TDS (Tax Deducted at Source) Under GST: Complete Guide for 2026

Tax Deducted at Source (TDS) under GST is a critical compliance mechanism that requires specified entities — primarily government bodies, public sector undertakings, and notified organisations — to deduct 2% GST from payments made to suppliers when the contract value exceeds Rs. 2.5 lakh. Governed by Section 51 of the CGST Act, 2017, TDS under GST is distinct from TDS under the Income Tax Act and carries its own set of rules, returns, certificates, and penalties. This comprehensive guide covers every aspect of GST TDS that deductors, suppliers, and tax professionals need to know in 2026.

What Is TDS Under GST?

TDS under GST — Tax Deducted at Source under the Goods and Services Tax framework — is a mechanism where certain specified persons are required to deduct a percentage of GST from the payment made to a supplier of taxable goods or services. The deducted amount is then deposited with the government, and the supplier receives credit for the deducted tax in their electronic cash ledger on the GST portal.

The concept of TDS is not new to the Indian tax system. It has been a cornerstone of the Income Tax framework for decades, ensuring that tax is collected at the point of transaction rather than relying entirely on the payee to self-assess and pay. The GST framework adopted a similar mechanism through Section 51 of the Central Goods and Services Tax (CGST) Act, 2017, but with significant differences in scope, applicability, and procedure compared to Income Tax TDS.

The primary objective of TDS under GST is to create a trail of transactions and ensure that government purchases and contracts are properly tracked within the GST system. By requiring government departments, public sector undertakings, and other specified entities to deduct tax at source, the system creates an automatic verification mechanism that links the deductor's reporting with the supplier's tax filings.

Unlike TDS under Income Tax, which applies broadly across the economy, TDS under GST has a narrow scope. It applies only to specified categories of deductors (predominantly government and government-controlled entities) and only when the contract value exceeds a specified threshold. This narrow scope was a deliberate design choice to avoid burdening private sector businesses with additional compliance requirements while ensuring accountability in government procurement.

The TDS provisions under GST were introduced in the original CGST Act of 2017 but were not brought into effect immediately. The government notified the commencement of TDS provisions through Notification No. 50/2018-Central Tax dated 13 September 2018, making Section 51 effective from 1 October 2018. This delay allowed the GST system to stabilise and gave government departments time to prepare for the additional compliance requirement.

Since its implementation, TDS under GST has become a well-established compliance mechanism, with thousands of government departments and PSUs across India deducting and depositing GST TDS on a monthly basis. The process has been significantly streamlined through the GST portal's automated systems, including auto-generation of TDS certificates and auto-population of TDS credits in supplier ledgers.

Legal Framework: Section 51 of the CGST Act

The legal foundation for TDS under GST rests on Section 51 of the Central Goods and Services Tax Act, 2017, read with Rule 66 of the CGST Rules. Corresponding provisions exist in the state GST laws (SGST Acts) and the Integrated Goods and Services Tax (IGST) Act for inter-state supplies.

Section 51(1) — Power to Notify TDS Deductors

Section 51(1) of the CGST Act empowers the Government to require the following categories of persons (referred to as "deductors") to deduct tax at the rate of one per cent from the payment made or credited to the supplier:

• (a) A department or establishment of the Central Government or State Government
• (b) Local authority
• (c) Governmental agencies
• (d) An authority or a board or any other body that has been set up by an Act of Parliament or a State Legislature, or established by any Government, with fifty-one per cent or more participation by way of equity or control, to carry out any function
• (e) A society established by the Central Government or the State Government or a Local Authority under the Societies Registration Act, 1860
• (f) Public Sector Undertakings

The Government may also notify any other person or category of persons for the purposes of this section. This provision gives the government the flexibility to expand the list of TDS deductors through notifications without amending the Act.

Section 51(2) — Threshold for Deduction

No deduction shall be made if the total value of the supply under a contract exceeds two lakh and fifty thousand rupees. In other words, the Rs. 2.5 lakh threshold is the minimum contract value above which TDS must be deducted. The value of supply is taken as the amount excluding the central tax, state tax, union territory tax, integrated tax, and cess indicated in the invoice. This means GST components are excluded from the base value on which TDS is computed.

