Taxation · Tax Deduction at Source and Collection of Tax at Source

TDS Compliance under GST: Registration, Payment, Returns and Certificate

Updated 4 October 2026 · Fact-checked

GST TDS compliance is the set of steps a notified deductor follows after deducting 2% under section 51: register, deposit the tax and file GSTR-7 by the 10th of the next month, issue the GSTR-7A certificate within five days of deposit, and pay interest or late fee if late. The supplier then gets credit in the electronic cash ledger.

Understand TDS Compliance: Registration, Payment, Returns and Certificate

Under GST, certain notified persons, such as government departments, local authorities and other specified bodies, must deduct tax at source when they pay a supplier under a contract. The deduction is 2% of the payment (1% CGST + 1% SGST, or 2% IGST). It applies only when the contract value, excluding GST, is more than ₹2,50,000. The deductor keeps part of the payment and sends it to the Government on the supplier's behalf.

This topic is about what the deductor must do after deducting. There are four duties. First, be registered as a deductor. Second, deposit the tax and file the return GSTR-7. Third, give the supplier a certificate (GSTR-7A). Fourth, pay interest and late fee if any step is late.

A deductor must take registration even if its turnover is below the normal threshold, because the law makes registration compulsory for persons who must deduct tax under section 51. A registration taken only as a TDS deductor is for deducting tax and filing GSTR-7. It does not entitle the deductor to make taxable supplies or to claim input tax credit.

Timing is the heart of the topic. Tax deducted in a month is paid, and GSTR-7 is filed, within 10 days after the end of that month. The certificate GSTR-7A is available on the portal after GSTR-7 is filed. The deductor must give the certificate within 5 days of the date the tax is credited to the Government.

The supplier (deductee) does not get credit in the input tax credit ledger. The amount is credited to the supplier's electronic cash ledger based on the deductor's GSTR-7. The supplier checks it on the portal and uses it to pay tax liability or claims it as refund.

Key rules to remember

Rate of TDS: TDS = 2% of contract payment (1% CGST + 1% SGST, or 2% IGST); Applies when the contract value (excluding GST) exceeds ₹2,50,000. The base is the payment excluding GST.
Payment and GSTR-7 due date: Due date = 10th day after the end of the month of deduction; Tax deducted in June is due by 10 July. GSTR-7 is filed by the same date.
Certificate time limit: GSTR-7A within 5 days of crediting the tax to the Government; The certificate is available on the portal after GSTR-7 is filed. It shows contract value, rate, amount deducted and amount paid.
Late fee for certificate: ₹100 per day from the day after the 5-day limit; maximum ₹5,000; Counted for each day of delay after the five days.
Late fee for GSTR-7: ₹100 per day under CGST + ₹100 per day under SGST/UTGST (total ₹200 per day); maximum ₹5,000 under each Act; Late fee under section 47 starts the day after the due date. For an IGST deduction, the late fee is still charged under CGST and SGST/UTGST.
Interest on late payment of tax: Interest = Tax unpaid × 18% × days of delay ÷ 365; Charged from the day after the due date until the day of payment.
Deductee credit: TDS shown in deductor's GSTR-7 → credited to deductee's electronic cash ledger; Credit does not go to the electronic credit ledger. The deductee can use it for tax payment or claim a refund.

How to solve TDS Compliance: Registration, Payment, Returns and Certificate questions

Use this order for any question on GST TDS compliance. It keeps dates, amounts and consequences separate.

1Check whether the payer is a notified deductor and whether the contract value, excluding GST, is more than ₹2,50,000.
2Compute the TDS at 2% of the payment excluding GST. Split it into CGST and SGST (1% each) for intra-State supplies, or IGST (2%) for inter-State supplies.
3Find the month of deduction. The due date for deposit and GSTR-7 is the 10th of the next month.
4Count the days of delay from the day after the due date to the day of filing or payment. Include both end dates correctly.
5Compute interest at 18% per year on the tax paid late, and the late fee for GSTR-7 at ₹200 per day, up to the cap.
6Check the certificate: the five-day limit runs from the date the tax was credited to the Government, not from the deduction date. Late fee is ₹100 per day, maximum ₹5,000.
7State the deductee's position: credit goes to the electronic cash ledger on the basis of GSTR-7, and can be used to pay tax or claimed as refund.
8Write the conclusion in one line, with the amounts.

Quickest way: Date-and-rate shortcut for MCQs and written answers

When to use it: Use when you have little time and the question gives dates and a contract value.

Remember three numbers: 2% rate, 10th of next month, 5 days for the certificate.
In MCQs, first find the due date. Then count the delay in days. Most options differ only in the number of days or in the late fee cap.
Check the late fee against the cap of ₹5,000 before choosing an answer.
Eliminate options that put the credit in the electronic credit ledger. TDS credit goes to the electronic cash ledger.
For written answers, use four short headings: Provision, Facts, Computation, Conclusion. Show the TDS, the due date, the days late, interest and late fee as separate lines so each earns step marks.

