• How do I pay to my sub-contractor who does not have GST number

I have a GST number and type of business is a proprietorship. I am working with a client and providing them some service. In turn, I have outsourced that work to a vendor. My client would pay me invoiced amount with GST after debuting TDS (~1% as I will be an individual contractor ). After receiving the invoice amount , I will keep my share(Approximately 25%) and transfer the rest(approximately 75%) of the amount to the vendor/sub-contractor. My vendor does not have GST. What are the options I have to make sure I don't face any tax-related issues in the future? I have no option but to work with this vendor. 
Every month I may receive up to 2 Lakhs with GST and TDS 1% deducted. Now I will pay the GST to the government and transfer, let us say 1.5 Lakh to my vendor should I
1. Not deduct TDS and transfer the remaining amount to the vendor. If I do, since the amount will go above a few lakhs, will I be in trouble for not deducting TDS [Please note I don't have TAN]. If I don’t have any issue with this, I prefer this approach.
2. Obtain TAN and deduct TDS [1% - having him as the individual contractor] . Since he does not have GST , will it cause me any harm.?
3. If I receive any amount in my bank account and it comes without any TDS deduction, would it still come under GST purview as I have GST number.
Asked 9 months ago in GST

Hi,

 

Please refer to the replies in line below:

 

- Any person making specified payments mentioned under the Income Tax Act are required to deduct TDS at the time of making such specified payment. But no TDS has to deducted if the person making the payment is an individual or HUF whose books are not required to be audited. I understand you fall in this criteria and hence need not deduct the TDS.

 

- You can obtain TAN and deduct TDS as per your choice. He should take the GST number if he crosses the threshold of 20L (applicable for service providers). Below that there is no harm.

 

- TDS and GST come under two separate regimes. TDS is direct tax on the income of individual. GST is an indirect tax on the consumption of service/goods.

 Since you hold a GST number, you must charge GST on every invoice that you are raising to your customer. The payment received against that invoice can come without TDS deduction irrespective of the same being charged under GST. Because deducting TDS is the obligation of your client making the payment. But charging GST is your obligation. Since the client is going to claim the amount paid to you as expenditure in his balance sheet, hence all the invoices raised by you shall be proper and GST endorsed.

 

Thanks

Damini

Damini Agarwal
CA, Bangalore
384 Answers
31 Consultations

5.0 on 5.0

Hii

1 after getting registered under GST as an individual each and every receipt is covered under gst however some are taxable some are not taxable 

mom your query if you Have receive Any amount either after deduction of TDS or not all are subject to TDS 

 

2 payment to sub contractor not having gst will not impact you , since subcontractor is not Gst registered Thus you Are payIn gst direct to government otherwise you have to pay gst to subcontractor and they will pay to government 

 

3if your accounts not audited last year then you are not compulsory liable to deduct TDS but you can do as optional, by doing this your expenses and receivers income both are shown to government then it’s better for you in cash any enquiry from income tax or gst to prove genuine ness of your expenses 

Lalit Bansal
CA, Delhi
739 Answers
53 Consultations

5.0 on 5.0

1.You will have to deduct TDS at 1% as payment during FY exceeds 75K.

2. You should obtain TAN. His turnover will not exceed 20 lacs so GST registration is not mandatory for him.

3.Yes, you will come under GST purview. You should charge GST on the full invoice value.

Ruchi Goel Anchal
CA, Gurgaon
443 Answers
5 Consultations

5.0 on 5.0

Hello,

 

1 & 2. If you are not required to get your accounts audited under the Income Tax Act, you are not compulsorily required to deduct TDS on such payment. However, you can obtain TAN and deduct TDS voluntarily. the vendor having GST registration or not won't affect you.

3. TDS deduction won't affect the GST applicability on any transaction. GST would be applicable depending upon the nature of the transaction.

I hope this answer satisfies your requirements. 

 

Regards,

CA Hunny Badlani

Hunny Badlani
CA, Madhya Pradesh
2555 Answers
9 Consultations

5.0 on 5.0

Hello,

Answer of your question is below:

1. Deduction of TDS is applicable if you are liable to audit. If you are not liable to audit you are not required to deduct TDS.

2. Their is no harm at your end if other person not having GST. However if you are not liable to audit you are not required to deduct TDS.

3. Yes its fall under your revenue you are liable to charge GST, either TDS deducted or not.

Gourav Arora
CA, Delhi
11 Answers

Not rated

Dear Sir,

 

In GST, TDS is deducted by the notified entities (which consists of government bodies) @ 2 percent on payments more than 2.5 Lakhs rupees under an individual contract.  There is no requirement of TDS when location of supplier and place of supply is different from the State of the registration of the recipient.

At present, there is no RCM on purchase or receiving services from unregistered person. Also,  SUB-CONTRACTORS are not covered under RCM list u/s 9(3) of CGST ACT. 

Therefore, there is no tax liability under RCM in the subcontractors. 

If subcontractor isn't registered for GST he can not receive GST.

If you receive GST you need to remit it.

In nutshell, you are not required to fulfill GST TDS requirement.

 

Regards

Shiv Kumar Agarwal 

 

Shiv Kumar Agarwal
CA, Delhi
475 Answers
74 Consultations

5.0 on 5.0

Hi

1.TDS is basically a part of income tax. It has to be deducted by a person for certain payments made by them. 

In case of Individual & HUF whose books are not required to be audited  no need to deduct tds. 

2. No it won't be harm .

3.  Yes you nees to charged GST because GST & TDS are different things there is no relevance that whether TDS is deducted or not.

Karishma Chhajer
CA, Jodhpur
2387 Answers
20 Consultations

5.0 on 5.0

Dear Sir,

 

Hope you are doing well !!

 

1. No TDS has to deducted if the person making the payment is an individual or HUF whose books are not required to be audited.

 

2. No harm.

 

3. Yes. 

Payal Chhajed
CA, Mumbai
5077 Answers
152 Consultations

5.0 on 5.0

Since you are individual you only need TDS if your turnover exceeds 1 crore in case of business and 50 lakh in case of professional.

No it won't cause any harm as of now if he doesn't have GST.

Didn't get your 3rd question.

 

Hope you find the information helpful if you do please rate it 5 and provide your valuable feedback for my improvement.

Thank you

Naman Maloo
CA, Jaipur
3791 Answers
45 Consultations

5.0 on 5.0

Assuming you were liable for tax audit in the previous year, my response is as follows:

 

1. No, you can use this approach

 

2. You will have to take TAN and deduct TDS@1%. It will not cause any issue if he is not liable for GST registration. In case he is liable for gst registration, he will anyway have an issue whether you deduct tds or not.

 

3. Yes, any consideration received for your services will come under gst purview. TDS u/s 194C of the income tax act has no connection with the GST.

Lakshita Bhandari
CA, Mumbai
5460 Answers
539 Consultations

5.0 on 5.0

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