Section 51(3) — Deposit with Government

The amount deducted under Section 51(1) must be paid to the Government by the deductor within ten days after the end of the month in which the deduction is made. This is done by making the appropriate entry in the deductor's return filed under Section 39 (specifically, the GSTR-7 return).

Section 51(4) — TDS Certificate (GSTR-7A)

The deductor is required to furnish to the deductee (supplier) a certificate of tax deduction at source in the prescribed form (GSTR-7A). This certificate is auto-generated on the GST portal once the deductor files their GSTR-7 return.

Section 51(5) to 51(8) — Credit and Penalties

The deducted amount is credited to the electronic cash ledger of the deductee (supplier) on the GST portal. If any deductor fails to furnish the TDS certificate within five days of crediting the amount to the Government, a late fee of Rs. 100 per day is applicable from the day after the five-day period until the certificate is furnished. If the deductor deducts an amount in excess of the required TDS or deducts when no deduction was required, the excess amount may be refunded to the deductor or the deductee, as applicable.

Who Must Deduct TDS Under GST

The list of persons required to deduct TDS under GST is defined in Section 51(1) of the CGST Act and further specified through notifications issued by the Central Government. Unlike Income Tax TDS, which applies to a wide range of deductors including private companies and individuals above certain thresholds, GST TDS is primarily limited to government and government-controlled entities.

1. Central and State Government Departments

Every department and establishment of the Central Government and State Government is required to deduct TDS when making payments to suppliers for taxable goods or services where the contract value exceeds Rs. 2.5 lakh. This includes all ministries, departments, directorates, and attached offices at both central and state levels. Examples include the Ministry of Defence, Department of Revenue, State Public Works Departments, and all other government offices.

2. Local Authorities

Local authorities — including municipal corporations, municipalities, zila parishads, panchayats, cantonment boards, and other bodies entrusted with the control or management of a municipal or local fund — are required to deduct TDS under GST. This covers all local government bodies across India, from large metropolitan municipal corporations to small gram panchayats, provided they make payments exceeding the threshold.

3. Governmental Agencies

Governmental agencies that are established or constituted by or under a Central Act, State Act, or by a Government order for carrying out government functions are also required to deduct TDS. This includes agencies like the National Highways Authority of India (NHAI), Food Corporation of India (FCI), and similar bodies that execute government projects and programmes.

4. Authorities, Boards, and Bodies Under Legislation

Any authority, board, or body set up by an Act of Parliament or a State Legislature, or established by any Government with fifty-one per cent or more participation by way of equity or control, is required to deduct TDS. This is a broad category that covers regulatory authorities (like SEBI, TRAI, IRDA), development boards, welfare bodies, and any entity where the government holds majority control. The 51% threshold is assessed based on equity participation or administrative control by the government.

5. Societies Established Under Societies Registration Act

Societies established by the Central Government, State Government, or a Local Authority under the Societies Registration Act, 1860 (or corresponding state laws) are required to deduct TDS. Many government-promoted educational institutions, research organisations, and welfare bodies are registered as societies and fall under this category. For example, Indian Institutes of Management (IIMs), Indian Institutes of Technology (IITs), and numerous government-sponsored research institutions operate as registered societies.

6. Public Sector Undertakings (PSUs)

All Public Sector Undertakings — both Central PSUs and State PSUs — are required to deduct TDS under GST. This includes major entities like Indian Oil Corporation, NTPC, BHEL, Coal India, and hundreds of other PSUs at both central and state levels. Given the volume of procurement by PSUs, this category accounts for a significant portion of GST TDS deductions nationally.

When TDS Deduction Is NOT Required

Even for specified deductors, TDS is not required in the following situations:

• Contract value is Rs. 2.5 lakh or below (excluding GST) — the threshold must be exceeded for TDS to apply.
• Payment to an unregistered supplier — TDS under GST is deducted only from payments to registered suppliers. If the supplier is not registered under GST, no TDS deduction is required (however, reverse charge may apply separately).
• Supplies on which tax is payable under reverse charge — when the recipient is liable to pay GST under the reverse charge mechanism (Section 9(3) or 9(4)), TDS is not applicable on such supplies.
• Supply of goods or services that are exempt from GST — no TDS is required on exempt or nil-rated supplies.
• Intra-entity transactions — transactions between two registrations of the same entity (such as head office and branch in different states) are generally not subject to TDS, though this requires careful analysis based on the facts.

