Section 51 – Tax Deduction at Source (TDS)

What does the Section say?

Section 51 provides for deduction of GST at source (TDS) by specified persons when making payments to suppliers. The Government, departments, local authorities, governmental agencies, and notified entities are required to deduct tax at the rate of 2% (1% CGST + 1% SGST) from payments made to suppliers where the value of supply under a contract exceeds ₹2,50,000 excluding GST.

The purpose of this provision is to ensure proper tax compliance and create a transaction trail. The deductor must deposit the deducted amount with the Government within the prescribed time and issue a TDS certificate to the supplier.

The deducted amount gets reflected in the electronic cash ledger of the supplier and can be used for payment of GST liability.

Failure to deduct or deposit TDS may result in interest and penalties under GST law.

1. TDS Applicable to Whom?

TDS under GST is required to be deducted by:

• Central Government Departments
• State Government Departments
• Local Authorities (Municipal Corporations, Panchayats, etc.)
• Governmental Agencies
• Notified persons/entities such as:
• Public Sector Undertakings (PSUs)
• Authorities, Boards, or Bodies set up by Parliament or State Legislature
• Societies established by Government having 51% or more Government participation

Condition: TDS is applicable when the value of supply under a contract exceeds ₹2,50,000 (excluding GST and cess).

Rate of TDS: 2%

• CGST: 1%
• SGST: 1%
  (For intra-state supplies)

For inter-state supplies, 2% IGST is deducted.

2. What is the Due Date of TDS Payment?

The deductor must deposit the TDS amount with the Government:

On or before the 10th day of the month succeeding the month in which deduction is made.

Example:

• TDS deducted on 20 June
• Due date for payment = 10 July

Failure to deposit within the due date attracts:

• Interest under Section 50
• Penalty under GST provisions

3. Which Return is to be Filed for TDS?

The deductor is required to file:

GSTR-7

Due Date: 10th of the succeeding month.

The return contains:

• GSTIN of deductee
• Amount paid
• Amount of TDS deducted
• Tax deposited with Government

After filing GSTR-7, the deductee can view the TDS credit in their Electronic Cash Ledger.

Example

A State Government department awards a contract of ₹10,00,000 to a contractor for office renovation. While making payment, the department deducts GST TDS of 2% and deposits it with the Government. The contractor can view this amount in his GST portal and utilize it against future tax liabilities.

Key Points

• Applicable to specified Government entities and notified persons.
• TDS rate is 2%.
• Contract value must exceed ₹2.5 lakh.
• Deducted tax is credited to supplier's electronic cash ledger.
• Non-compliance attracts interest and penalties.

In One Line

Specified Government entities must deduct GST at source while making certain payments to suppliers.