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GST TDS: A Comprehensive Guide to Tax Deduction at Source

Abhishek Raja Ram at September 06, 2025

Mastering GST TDS: Your Ultimate Guide to Tax Deduction at Source

Tax Deducted at Source (TDS) under GST is a mechanism to collect tax at the point of payment to certain categories of suppliers, thereby ensuring tax traceability and compliance. The statutory basis for this provision is Section 51 of the CGST Act, 2017 and corresponding State GST/UTGST Acts. The provision came into effect from 1st October 2018 (Notification No. 50/2018-CT dated 13.09.2018).

GST TDS

Specified Deductors:

Central/State Government Departments or establishments
Local authorities
Governmental agencies
Authorities/Boards/Bodies:
Set up by an Act of Parliament/State Legislature
Established by the Government with ≥51% equity/participation
Societies established under the Societies Registration Act, 1860, by the Government or a local authority
Public Sector Undertakings (PSUs)
Persons or categories as notified by the Government

Relevant Notifications:

Notification	Provision/Notification
33/2017-CT	Initial list of TDS deductors, enabled TDS registration
50/2018-CT	TDS provisions made effective from 01.10.2018
57/2018-CT	Specified Ministry of Defence authorities for TDS
61/2018-CT	Exempts TDS on supplies between PSUs (w.e.f. 01.10.2018)
73/2018-CT	Exempts TDS on inter-governmental supplies (w.e.f. 31.12.2018)

2. Transactions Attracting GST TDS

Key Conditions:

TDS is deductible when:
- Payment/credit is made to a supplier of taxable goods or services or both.
- The value of supply under a single contract exceeds ₹ 2.5 lakhs (exclusive of taxes)
No TDS if:
- Location of supplier and place of supply is in a different State/UT than the State/UT of registration of the recipient (i.e., for such inter-state supplies)
- Supply consists only of exempt/non-taxable goods/services

When TDS is NOT Applicable

Scenario	TDS Liability	Notification Reference
Inter-state supplies (see above condition)	Not deductible	Sec. 51 provision
PSU-to-PSU supplies	Not deductible	Notification 61/2018-CT
Inter-governmental supplies	Not deductible	Notification 73/2018-CT
Amount ≤ ₹2.5 lakh per contract	Not deductible	Sec 51(1), CGST Act
Exempt/non-taxable supplies	Not deductible	Sec 51(1), CGST Act

3. Rate of TDS Deduction

Type of Supply	Rate	Distribution
Intra-State	2%	1% CGST + 1% SGST/UTGST
Inter-State	2%	2% IGST

TDS is deducted on the value excluding GST (Sec. 51(1) Explanation)

4. Payment, Return, and Compliance

a) Deposit of TDS

Deposited by deductor: within 10 days after the end of the month in which deduction is made

(Section 51(2); Rule 66 of the CGST Rules)

b) TDS Return

Form GSTR-7: To be filed by every deductor by the 10th of the following month

c) TDS Certificate

Form GSTR-7A: Generated automatically on the GST portal upon filing of GSTR-7 (no separate certificate required post 01.01.2021 as per Notification and SOPs)

d) Late Fees & Interest (in case of default)

Non-compliance	Penalty/Fee	Legal Provision
Delay in deposit of TDS	Interest @18% p.a.	Section 50

Delay in GSTR-7 filing (w.e.f. Jun 2021) Rs. 50/day (max Rs. 2,000 for CGST+SGST) Notification 22/2021-CT

5. Claiming & Refund of TDS

Credit: Deductee (supplier) gets credit of TDS only when the deductor files GSTR-7 and the deductee accepts the TDS in GST portal; credited to deductee’s e-cash ledger.
Refund:
- Excess/erroneous deduction: Refund possible (Section 54, CGST Act)
- If TDS credited to deductee’s cash ledger, deductor cannot claim refund.
Case Law: Royale Edible Company v. State Tax Officer, SGST Deptt., Thrissur [2021 (50) GSTL 406 (Ker.)]: Refund of balance in cash ledger (from TDS) cannot be denied if there are no dues.