TDS Rate Under GST

The rate of TDS under GST is 2% of the taxable value of the supply (excluding GST). This 2% is split between the central and state/UT components of GST depending on whether the supply is intra-state or inter-state.

Intra-State Supplies

For supplies where both the supplier and the place of supply are within the same state or union territory, TDS is deducted as:

• 1% CGST (Central Goods and Services Tax)
• 1% SGST/UTGST (State/Union Territory Goods and Services Tax)
• Total TDS: 2%

Inter-State Supplies

For supplies where the supplier and the place of supply are in different states or union territories, TDS is deducted as:

• 2% IGST (Integrated Goods and Services Tax)
• Total TDS: 2%

Value for TDS Computation

TDS is computed on the value of supply as mentioned in the invoice, excluding the following tax components:

• Central Tax (CGST)
• State Tax (SGST)
• Union Territory Tax (UTGST)
• Integrated Tax (IGST)
• Cess

This means TDS is deducted on the taxable value (the value before adding GST), not on the total invoice value inclusive of GST. This is a critical distinction — computing TDS on the gross invoice value (inclusive of GST) would result in excess deduction and create reconciliation issues.

Threshold Limit: Rs. 2.5 Lakh Per Contract

TDS under GST is applicable only when the total value of supply under a contract exceeds Rs. 2,50,000 (two lakh fifty thousand rupees), excluding GST. This threshold is one of the most important aspects of the TDS provision and requires careful interpretation.

Per Contract, Not Per Invoice

The Rs. 2.5 lakh threshold is determined based on the total contract value, not on individual invoices or payments. This is a crucial distinction. If you have a contract with a supplier worth Rs. 5 lakh (excluding GST), TDS must be deducted on every payment made under that contract, even if individual invoices are for amounts below Rs. 2.5 lakh.

For example, if a government department enters into a contract for office supplies worth Rs. 4 lakh (excluding GST), and the supplier raises four invoices of Rs. 1 lakh each, TDS must be deducted on each invoice payment because the total contract value exceeds the threshold. It does not matter that each individual invoice is below Rs. 2.5 lakh.

Excluding GST Components

The Rs. 2.5 lakh threshold is computed on the value excluding GST. If a contract is valued at Rs. 2,50,000 plus GST (say 18% = Rs. 45,000, total Rs. 2,95,000), the threshold comparison is made against Rs. 2,50,000 (the value excluding GST). In this case, the contract value is exactly at the threshold limit — it does not exceed Rs. 2.5 lakh, so TDS would NOT be applicable.

When Is the Threshold Not Exceeded?

If the total value of supply under a contract is Rs. 2,50,000 or below (excluding GST), no TDS is required. The provision says "exceeds," meaning the value must be more than Rs. 2.5 lakh. A contract valued at exactly Rs. 2,50,000 does not exceed the threshold and is therefore exempt from TDS.

Individual Supplies Without a Contract

When there is no formal contract and supplies are made on a standalone basis, each purchase order or individual supply is generally treated as a separate transaction for threshold purposes. However, if multiple purchase orders to the same supplier are part of an ongoing arrangement that functions as a contract (such as a rate contract or annual arrangement), they may be aggregated for threshold determination. The key test is whether the purchases are under a single contract or arrangement.

Registration Requirements for TDS Deductors

Every person who is required to deduct TDS under Section 51 must obtain a separate GST registration as a TDS deductor. This registration is distinct from the regular GST registration that a person may hold for their business activities.

Mandatory Registration

Under Section 24(vi) of the CGST Act, persons who are required to deduct tax under Section 51 must compulsorily register under GST, regardless of their aggregate turnover. There is no threshold exemption for TDS deductor registration. Even if a government department has no taxable supplies of its own, it must register as a TDS deductor if it makes payments to suppliers exceeding the TDS threshold.

Registration Process

TDS deductor registration is obtained through Form GST REG-07 on the GST portal. The process involves:

1. Apply online: Submit Form GST REG-07 on the GST portal with the required details including PAN/TAN of the deductor, address, and authorised signatory information.
2. Verification: The application is verified by the GST officer. Unlike regular registration, TDS deductor registration does not require documents like proof of business premises or bank details.
3. GSTIN allotment: Upon approval, a unique GSTIN is allotted with a registration type of "Tax Deductor." This GSTIN is used exclusively for TDS-related compliance.
4. Registration certificate: The registration certificate is issued in Form GST REG-06.

