TDS Under GST (Section 51): Who Deducts, Rate & Process
GST TDS explained — who must deduct, 2% rate calculation, GSTR-7 filing, how suppliers claim credit, TDS vs TCS comparison, and late filing penalties.
Reviewed by Vikram Mehta
Chartered Accountant · ICAI FRN 142087W
TDS under GST is different from income tax TDS. It applies when certain specified entities (government departments, PSUs, companies with turnover >₹20 Cr) make payments exceeding ₹2.5 lakh per contract to GST-registered suppliers. The deductor withholds 2% and deposits it with the government.
This guide covers who must deduct, when, at what rate, how to deposit, and how the supplier (deductee) claims credit.
Who Must Deduct TDS Under GST?
- Central/State Government departments
- Local authorities
- Government agencies
- Persons or entities registered under Section 51 (notified by government)
- Public Sector Undertakings (PSUs)
- Societies established by government
- Authority/Board/Body set up by Central/State Act
Note: Regular private companies generally do NOT deduct GST TDS unless specifically notified.
When to Deduct
- When total value of supply under a single contract exceeds ₹2,50,000
- The value of supply for TDS calculation excludes GST (deduct on taxable value only)
- Deduction at the time of payment or credit to supplier — whichever is earlier
TDS Rate
| Component | Rate |
|---|---|
| CGST TDS | 1% |
| SGST/UTGST TDS | 1% |
| Total (intra-state) | 2% |
| IGST TDS (inter-state) | 2% |
TDS is deducted on the taxable value (not on invoice value including GST).
Example
Contract value: ₹5,00,000 (intra-state supply)
GST @18%: ₹90,000 | Total invoice: ₹5,90,000
TDS: ₹5,00,000 × 2% = ₹10,000 (₹5,000 CGST + ₹5,000 SGST)
Payment to supplier: ₹5,90,000 − ₹10,000 = ₹5,80,000
₹10,000 deposited by deductor with government
TDS Registration
Entities required to deduct TDS must obtain a separate TDS registrationunder GST (even if they already have a regular GSTIN). This is done using Form REG-07.
- No threshold exemption — if you're notified, you must register
- Registration is state-specific (one per state where deduction is made)
- PAN-based registration (like regular GST)
Filing Requirements: GSTR-7
TDS deductors must file GSTR-7 monthly by the 10th of the following month. It contains:
- Details of TDS deducted (GSTIN of deductee, invoice details, amount)
- TDS payable and paid
- Interest on late payment (if any)
How Suppliers Claim TDS Credit
- When deductor files GSTR-7, the TDS amount appears in supplier's electronic cash ledger
- Supplier can see it in their GSTR-2B (TDS/TCS section)
- Supplier accepts/rejects TDS details
- Accepted amount becomes available for use to pay output tax or for refund
Important: TDS credit goes to the cash ledger, not credit ledger. It's like a pre-payment of tax — directly usable for any GST payment.
Auto-reconcile TDS credits with your cash ledger
1010 tracks TDS deducted by government clients, matches with GSTR-2B, and ensures you claim every rupee of credit in your cash ledger.
Try 1010 FreeLate Filing/Payment Consequences
| Default | Consequence |
|---|---|
| Late filing of GSTR-7 | Late fee: ₹200/day (₹100 CGST + ₹100 SGST), max ₹5,000 |
| Late deposit of TDS | Interest: 18% p.a. from due date till payment |
| Not deducting TDS | ₹10,000 penalty + interest on un-deducted amount |
| Wrong deduction | Refund to deductee via amended GSTR-7 |
TDS vs TCS in GST
| Parameter | TDS (Section 51) | TCS (Section 52) |
|---|---|---|
| Deducted/Collected by | Government entities, PSUs | E-commerce operators |
| Rate | 2% (1% CGST + 1% SGST) | 1% (0.5% CGST + 0.5% SGST) |
| Threshold | Contract value > ₹2.5 lakh | No threshold |
| Return | GSTR-7 (10th of next month) | GSTR-8 (10th of next month) |
| Credit to supplier | Cash ledger | Cash ledger |
Practical Tips
- Always verify deductor's GSTIN and state before accepting TDS on your account
- Reconcile GSTR-2B TDS section monthly — any unaccepted TDS is lost credit
- If TDS is deducted incorrectly (wrong rate, wrong person), raise it with the deductor for GSTR-7 amendment
- TDS credit cannot be refunded directly — it must first be used or accumulated in cash ledger, then refund via RFD-01
Frequently Asked Questions
What is TDS in GST?
Tax Deducted at Source under GST — certain notified entities (government, PSUs) deduct 2% of taxable value on payments exceeding ₹2.5 lakh and deposit it with the government. The supplier claims this as credit in their cash ledger.
What is the TDS rate under GST?
2% — split as 1% CGST + 1% SGST (intra-state) or 2% IGST (inter-state). Deducted on taxable value, not on total invoice value including GST.
Who is liable to deduct TDS under GST?
Government departments, local authorities, PSUs, government agencies, and other notified entities. Regular private businesses generally don't deduct GST TDS.
How does the supplier claim TDS credit?
Once the deductor files GSTR-7, the TDS amount automatically appears in the supplier's electronic cash ledger. The supplier accepts it via GSTR-2B and can use it for any GST payment.
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