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Indirect Tax Laws and Practice · TDS and TCS under GST

TDS under GST: Section 51, Deductors, Rate and Threshold

Updated 11 October 2026 · Fact-checked

TDS under GST is tax a notified deductor withholds from payments to a supplier of taxable goods or services under a contract worth more than ₹2,50,000 (excluding GST). The total rate is 2%: 1% CGST plus 1% SGST/UTGST, or 2% IGST. No deduction applies if the supplier's location and place of supply are in a different State from the recipient's registration.

Understand TDS under GST: Section 51 and Deductors

Section 51 of the CGST Act lets the Government mandate certain persons to deduct tax from payments they make to suppliers. This is a withholding tool. It is not an extra tax. The tax deducted is later credited to the supplier's electronic cash ledger, and the supplier uses it to pay its own GST.

The deductor is one of these: a department or establishment of the Central or State Government; a local authority; Governmental agencies; or any person or category of persons notified by the Government on the Council's recommendation. The supplier who receives the reduced payment is the deductee. The Act says the Government "may mandate" deduction, so the obligation applies to these persons as mandated.

Deduction applies only when the total value of supply under a contract exceeds ₹2,50,000. The test is on the contract, not on a single invoice or payment. The value is taken excluding central tax, State tax, UT tax, integrated tax and cess shown in the invoice. So you compute the threshold on the taxable value, not the invoice total.

The rate under the CGST Act is 1%, and the same 1% applies under the SGST/UTGST law. That makes 2% for an intra-State supply. Under the IGST Act, the proviso to section 20 fixes the rate at 2% for inter-State supplies. The 2% is applied on the payment made or credited to the supplier, on the value excluding GST.

There is one key exclusion. No deduction is made if the supplier's location and the place of supply are in a State or Union territory different from the State or UT of registration of the recipient. In plain words, if the supplier is in State X, the place of supply is also in State X, and the deductor is registered in State Y, there is no TDS.

Key rules to remember

Persons who may be mandated to deduct (section 51(1))
Central/State Government department or establishment | local authority | Governmental agencies | persons notified on Council's recommendation
Only those mandated must deduct. Learn all four categories.
Threshold
Total value of supply under a contract > ₹2,50,000 (excluding CGST, SGST/UTGST, IGST and cess)
Test is 'exceeds'. Exactly ₹2,50,000 does not attract TDS. Test is per contract.
Rate (intra-State)
1% CGST + 1% SGST/UTGST = 2% in total
Section 51(1) gives 1% for central tax. Apply on payment made or credited.
Rate (inter-State)
IGST at 2% (proviso to section 20, IGST Act)
Same 2% overall, split differently.
TDS amount
TDS = 2% × value of supply excluding GST
Value excludes taxes shown in the invoice.
Exclusion
No TDS if supplier's location and place of supply are in a State/UT different from recipient's State/UT of registration
Both conditions must be met: location AND place of supply differ from the recipient's State.
Payment to Government
Within 10 days after the end of the month of deduction (section 51(2))
Deposit and return detail are covered in the related topic on TDS deposit, returns and certificates.

How to solve TDS under GST: Section 51 and Deductors questions

Use this order for any TDS under GST question. It follows the section line by line and stops you from deducting where the law does not require it.

  1. 1Check the payer. Is it a Government department or establishment, local authority, Governmental agency, or a person notified by the Government? If not, there is no TDS.
  2. 2Check the supply. It must be a supply of taxable goods or services or both. Exempt or non-taxable supplies do not qualify.
  3. 3Find the contract value excluding CGST, SGST/UTGST, IGST and cess. Use the total value under the contract, not one invoice.
  4. 4Compare with ₹2,50,000. Deduct only if the value exceeds it.
  5. 5Apply the location test. If the supplier's location and the place of supply are both in a State/UT different from the recipient's State/UT of registration, there is no TDS.
  6. 6Compute 2% on the payment made or credited, on the value excluding GST. Split as 1% CGST + 1% SGST/UTGST for intra-State, or 2% IGST.
  7. 7State the compliance: deposit within 10 days after the end of the month, and issue the certificate.

Quickest way: Four-gate check

When to use it: Use this for MCQs and for the first line of a descriptive answer when you must decide quickly whether TDS applies.

  1. Gate 1: Is the payer a mandated deductor?
  2. Gate 2: Is the contract value, excluding GST, above ₹2,50,000?
  3. Gate 3: Is the supply within the recipient's State (or is either location or place of supply in the recipient's State)?
  4. If all gates pass, TDS = 2% of value excluding GST. If any gate fails, TDS = nil.

Common mistakes in TDS under GST: Section 51 and Deductors

  • Deducting TDS when the contract value is exactly ₹2,50,000.

    Students read the limit as 'up to' rather than 'exceeds'.

    Fix: The Act says the value must exceed ₹2,50,000. At exactly ₹2,50,000, no TDS applies.

  • Calculating 2% on the invoice total including GST.

    The invoice total is the figure most visible in the question.

