# Tax Deduction at Source (TDS) under GST [Section 51]
## Concept
TDS under GST is a mechanism where specified recipients deduct a portion of the payment due to the supplier and deposit it directly with the government. The supplier can later claim credit of this TDS in their Electronic Cash Ledger to pay any GST liability.
## How the Mechanism Works
Illustrative flow:
- Supplier raises invoice of ₹ 1,00,000 + ₹ 18,000 (GST) = ₹ 1,18,000
- Recipient pays supplier: ₹ 1,00,000 – ₹ 2,000 (2% TDS on taxable value) + ₹ 18,000 GST = ₹ 1,16,000
- Recipient deposits ₹ 2,000 TDS with the Government
- Supplier avails this TDS as credit in Electronic Cash Ledger
## Persons Liable to Deduct TDS
1. Departments or establishments of Central or State Government
2. Local authority
3. Government agencies
4. Public Sector Undertakings (PSUs)
5. Society established by Central/State Government or local authority under Society Act
6. An authority/board/any other body that is:
- Set up by an Act of Parliament/State Legislature, OR
- Established by any Government
- With 51% or more participation by way of equity or control
7. Any registered person receiving supplies of metal scrap from another unregistered person
## When TDS Must be Deducted
TDS is deducted only when value of taxable supply under a single contract exceeds ₹ 2,50,000.
Key points on threshold:
- Contract value is taken exclusive of GST
- Threshold is judged on contract value, not invoice value
- Value of exempt supplies is excluded while computing the ₹ 2,50,000 threshold
## Rate of TDS
| Type of Supply | Rate |
|---|---|
| Intra-State Supply | 1% CGST + 1% SGST |
| Inter-State Supply | 2% IGST |
TDS is calculated on payment made or credited to the supplier (on the taxable value, excluding GST).
## Cases Where TDS is NOT Required
- Value of taxable supplies in a contract does not exceed ₹ 2,50,000
- Only exempt supplies are being made
- Supplies are taxable under Reverse Charge Mechanism (RCM)
- Payment is made to an unregistered supplier
- Supplies between two PSUs
- Supplies between persons notified to deduct TDS (mutual exemption), except recipient of metal scrap
- When supplier's location and place of supply are in the same State but recipient is in a different State (recipient cannot deduct another state's CGST/SGST)
## Other Procedural Provisions
1. Registration: Deductor must apply for separate registration; Proper Officer grants registration within 3 working days.
2. Deposit deadline: TDS deposited with government by 10th of the succeeding month.
3. TDS Certificate: Issued to deductee in Form GSTR-7A.
4. Credit availability: TDS reflects in deductee's Electronic Cash Ledger and can be used to pay any liability.
5. Interest on default: Interest @ 18% p.a. applies if TDS is not deposited on time.