GST TDS is a 2% deduction under section 51 of the CGST Act that certain buyers, mainly government bodies and, since FY 2024-25, registered buyers of metal scrap, make from payments to a supplier when the taxable value of a contract exceeds ₹2,50,000. Within one state it is split as 1% CGST and 1% SGST; between states it is 2% IGST.
It is a GST rule, not an income tax rule, and it sits on top of any income tax TDS on the same bill. A contractor working for a municipal body can see both cut from one invoice. This page explains GST TDS, the worked entries for a bill carrying both, and how income tax TDS treats the GST part. For the income tax side, start at what TDS is.
Quick facts
Law
Section 51, CGST Act, 2017Rate
2% (1% CGST + 1% SGST, or 2% IGST)Applies when
Taxable value of a contract above ₹2,50,000Base
Value excluding GSTDeposit and return
By the 10th of the next month, in GSTR-7Supplier's proof
GSTR-7A, generated on the GST portalInterest if late
18% a year
GST TDS applicability: who must deduct
- A department or establishment of the Union or any state government.
- A local authority, such as a municipal corporation or panchayat.
- A governmental agency.
- Notified persons: an authority or board set up by Parliament or a state legislature, or by a government with 51% or more equity or control, a society set up by such a government, and public sector undertakings.
- Registered buyers of metal scrap (Customs Tariff chapters 72 to 81), from 10 October in FY 2024-25, when buying from a registered supplier.
No GST TDS is cut when the supplier's location and place of supply are in one state and the buyer is registered in another. Each deductor needs a separate GST registration as a TDS deductor, even if it does not supply anything.
GST TDS rate and limit
| Situation | Deduction |
|---|---|
| Supplier and buyer in the same state | 1% CGST + 1% SGST (or UTGST) = 2% |
| Supplier and buyer in different states | 2% IGST |
| Contract taxable value ₹2,50,000 or less | No GST TDS |
| Exempt supply | No GST TDS |
The ₹2,50,000 test is on the total value of one contract, before GST, not on each part payment. A ₹6,00,000 road repair contract paid in three bills of ₹2,00,000 each attracts GST TDS on every bill.
How to deduct TDS on a GST bill: example
A painting contract for a municipal school. The contractor is a company in the same state. Bill: ₹4,00,000 plus 18% GST of ₹72,000, so ₹4,72,000 in all.
- GST TDS at 2% on ₹4,00,000: ₹8,000 (₹4,000 CGST and ₹4,000 SGST).
- Income tax TDS under 194C at 2% on ₹4,00,000, since GST is shown separately: ₹8,000.
- Net paid to the contractor: ₹4,72,000 minus ₹8,000 minus ₹8,000 = ₹4,56,000.
- The contractor uses the ₹8,000 GST TDS in its electronic cash ledger and claims the ₹8,000 income tax TDS in its return.
Income tax TDS is worked out without GST because CBDT Circular 23 of FY 2017-18 says so when the invoice lists GST as its own line. If the invoice shows one combined figure, income tax TDS applies on the whole amount. More on the income tax part is in 194C TDS.
Purchase entry with GST and TDS
| Account | Debit | Credit |
|---|---|---|
| Professional fees (expense) | ₹1,00,000 | |
| Input CGST | ₹9,000 | |
| Input SGST | ₹9,000 | |
| TDS payable (income tax) | ₹10,000 | |
| Supplier | ₹1,08,000 |
When the buyer is also a GST TDS deductor, add a credit line for GST TDS payable and reduce the supplier's credit by the same amount. Clear each payable when you deposit it.
GST TDS return due date and portal steps
Deposit the GST TDS and file GSTR-7 by the 10th of the month after deduction. A certificate in GSTR-7A is then generated for the supplier. Late filing carries a daily late fee subject to a cap, and unpaid tax carries 18% a year interest.
- GST TDS login: sign in to the GST portal with the user ID of the TDS registration.
- Go to Services, then Returns, then Returns Dashboard, and choose the month.
- Open GSTR-7, enter each supplier's GSTIN with the taxable value and tax deducted, and preview.
- Pay any balance from the cash ledger and file with a digital signature or EVC.
- The supplier then accepts the credit under Services, Returns, TDS and TCS Credit Received.
GST tax slabs and the link with income tax
After the rate rationalisation from 22 September in FY 2025-26, most goods and services fall in two GST slabs, 5% and 18%, with 40% for a short list of luxury and sin goods, and nil on exempt items. GST and income tax are separate laws: GST is a tax on supplies, run on the GST portal, while income tax TDS is credited to your PAN and seen in Form 26AS. A GST refund cannot be adjusted against income tax or the other way round.
GST TDS problems and fixes
| Problem | Fix |
|---|---|
| Deducting GST TDS on the GST-inclusive amount | Use the taxable value only |
| Supplier does not accept the credit | Accept it under TDS and TCS Credit Received before the cash ledger shows it |
| Scrap buyer not registered as deductor | Take TDS registration before the first purchase |
| Mixing GST TDS with income tax TDS | Deposit and report each in its own system |
General information on GST TDS and its link with income tax in India. GST notifications change often, so test your case against the latest CBIC notices or with your tax adviser.
Sources we checked
- CGST Act, 2017, section 51
- CBIC notifications on GST TDS
- CBDT Circular 23 of FY 2017-18
Frequently asked questions
What is the GST TDS rate?
2% of the taxable value: 1% CGST and 1% SGST for supplies within a state, or 2% IGST for supplies between states.
When is GST TDS applicable?
When a government department, local authority, governmental agency or notified body, or a registered metal scrap buyer, pays a supplier under a contract whose taxable value exceeds ₹2,50,000.
Is income tax TDS on GST bill calculated with GST?
Not if the invoice lists GST on its own line; then income tax TDS is worked on the pre-GST value.
What is the GST TDS return due date?
GSTR-7 is due by the 10th of the month after the month of deduction, along with payment of the tax deducted.
Is GST TDS applicable on metal scrap?
Yes. From 10 October in FY 2024-25, registered persons buying metal scrap from registered suppliers must deduct GST TDS under section 51.