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Sub: Procurement of goods and services by Government Departments and Government entities/agencies and TDS under GST.

Government Departments and Government entities/agencies procure goods and services. Goods and services are also procured under different programmes/schemes for which subsidies and reimbursement of net SGST are payable. All such procurements have GST implications as well. In order to safeguard the interest of the State Government revenue, there is a strong need to take proactive measures at the time of procurement of goods and/or services and release of financial incentives in the shape of subsidies and reimbursement of net SGST.

2. Section 51 of the Odisha GST Act 2017 provides for deduction of tax by the Government Agencies (Deductor) or any other person responsible for making payment to the supplier (Deductee) of taxable goods or services or both, where the total value of such supply, under a contract, exceeds two lakh and fifty thousand rupees. The amount deducted as tax under this section shall be paid to the Government by deductor within ten days after the end of the month in which such deduction is made along with a return in FORM GSTR-7 giving the details of deductions and deductees. Further, the deductor has to issue a certificate to the deductee mentioning therein the contract value, rate of deduction, amount deducted etc. The TDS provision came into force with effect from 1st October, 2018 under CGST/OGST Act, 2017.

3. In order to comply with the provisions of the said Act for TDS, the following steps are required to be taken:

A. Registration of such Government bodies as Tax Deductors in the GST common portal

B. Deduction of TDS amount as per the provisions from the bills to be paid to the suppliers

C. Deposit of the TDS amount in appropriate Government account(s)

D. Filing of Tax Returns for TDS (GSTR 7) within the prescribed time limit

4. As per Section 51 of the Act, the following entities are required to deduct tax at Source and thus are required to get themselves compulsorily registered as Tax Deductors under Section 24 (vi) of the OGST Act:

i. Central and State Government Departments / Establishments (e.g. Departments, Heads of Departments, Collectorates, other sub-ordinate /field offices etc.)

ii. Local Authority (e.g. Municipal Corporations, Municipalities, NACs, Panchayati Raj Institutions etc.)

iii. Governmental Agencies (e.g. DRDA, ITDA etc.)

iv. An Authority or Board or Any other Body-

a. set up by an Act of Parliament or State Legislature or

b. established by any Government with fifty-one percent or more participation by way of equity or control to carry out any function

v. Society established by Central Government or State Government or a Authority under Societies Registration Act, 1860

vi. Public Sector Undertakings (Central and State) (e.g. OMC, OPGC etc.)

5. For registration as Tax Deductor under GST, the following documents are required:

i. TAN / PAN of the entity

ii. Proof of Address of the place of the entity (Any proof issued by Government Authority / Local Authority / Electricity Bill / Legal Ownership Document / Rent or Lease Agreement etc.) - to be uploaded

iii. PAN of the DDO or Authorised Signatory

iv. Photograph of the DDO or Authorised Signatory - to be uploaded

v. Aadhaar Card / Digital Signature Certificate (DSC) of the DDO (or Authorised Signatory)

vi. Valid email ID (preferably official email ID) of the DDO or Authorised Signatory

vii. Mobile Phone Number of the DDO or Authorised Signatory

The DDO or the Authorised Signatory is required to make an application online through GST REG 7 in the GST Common Portal on behalf of the Tax Dedcutor.

6. Under Section 51 of the Act, the Tax Deductor is required to deduct TDS at the rate of 2% (i.e. 1% Odisha GST + 1% Central GST in case of Intra-State Supply and 2% of IGST in case of Inter-State Supply) from the supplier, where total taxable supply of goods or services or both exceeds Rs. 2.5 lakh or more, excluding GST. Once such deduction is made by the Tax Deductor, the TDS amount is to be deposited by the Tax Deductor in the Government account ( OGST / CGST / IGST). within 10 days after the end of the month in which such deduction is made.

7. In order to protect the revenue of the State, it is hereby directed that the following steps shall be taken by all concerned:

i. All Government procurement of goods or services or both may be done from registered GST taxpayers.

ii. It may be ensured that the registration of such suppliers of goods or Services or both is valid on the date of the supply. A brief User Manual on the process of verification of GSTIN is enclosed as Annexure (Part-A) for reference.

iii. The return filing status of such taxpayers may also be verified in the GST Common porta) to check if the supplier is a compliant supplier. The process for the same is also elaborated in the attached User Manuals Annexure (Part-B).

iv. TDS as applicable must be made while making payment to the Suppliers as per the provisions given in the above paragraphs.

v. The GST returns need not be filed for the periods, when there is no TDS made.

8. All subordinate offices under the control of respective Departments of Government may accordingly be instructed to ensure strict compliance of statutory provision of OGST Act, 2017 and Rules made thereunder.

Suresh CH Mahapatra, IAS

Chief Secretary