The Central Board of Direct Taxes (CBDT) today clarified that the Goods and Services Tax (GST) paid on services will continue to be excluded from the TDS provisions under the Income Tax Act when the GST component is separately shown in the invoice.
Earlier, the Board had excluded the service tax component from the amount paid or payable as per a contract between two persons.
After the rollout of GST from 1st July 2017, references received by the Board regarding the treatment of GST component on services. GST replaced all the earlier indirect taxes including service tax, excise duty, sales tax etc.
In order to bring clarity on the above issue, the Board said that “even under the new GST regime, the rationale of excluding the tax component from the purview of TDS remains valid, the Board hereby clarifies that wherever in terms of the agreement or contract between the payer and the payee, the component of ‘GST on services’ comprised in the amount payable to a resident is indicated separately, tax shall be deducted at source under Chapter XV Il-B of the Income Tax Act on the amount paid or payable without including such ‘GST on services’ component. GST for these purposes shall include Integrated Goods and Services Tax, Central Goods and Services Tax, State Goods and Services Tax and Union Territory Goods and Services Tax”
Read the full text of the Circular below.
