GST and TDS Automation: A Developer's Guide to Tax Compliance for Payment Platforms

Tax compliance is one of the most time-consuming and error-prone aspects of financial operations for Indian businesses. GST filings, TDS deductions and deposits, reconciliation of input tax credits, and preparation of annual returns consume hundreds of hours per year for a mid-sized company. The stakes are high — errors lead to penalties, interest charges, and compliance notices from the tax department.

This guide explains how Paywize automates GST and TDS workflows for businesses processing payments through our platform, reducing compliance effort by up to 80% while improving accuracy.

The GST Compliance Challenge

Since GST's introduction in 2017, Indian businesses have had to file monthly or quarterly returns (GSTR-1, GSTR-3B), maintain detailed records of every transaction's GST treatment, reconcile purchase invoices against the auto-populated GSTR-2A/2B, and ensure that input tax credit claims match with supplier filings. For a company processing thousands of transactions monthly, this means tracking the GST treatment (5%, 12%, 18%, 28%, exempt, reverse charge) for every single payment and collection.

The reconciliation between GSTR-2A (auto-populated from supplier filings) and your purchase records is particularly painful. Mismatches are common due to timing differences, incorrect GST numbers, or invoice-level discrepancies. Unresolved mismatches block input tax credit claims, directly impacting cash flow.

How Paywize Automates GST Workflows

Automatic GST Tagging

Every payment and collection processed through Paywize is automatically tagged with the applicable GST rate based on the merchant category, HSN/SAC code, and transaction type. Our system maintains an up-to-date mapping of GST rates across all categories, updated as government notifications are issued. For payouts, you can attach GST details (GSTIN, invoice number, HSN code, tax amount) at the transaction level via API.

Invoice-Level Tracking

Paywize supports attaching invoice details to individual transactions. When you make a vendor payout, you can include the invoice number, taxable value, CGST, SGST, IGST, and cess amounts. This data is stored alongside the transaction record and is available for automated GST return preparation. For collections, the payment reference links back to your invoice in your billing system.

GSTR Reconciliation

Paywize's reconciliation engine matches your purchase transactions against the GSTR-2A/2B data auto-populated by the GST portal. Matched invoices are flagged as reconciled. Mismatches — different amounts, missing entries, GSTIN discrepancies — are highlighted for review. The system suggests resolution actions based on the type of mismatch, such as contacting the supplier to correct their filing or adjusting your records.

TDS Automation

Tax Deducted at Source applies to a wide range of business payments: contractor fees (Section 194C), professional services (194J), rent (194I), commission (194H), and more. For each applicable payment, the business must deduct TDS at the prescribed rate, deposit the deducted amount with the government within specified timelines, issue TDS certificates (Form 16A) to deductees, and file quarterly TDS returns (Form 26Q).

Automatic TDS Calculation

When you create a payout through Paywize, our system automatically identifies whether TDS applies based on the payment category and beneficiary type. The correct TDS rate is applied, the net amount is disbursed to the beneficiary, and the TDS amount is held for deposit. You can override rates for beneficiaries with lower deduction certificates or exemptions.

TDS Deposit and Return Filing

Paywize aggregates TDS deductions across all your payouts and generates challans for deposit with the government. Deposits can be initiated directly through the platform. Quarterly TDS returns are pre-filled with deductee details, PAN numbers, transaction amounts, and TDS amounts — ready for review and filing. Form 16A certificates are generated automatically and can be emailed to deductees.

Section 194O: TDS on E-Commerce

E-commerce operators face specific TDS obligations under Section 194O, which requires deduction of 1% TDS on gross payments to sellers. For a marketplace processing thousands of seller settlements monthly, this is a massive compliance burden. Paywize automates 194O compliance end-to-end: TDS is calculated and deducted from each seller settlement, deposited with the government in aggregate, and reported in quarterly returns with full seller-level breakdowns.

Handling Edge Cases

Tax automation must handle numerous edge cases that trip up manual processes:

• Threshold limits: TDS applies only after cumulative payments exceed threshold limits for certain sections. Paywize tracks cumulative payments per beneficiary per section per financial year.
• PAN availability: Higher TDS rates apply when the beneficiary's PAN is not available or invalid. The system automatically applies the correct rate and flags missing PANs for follow-up.
• Inter-state vs intra-state: GST treatment differs for inter-state (IGST) and intra-state (CGST+SGST) transactions. Paywize determines the correct treatment based on supplier and recipient GSTINs.
• Reverse charge mechanism: Certain categories require GST to be paid by the recipient under reverse charge. The system identifies applicable transactions and calculates reverse charge liability.
• Amendments and credit notes: When invoices are amended or credit notes issued, GST and TDS implications change. Paywize tracks amendments and adjusts filings accordingly.

Integration with Accounting Software

Tax automation is most effective when integrated with your accounting system. Paywize pushes GST-tagged transactions, TDS entries, and tax liability summaries directly to Tally, Zoho Books, and other accounting platforms via API integrations. Journal entries for GST payable, GST receivable, TDS payable, and TDS receivable are generated automatically based on your chart of accounts mapping.

Compliance Calendar and Alerts

Missing a tax filing deadline means penalties and interest. Paywize's compliance calendar tracks all GST and TDS filing deadlines and sends proactive alerts. You receive notifications 7 days, 3 days, and 1 day before each due date, along with a readiness status indicating whether your data is complete for filing. This simple feature alone has saved our partners from hundreds of late filing penalties.

Tax compliance should not require a team of specialists wrestling with spreadsheets. With Paywize's automated GST and TDS workflows, your finance team can focus on strategic work while the system handles the compliance mechanics. Explore our tax automation features at dashboard.paywize.in or contact our team for a walkthrough.