6. Key Procedural Points

Mandatory Registration for TDS Deductors under Section 24(vi) (even if below normal turnover threshold); allowed via TAN
Monthly compliance: GSTR-7, deposit TDS
No TDS in transitional cases: If invoice is pre-GST but payment is post-GST, TDS is not applicable (Section 142(13), CGST Act)

7. Important FAQs

Question	Answer/Clarification
Who is required to deduct TDS?	Govt departments, PSUs, Local Authorities, Notified entities (see above)
When to deduct TDS?	On payment/credit for taxable supply under a contract > Rs. 2.5 lakh
What if payment is split?	TDS is not required if each individual supply is ≤2.5 lakh, even if annual aggregate exceeds limit
What about intra-government supplies?	TDS not required (Notification 73/2018-CT, w.e.f. 31.12.2018)
How to claim credit?	Supplier sees credit in e-cash ledger after deductor files GSTR-7 and supplier accepts TDS credit
Can TDS be claimed as refund?	Yes, subject to rules; deductor cannot claim once credited to supplier’s e-cash ledger
What about errors/excess deduction?	Refund can be claimed as per Section 54 CGST Act

8. Common Mistakes & Cautions

Deducting TDS on non-taxable/exempt supplies (Not required)
Deducting TDS when contract value is ≤2.5 lakh (Not required)
Wrong state/jurisdiction for TDS deposit in inter-state transactions (TDS not applicable in such cases)
Missing TDS registration for liable entities

9. Select Case Laws

Case / Order	Key Principle	Citation
Royale Edible Company v. STO, SGST Deptt., Thrissur - Kerala High Court	Refund of TDS credited in cash ledger	[2021 (50) G.S.T.L. 406 (Ker.)]
Shapoorji Pallonji and Company Pvt. Ltd. vs Union of India – Andhra Pradesh High Court	Refund of accumulated TDS in the cash ledger is permissible after tax liability is discharged through ITC, as per CBIC Circular No.166/22/2021-GST.	[2025 (27) CENTAX 259 (A.P.)]
Aarav Consultancy Services Pvt. Ltd. - AAR Chhatisgarh	Deduction of TDS is not required when supply is exempt from GST	[2023 (2) CENTAX 319 (AAR-GST-Chh.)]

10. Summary Table – Main Points

Particular	Provision/Rate/Requirement
Who deducts?	Govt Depts, PSUs, Notified Bodies
From whom?	Supplier of taxable goods/services
When?	Value > ₹2.5 lakh per contract (excl. GST)
Rate	2% (1% CGST + 1% SGST/UTGST; or 2% IGST)
Deposit timeline	Within 10 days after month end
Compliance forms	GSTR-7 (return), GSTR-7A (auto certificate)
Not applicable for	Inter-state (cross-State registration), PSU-to-PSU, inter-government
Registration	Mandatory for all specified deductors (no threshold)
Refunds	Excess/erroneous deduction per Sec. 54
Reference start date	01.10.2018 (Notification 50/2018-CT)

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About the Author

Abhishek Raja Ram

Senior Author

Abhishek Raja Ram - Popularly known as Revolutionary Raja; is FCA, DISA, Certificate Courses on – Valuation, Indirect Taxes , GST etc, M. Com (F&T) Mr. Abhishek Raja “Ram” is a Fellow member of Read more...

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Mastering GST TDS: Your Ultimate Guide to Tax Deduction at Source
1. Who is Required to Deduct TDS? (Section 51(1), CGST Act, 2017 & Related Notifications)
Relevant Notifications:
2. Transactions Attracting GST TDS
3. Rate of TDS Deduction
4. Payment, Return, and Compliance
5. Claiming & Refund of TDS
6. Key Procedural Points
7. Important FAQs
8. Common Mistakes & Cautions
9. Select Case Laws
10. Summary Table – Main Points

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