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TDS Impact on PSU-PSU Transactions

Tax Deduction at Source is applicable under GST from 1st of Oct 2018  wide Notification No. 50/2018-Central Tax, dated the
13th September 2018, on all transactions, if the contract value is above Rs 2.5 Lacs. The whole intention of rolling out of TDS is an anti-evasion measure. Being an anti-evasion measure the question arises is GST-TDS applicable to be recovered on transactions between PSU’s i.e the supplier is a PSU and recipient is another PSU?

The answer was “Yes” but it seems the whole intent of TDS in GST is being lost. To address this Government has released a Notification No 61/2018 – Central Tax dated 5th November 2018, which clearly states that GST-TDS is not applicable on transactions between PSU’s. The notification is with retrospective from 1st Oct 2018 i.e the day of the rollout of GST-TDS

“Provided further that nothing in this notification shall apply to the supply of goods or services or both from a public sector undertaking to another public sector undertaking, whether or not a distinct person, with effect from the 1st day of October 2018.”.