    Fix: Use the value excluding central tax, State tax, UT tax, integrated tax and cess, as the Explanation to section 51(1) states.

  • Applying the threshold to each invoice instead of the contract.

    Questions often list several bills and students test them one by one.

    Fix: Section 51 says the total value of supply under a contract. Add up the supplies under the same contract.

  • Deducting TDS on an inter-State supply where the place of supply is outside the recipient's State.

    Students remember 2% IGST and forget the proviso.

    Fix: Check the proviso: if supplier's location and place of supply are in a different State/UT from the recipient's registration State, no deduction is made. IGST TDS arises where the place of supply is in the recipient's State but the supplier is elsewhere.

  • Treating every company or business as a deductor.

    Students confuse TDS with income-tax TDS, which has wider coverage.

    Fix: Under GST, only the persons mandated under section 51(1) deduct. Name the category in your answer.

  • Stating the rate as 1% for all cases.

    Section 51 mentions 1% and students stop there.

    Fix: 1% is the CGST part. Total is 2%: 1% + 1% intra-State, or 2% IGST inter-State.

Worked examples

Example 1

A State Government department, registered in Maharashtra, enters into one contract with a Maharashtra supplier for taxable services. The contract value is ₹4,00,000 excluding GST. GST at 18% is charged separately. Compute the TDS and state the split.

Show the solution
  1. Payer: a department of the State Government, so a deductor under section 51(1)(a).
  2. Contract value excluding GST: ₹4,00,000, which exceeds ₹2,50,000.
  3. Location: supplier and place of supply are in Maharashtra, the recipient's State, so the exclusion does not apply.
  4. TDS at 2% of ₹4,00,000 = ₹8,000.
  5. Split for an intra-State supply: CGST 1% = ₹4,000 and SGST 1% = ₹4,000.
  6. Payment to supplier = ₹4,00,000 + GST ₹72,000 − TDS ₹8,000 = ₹4,64,000.

Answer: TDS = ₹8,000 (CGST ₹4,000 + SGST ₹4,000). Net payment to the supplier is ₹4,64,000. The deductor must deposit the tax within ten days after the end of the month of deduction.

Example 2

A local authority in Karnataka awards a contract to a supplier located in Tamil Nadu. The goods are delivered to a site in Tamil Nadu and the place of supply is Tamil Nadu. The contract value is ₹6,00,000 excluding GST. Is TDS required? Would your answer change if the place of supply were Karnataka?

Show the solution
  1. Payer: a local authority, so a deductor under section 51(1)(b).
  2. Value ₹6,00,000 exceeds ₹2,50,000, so the threshold is met.
  3. Location test: the supplier's location (Tamil Nadu) and the place of supply (Tamil Nadu) are both in a State different from Karnataka, where the recipient is registered.
  4. The proviso to section 51(1) applies, so no deduction is made.
  5. If the place of supply were Karnataka, the supplier's location alone would not trigger the exclusion, as both conditions are needed.
  6. Then it would be an inter-State supply and IGST TDS at 2% of ₹6,00,000 = ₹12,000 would apply.

Answer: On the facts given, no TDS is required because of the proviso. If the place of supply were Karnataka, TDS of ₹12,000 (2% IGST) would apply.

Exam tips

  • Write the four checks (deductor, taxable supply, value above ₹2,50,000, location test) in order. Examiners give marks for each one.
  • Always strip GST out of the figure before testing the threshold and computing 2%.
  • In a case scenario with several States, mark the supplier's location, the place of supply and the recipient's registration State before you decide.
  • Use the word 'exceeds' for the threshold. MCQs often set the value at exactly ₹2,50,000 as a trap.
  • Learn the split: 1% + 1% intra-State, 2% IGST inter-State. A one-line mention scores easy marks.

Practice questions from TDS and TCS under GST

TDS under GST: Section 51 and Deductors in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

TDS under GST: Section 51 and Deductors: frequently asked questions

Who is liable to deduct TDS under GST?

The persons the Government mandates under section 51(1): a department or establishment of the Central or State Government, a local authority, Governmental agencies, and persons or categories of persons notified on the Council's recommendation. Such a person must also take registration as a deductor in FORM GST REG-07.

What is the TDS rate and threshold under GST?

The total rate is 2%. It is 1% CGST plus 1% SGST/UTGST for intra-State supplies, or 2% IGST for inter-State supplies. TDS applies where the total value of supply under a contract exceeds ₹2,50,000, excluding GST and cess.

Is TDS under GST deducted on the GST amount too?

No. The value of supply for TDS excludes central tax, State tax, UT tax, integrated tax and cess shown in the invoice. You apply the rate only on the base value.

When is no TDS deducted even if the contract exceeds ₹2,50,000?

No TDS is deducted if the supplier's location and the place of supply are in a State or UT different from the State or UT of registration of the recipient. Both the supplier's location and the place of supply must be outside the recipient's State.

What is the time limit to pay the TDS to the Government?

The deductor must pay the amount within ten days after the end of the month in which the deduction was made. Failure to pay attracts interest under section 50(1) in addition to the tax deducted.