State-Wise Registration

If a TDS deductor operates in multiple states, a separate registration is required in each state where it has a presence and makes TDS-liable payments. For example, if a Central Government ministry has offices in Delhi, Mumbai, and Kolkata, each office must obtain a separate TDS deductor registration in the respective state. Each registration will have a separate GSTIN, and GSTR-7 must be filed separately for each registration.

When to Deduct and Deposit TDS

Understanding the timing of TDS deduction and deposit is critical for compliance. The CGST Act prescribes specific timelines for both the deduction and the deposit of TDS with the government.

Time of TDS Deduction

TDS must be deducted at the time of making payment or crediting the amount to the supplier's account, whichever is earlier. This means:

• Cash payment: TDS must be deducted at the time of making the cash payment to the supplier.
• Bank transfer: TDS must be deducted at the time of releasing the payment through bank transfer (NEFT/RTGS/cheque).
• Credit to account: If the payment is credited to the supplier's account in the books of the deductor (even if actual payment has not been released), TDS must be deducted at the time of such credit. This is particularly relevant for accrual-based accounting where amounts are booked as payable before actual payment.

The point of deduction is the earlier of payment or credit. If a government department books an expense of Rs. 5 lakh in March 2026 but makes the actual payment in April 2026, TDS should be deducted in March 2026 (when the amount was credited to the supplier's account in the books).

Time of TDS Deposit

The deducted TDS amount must be deposited with the government within 10 days after the end of the month in which the deduction was made. In practice, the deposit is made through the GSTR-7 return, which must be filed by the 10th of the following month.

If the 10th of the month falls on a public holiday, the deadline is extended to the next working day. However, it is advisable not to rely on last-day filing — processing delays or portal issues on the last day can result in missed deadlines and penalties.

GSTR-7 Return Filing

GSTR-7 is the monthly return form that must be filed by all persons registered as TDS deductors under GST. It is the primary compliance document for reporting TDS deductions, deposits, and related information.

Who Must File GSTR-7

Every person registered as a TDS deductor under Section 51 of the CGST Act must file GSTR-7. This includes all government departments, local authorities, PSUs, and other notified entities that have obtained TDS deductor registration. GSTR-7 must be filed for every month in which TDS has been deducted. Even if no TDS was deducted in a particular month, it is advisable to file a nil GSTR-7 to maintain the filing sequence, though there is no late fee for late filing of nil GSTR-7 returns.

Contents of GSTR-7

GSTR-7 contains the following information:

• GSTIN of the deductor
• Details of TDS deducted: For each deductee (supplier), the following details are reported:
  • GSTIN of the deductee
  • Total amount of supply (taxable value excluding GST)
  • Amount of TDS deducted under IGST, CGST, and SGST/UTGST
• Amendments to previously filed returns: If there were errors in earlier GSTR-7 filings, corrections can be made in the current month's return.
• TDS payable and paid: Summary of total TDS liability and the amount paid through the electronic cash ledger.
• Interest payable: Any interest due on delayed TDS deposits.
• Refund claimed: If excess TDS was deducted or deposited, a refund can be claimed through the GSTR-7.

Step-by-Step Filing Process

1. Login to GST Portal: Access the GST portal (gst.gov.in) using the TDS deductor GSTIN credentials.
2. Navigate to GSTR-7: Go to Returns → Returns Dashboard → Select the return period → Prepare Online or Upload.
3. Add TDS details: Enter the GSTIN of each deductee, the taxable value of supply, and the TDS amounts (CGST, SGST, or IGST as applicable).
4. Add amendments (if any): If correcting previous months' data, enter the original details and the corrected details.
5. Compute liability: The portal automatically computes the total TDS liability based on the entries.
6. Make payment: Pay the TDS liability through the electronic cash ledger. Create a challan if insufficient balance exists.
7. File the return: After payment, file the return using DSC (Digital Signature Certificate) or EVC (Electronic Verification Code).
8. Download acknowledgement: After successful filing, download the filing acknowledgement for records.

