Section 51 – Tax Deduction at Source (TDS)
Section 51 of CGST Act, 2017 – Tax Deduction at Source (TDS)
Updated on: February 2026 (as applicable till date)
Prepared by: Yours Tax Consultant
1. Scope and Objective of Section 51
Section 51 provides for Tax Deduction at Source (TDS) under GST in specified cases.
The objective of GST-TDS is to:
- Ensure tax compliance by suppliers
- Create a trail of transactions
- Prevent tax leakage in Government contracts
2. Statutory Provision – Section 51(1)
Notwithstanding anything contained in this Act, the Government may mandate certain persons to deduct tax at source at the rate of 1% from the payment made or credited to the supplier of taxable goods or services or both, where the total value of supply under a contract exceeds the prescribed limit.
3. Persons Required to Deduct TDS
As notified, TDS under GST is applicable to:
- Departments or establishments of Central / State Government
- Local authorities
- Governmental agencies
- Such other persons or category of persons as may be notified
Private persons are generally outside GST-TDS, unless specifically notified.
4. Rate of TDS under GST
TDS is deducted at:
- 1% CGST + 1% SGST, or
- 2% IGST (for inter-State supplies)
TDS is deducted on the taxable value excluding GST.
5. Threshold for Deduction
TDS is required only if:
- Total value of supply under a contract exceeds ₹2,50,000
This threshold:
- Excludes GST amount
- Applies contract-wise, not invoice-wise
6. When is GST-TDS Not Applicable?
GST-TDS is not applicable when:
- Location of supplier and place of supply are in the same State, and
- Recipient is registered in a different State
This avoids incorrect cross-State deduction.
7. Payment and Deposit of TDS – Section 51(2)
The amount deducted as TDS shall be:
- Paid to the Government within 10 days after the end of the month in which deduction is made
Delay attracts:
- Interest under Section 50
- Late fee under Section 47
8. TDS Return and Certificate – Section 51(3) & (4)
The deductor shall:
- File a TDS return in FORM GSTR-7
- Issue a TDS certificate to the deductee
TDS certificate must be issued:
- Within 5 days of depositing TDS
9. Credit of TDS to Deductee – Section 51(5)
The amount deducted as TDS:
- Is reflected in the electronic cash ledger of the supplier
- Can be utilised for payment of tax or other dues
Thus, GST-TDS is not a cost to the supplier.
10. Section 51 Read with CGST Rules
Section 51 must be read with:
11. Common Practical Issues
- Deducting TDS on GST amount (incorrect)
- Ignoring ₹2.5 lakh threshold
- Late filing of GSTR-7
- Mismatch of TDS credit in supplier’s ledger
12. Related Provisions
13. Professional Insight
GST-TDS is a compliance responsibility, not a tax burden. Correct deduction, timely deposit and accurate return filing protect both deductor and supplier from avoidable disputes.
Disclaimer: This article is prepared based on the CGST Act, CGST Rules, notifications and prevailing legal position as applicable till date. Thresholds, rates and applicability are subject to Government notification.
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