxable income, you should first use the income tax calculator. It is an online tool that can help you know your taxable income after you enter your multiple details related to income and savings.

Coming back to the GST and TDS calculation under the Income Tax Act, let’s first understand something about the GST before getting to know more. 

What is GST?

GST stands for the Goods and Services Tax (GST). The GST is an indirect taxation system in India. It has replaced many existing and complicated indirect taxes in India. The Indian Parliament on 29th March 2017 passed the Good and Services Act. 

The Goods and Services Act (GST) came into existence on 1st July 2017 all over India. The GST law in India is a multi-stage, the comprehensive and destination-based tax levied on the addition of every value into it. 

In short, the Goods and Services Tax (GST) is an indirect tax which is levied on the good’s supply and services. GST is also one indirect tax application all over the length and breadth of the country in India.


What are the advantages of GST?

The intention of the GST is to remove the cascading effect on the sale of the services and goods. Hence, it will directly impact the price of the goods. Here are some significant advantages of GST in India: 

Removing the effect of cascading taxes
Higher registration threshold 
Small business composition scheme 
The online and simple procedure under the GST regime 
Lesser compliances
Systematic treatment for e-commerce 
Increased logistics’ competence and effectiveness 
Helps to regulate the unorganized sector 

Circular no 23/2017 of CBDT

The Central Board of Direct Taxes (CBDT) as per its issued circular no 112014 dated 13 January 2014 clarifies that whatever in agreements between payer and the payee, the service tax element included in the payable amount is indicated disjointedly.     

Hence, the tax shall be deducted at source (TDS) under the chapter XVII-B of the Income Tax Act of 1961. The tax should be cut on the paid amount or payable without including any such service tax element.


Since the government has brought in the GST Act, hence, there is a need to harmonize the circular no 01/20 14 of the CBDT board with the new taxation regime.

Hence, the component of GST on services is to be added to the circular. The TDS amount should be calculated without grossing up GST component as it’s a part of the bill now. 

What is included in GST for the deduction of TDS at source purpose?

GST for all such purposes includes: 

Integrated Goods and Services Tax (IGST)
Central Goods and Services Tax (CGST) 
State Goods and Services Tax (SCST) 
Union Territory Goods and Services Tax (UGST) 

For the purpose of the mentioned circular, GST does not include the chargeable cess under GST (states compensation) act. It is also a part of the chargeable GST as per the above-discussed acts.

As per the circular, now the TDS under income tax and TDS under the GST are deductible at the same time than being deducted separately. 

However, it needs to be accounted for in the different accounts and later deposited under a separate account. 

If you are still unsure about the GST and TDS computation underneath the Income Tax Act, you can get in touch with a financial expert to help you out.