Sequential Filing Requirement

GSTR-7 has a sequential filing requirement, meaning you cannot file a return for a later month without first filing all previous months' returns. If you miss filing GSTR-7 for April, you cannot file for May until the April return is filed. This makes it critical to maintain regular monthly filing discipline.

TDS Certificate: GSTR-7A

GSTR-7A is the TDS certificate under GST, serving as proof that TDS has been deducted and deposited with the government. It is the GST equivalent of Form 16/16A under the Income Tax Act.

Auto-Generation

Unlike Income Tax TDS certificates that require manual issuance, GSTR-7A is auto-generated on the GST portal once the deductor successfully files their GSTR-7 return. The moment GSTR-7 is filed, the system automatically creates GSTR-7A certificates for each deductee listed in the return. This automation eliminates the need for the deductor to manually issue certificates and ensures that the certificate data is always consistent with the return data.

Contents of GSTR-7A

The GSTR-7A certificate contains:

• GSTIN and name of the deductor
• GSTIN and name of the deductee (supplier)
• Contract details and supply description
• Taxable value on which TDS was deducted
• Amount of TDS deducted (CGST, SGST/UTGST, or IGST)
• Date of deduction
• Date of deposit with the government
• GSTR-7 return reference number

Download and Verification

The deductee (supplier) can download GSTR-7A certificates from the GST portal by navigating to Services → User Services → View/Download Certificates → GSTR-7A. The certificate can be verified against the TDS credit reflected in the supplier's electronic cash ledger to ensure accuracy and completeness.

Timeline for Certificate Issuance

Section 51(4) of the CGST Act requires the deductor to furnish the TDS certificate within five days of crediting the amount to the Government. Since GSTR-7A is auto-generated upon filing GSTR-7, the certificate is effectively issued as soon as the return is filed. If the deductor fails to file GSTR-7 within the due date, the certificate issuance is also delayed, potentially triggering the late fee of Rs. 100 per day.

How Suppliers Claim TDS Credit

For suppliers (deductees), the primary concern is how to access and utilise the TDS amount that has been deducted from their payments. The GST system provides a seamless mechanism for suppliers to receive and use their TDS credit.

Step 1: Auto-Population in Electronic Cash Ledger

When the deductor files GSTR-7 and the TDS amount is credited to the government, the corresponding TDS credit is automatically reflected in the supplier's electronic cash ledger on the GST portal. The supplier does not need to take any action for this credit to appear — it is populated automatically by the system based on the deductor's GSTR-7 filing.

Step 2: Verification Through GSTR-2B

The TDS deduction details are also reflected in the supplier's GSTR-2B statement, which is an auto-populated statement generated from the data reported by the deductor in GSTR-7. The supplier should verify the TDS amounts in GSTR-2B against their own records to ensure that:

• TDS has been correctly deducted on all eligible contracts
• The TDS rate and amount are accurate
• The taxable value matches the invoice value
• No TDS has been deducted on contracts below the threshold

Step 3: Utilisation of TDS Credit

The TDS credit in the electronic cash ledger can be used by the supplier to:

• Discharge output GST liability: The TDS credit can be used to pay CGST, SGST/UTGST, or IGST output tax liability, just like any other amount in the electronic cash ledger.
• Pay interest or penalties: The credit can also be used to pay any interest, penalty, or other amounts due under GST.
• Claim refund: If the TDS credit exceeds the supplier's GST liability (for example, for zero-rated supplies or inverted duty structures), the excess can be claimed as a refund through the refund application process on the GST portal.

Step 4: Reporting in GSTR-3B

When the supplier files their monthly GSTR-3B, the TDS credit available in the electronic cash ledger is automatically considered in the tax payment computation. The supplier should ensure that the TDS credit is appropriately accounted for while computing their net tax payable. The supplier does not need to separately "claim" the TDS credit — it is already available in the cash ledger and is automatically applied when tax payments are made.

Handling Discrepancies

If the supplier finds discrepancies between the TDS deducted (as per their records) and the TDS credit reflected on the portal, they should:

1. Verify the deductor's GSTR-7 filing: Check if the deductor has filed GSTR-7 for the relevant period. If the deductor has not filed, the credit will not appear in the supplier's ledger.
2. Contact the deductor: If the deductor has filed but the amounts are incorrect, communicate the discrepancy and request an amendment in the next GSTR-7 filing.
3. Check for amendments: The deductor can make corrections to previous months' TDS entries through the amendment section of GSTR-7.
4. Download GSTR-7A: Compare the GSTR-7A certificate with your invoice records to identify specific discrepancies.

