TDS not applicable on Exempt Supply

May 26, 2020


  • Mahalakshmi Mahila Sangha(Applicant) is an association of persons engaged in provision of catering services (HSN-9992) to educational institutes sponsored by State Govt/ Center Govt/ Union Territory.
  • Above service is exempted service under 66 of Notification 12/2017-Central Tax Rate.
  • As per Circular 65/39/2018, TDS under GST is applicable only for taxable supply contracts and they are providing exempt services and hence TDS is not applicable to them.

Issue before the AAR

  • Whether TDS under Secon 51 of CGST Act,2017 applicable on provision of exempted supply

Discussion and Finding of AAR

  • As per 66 of Notification 12/2017- Central Tax Rate, Services provided to an educational institute by way of catering including any mid-day meal meals sponsored by Central Govt/ State Govt or Union Territory.
  • Catering Service is provided to educational institute which is a Primary School and hence covered under S.No 66 and is exempted from GST.
  • As per Section 51(1) of CGST Act,2017, there is an requirement to deduct at 1%, of taxable goods or services or both, where total value of such supply, under a contract, exceeds two lakh and fifty thousand rupees.
  • From the above it is clear that TDS provision is applicable on payment made to supplier of taxable supply.
  • Since, applicant is supplying exempt services, TDS provisions are not applicable to payments made to them by educational institutes.

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