A co-operative society is not liable to deduct tax at source (TDS) from its vendors for supply of taxable goods and services, Rajasthan’s Authority for Advance Rulings (AAR) has said.
Though AAR rulings are applicable only on the applicant and jurisdictional officer, they have a persuasive value in similar matters. Also, many recent circulars by the Central Board of Indirect Taxes and Customs (CBIC), giving clarifications on various issues, have reflections of rulings by the AAR and the Appellate Authority for Advance Rulings (AAAR). AAAR rulings can be challenged in the High Court.
In this particular case, Jaipur Zila Dugdh Utpadak Sahakari Sangh was the applicant. It is a registered co-operative society which procures raw milk from the rural areas through its primary milk producers’ dairy co-operative societies and then produces and markets milk, ghee, chhach , butter, dahi , lassi , paneer , ice cream and related milk products. Most of the sale of Jaipur dairy is of milk which is an exempted sale under the GST regime. Apart from the exempted sale, it is also engaged in providing taxable sale.
The co-operative approached the AAR seeking a ruling on whether it is liable to deduct tax at source (TDS) under GST from payments made to it by vendors for providing/procuring taxable goods and services for making supplies. According to GST law, TDS is to be deducted at the rate of 2 per cent on payments made to the supplier of taxable goods and/or services, where the total value of such supply, under an individual contract, exceeds ₹2.5 lakh. This will enable the government to have a trail of transaction and to monitor and verify the compliance.
Notification on TDS prescribes who could be liable to deduct TDS — these could be a department or an establishment of the Central Government or State Government; or local authority; or Governmental agencies; or such persons or category of persons as may be notified by the Government; or an authority/a board/any other body which has been set up by Parliament or a State Legislature or by a government (with 51 per cent equity owned by the government); or a society established by the Central or any State Government or a Local Authority and the society is registered under the Societies Registration Act, 1860 or Public sector Undertakings.
During the hearing, the Tax Department said the applicant is not covered under any of the categories mentioned above. The AAR too agreed and ruled that the applicant was not liable to deduct tax at source.
The concept of TDS was there in the erstwhile VAT laws and accordingly found its mention in the GST law. However, provisions related to TDS came into effect from October 1, 2018, 14 months after the introduction of GST. Also, deductors of TDS under VAT laws have not been automatically migrated to GST. It is mandatory to register for the deductors of TDS. There is no threshold limit for this. The registration under GST can be obtained without PAN and by using the existing Tax Deduction and Collection Account Number (TAN) issued under the Income Tax Act. Thus, it can be said having TAN is mandatory.