Common mistakes in TDS Compliance: Registration, Payment, Returns and Certificate

Computing TDS on the amount including GST.
Students take the invoice total as the payment base.
Fix: Deduct 2% on the value excluding GST, and check the ₹2,50,000 limit on the same basis.
Counting the five days for the certificate from the date of deduction.
The deduction date feels like the starting point.
Fix: Count five days from the date the tax is credited to the Government. Late fee runs from the next day.
Saying the deductee gets input tax credit in the electronic credit ledger.
Students mix TDS credit with ITC.
Fix: Write that the amount is credited to the electronic cash ledger based on the deductor's GSTR-7.
Applying the late fee cap of ₹5,000 to the total of CGST and SGST together.
Students read the cap as one overall limit.
Fix: The cap of ₹5,000 applies under each Act. Check the cap for each Act separately.
Thinking a deductor need not register because its turnover is below the threshold.
Students remember the ₹40 lakh and ₹20 lakh limits for normal suppliers.
Fix: Registration is compulsory for persons who must deduct tax under section 51, regardless of turnover.
Mixing up the due date: using the 20th, or the 10th of the same month.
GSTR-3B is due on the 20th, so students confuse the dates.
Fix: For GSTR-7 the date is the 10th of the month following the month of deduction.

Worked examples

Example 1

A State Government department (a notified deductor) pays a supplier ₹5,00,000 (excluding GST) in June 2026 under a contract for an intra-State supply. It deposits the TDS and files GSTR-7 on 25 July 2026. Compute the TDS, the interest and the late fee on GSTR-7. Take 365 days in a year and round interest to the nearest rupee.

Show the solution

Contract value ₹5,00,000 exceeds ₹2,50,000, so TDS applies.
TDS = 2% × ₹5,00,000 = ₹10,000, being CGST ₹5,000 and SGST ₹5,000.
Deducted in June, so the due date is 10 July 2026.
Delay is from 11 July to 25 July = 15 days.
Interest = ₹10,000 × 18% × 15 ÷ 365 = ₹73.97, rounded to ₹74.
Late fee = 15 days × ₹200 (₹100 CGST + ₹100 SGST) = ₹3,000. This is below the cap of ₹5,000 under each Act.

Answer: TDS is ₹10,000 (₹5,000 CGST + ₹5,000 SGST). Interest is ₹74 and late fee for GSTR-7 is ₹3,000 (₹1,500 under each Act).

Example 2

A deductor deposits the TDS on 8 July 2026 for deductions made in June 2026 and files GSTR-7 on the same day, 8 July 2026. It issues the certificate to the supplier on 20 July 2026. State the due date of the certificate, compute the late fee, and explain how the supplier gets credit.

Show the solution

The tax was credited to the Government on 8 July 2026, and GSTR-7 was filed on 8 July 2026, so the certificate is available on the portal from that date.
The certificate must be given within 5 days of crediting the tax, so the due date is 13 July 2026.
Late fee runs from 14 July to 20 July = 7 days.
Late fee = 7 × ₹100 = ₹700. This is below the maximum of ₹5,000.
The supplier sees the TDS in its records from the deductor's GSTR-7, and the amount is credited to its electronic cash ledger.
The supplier can use this balance to pay output tax or claim it as refund.

Answer: The certificate was due on 13 July 2026. The late fee is ₹700. The supplier gets the credit in its electronic cash ledger on the basis of the deductor's GSTR-7.

Exam tips

Learn the three numbers: 2%, 10th of the next month and 5 days. Most MCQs test only one of them.
In computational questions, always show the day count. A wrong count with a correct method still earns partial marks.
Keep GSTR-7 late fee (₹200 per day in total, cap ₹5,000 under each Act) separate from the certificate late fee (₹100 per day, cap ₹5,000).
When asked about the deductee, write the words 'electronic cash ledger' and 'on the basis of GSTR-7'.
TDS applies to both intra-State and inter-State supplies. The tax is CGST + SGST if the supply is intra-State (the supplier's location and the place of supply are in the same State) and IGST if it is inter-State, irrespective of the deductor's own State.

Practice questions from Tax Deduction at Source and Collection of Tax at Source

TDS Compliance: Registration, Payment, Returns and Certificate: frequently asked questions

What is the due date of GSTR-7 and what is the late fee?

GSTR-7 is due by the 10th of the month following the month in which tax was deducted. Late fee is ₹100 per day under CGST and ₹100 per day under SGST/UTGST, with a maximum of ₹5,000 under each Act. It starts from the day after the due date.

What is the time limit for the TDS certificate in GSTR-7A?

The deductor must give the certificate within 5 days of crediting the deducted tax to the Government. After that, late fee of ₹100 per day applies, up to ₹5,000. The certificate is available on the portal after GSTR-7 is filed.

How does the supplier claim TDS credit in the electronic cash ledger?

Once the deductor files GSTR-7, the deducted amount is credited to the supplier's electronic cash ledger. The supplier checks it on the portal and the certificate. The balance can then be used to pay tax or claimed as refund.

Is there interest on late deposit of TDS under GST?

Yes. Interest is charged at 18% per year on the tax paid late, for the period from the day after the due date until the day of payment. It is separate from the late fee for the return.