Detailed Calculation Examples

Understanding how TDS under GST is calculated in various scenarios is essential for both deductors and suppliers. Below are detailed examples covering intra-state, inter-state, below-threshold, and mixed supply situations.

Example 1: Intra-State Supply Above Threshold

A State Government department in Karnataka awards a contract for office furniture to a Bangalore-based supplier. The contract value is Rs. 8,00,000 (excluding GST). GST rate on furniture is 18%.

The department deducts Rs. 16,000 (Rs. 8,000 CGST + Rs. 8,000 SGST) as TDS and deposits it with the government through GSTR-7. The supplier receives Rs. 9,28,000 (Rs. 9,44,000 minus Rs. 16,000 TDS). The Rs. 16,000 TDS credit is reflected in the supplier's electronic cash ledger.

Example 2: Inter-State Supply Above Threshold

A Central Government ministry in Delhi awards a contract for IT consulting services to a firm registered in Mumbai, Maharashtra. The contract value is Rs. 12,00,000 (excluding GST). GST rate on consulting services is 18%.

Since the supply is from Maharashtra to Delhi (inter-state), IGST applies. TDS is deducted at 2% IGST on the taxable value of Rs. 12,00,000, resulting in TDS of Rs. 24,000.

Example 3: Contract Below Threshold — No TDS

A municipal corporation awards a contract for landscaping services to a local vendor. The contract value is Rs. 2,00,000 (excluding GST). GST rate is 18%.

Since the contract value (Rs. 2,00,000 excluding GST) does not exceed the Rs. 2.5 lakh threshold, no TDS is deducted. The full invoice amount of Rs. 2,36,000 is payable to the supplier.

Example 4: Multiple Invoices Under a Single Contract

A PSU enters into an annual maintenance contract (AMC) with a service provider for Rs. 6,00,000 (excluding GST). The service provider raises quarterly invoices of Rs. 1,50,000 each.

Even though each quarterly invoice (Rs. 1,50,000) is below the Rs. 2.5 lakh threshold, TDS must be deducted on every invoice because the total contract value (Rs. 6,00,000) exceeds the threshold. TDS is deducted at 2% on each invoice payment.

Example 5: Mixed Supply with Different GST Rates

A government department awards a contract for supply of computers (18% GST) and installation services (18% GST) to a vendor in the same state. The contract specifies: Computers Rs. 5,00,000, Installation Rs. 2,00,000. Total contract value: Rs. 7,00,000 (excluding GST).

For mixed supplies under a single contract, TDS is computed on the total taxable value of the supply (Rs. 7,00,000), not on individual components separately. The TDS rate remains 2% regardless of the nature of supply (goods or services) within the contract.

Penalties for Non-Compliance

Non-compliance with TDS provisions under GST can result in significant financial consequences. The CGST Act prescribes penalties for various types of non-compliance, including failure to deduct, late deposit, late filing, and failure to issue certificates.

Interest Calculation on Late TDS

Interest on late TDS deposit is calculated at 18% per annum on the TDS amount, from the date the TDS should have been deposited (10th of the month following the deduction) until the date of actual deposit. The interest is calculated on a simple interest basis, pro-rated for the number of days of delay.

Impact on Suppliers

Non-compliance by the deductor directly impacts the supplier. If the deductor fails to file GSTR-7 or deposits TDS late, the TDS credit does not appear in the supplier's electronic cash ledger until the filing is completed. This can create cash flow issues for the supplier, as they may need to pay their output GST liability from their own funds without the benefit of the TDS credit. While the supplier is not penalised for the deductor's non-compliance, they bear the financial burden of delayed credit availability.

TDS Under GST vs TDS Under Income Tax: Key Differences

TDS under GST and TDS under Income Tax are two completely separate and independent mechanisms. Both can apply simultaneously on the same transaction, and compliance with one does not satisfy the requirement of the other. Understanding the differences is crucial to avoid confusion and ensure full compliance.

Simultaneous Application

When a government department makes a payment for services like consulting or professional fees, both GST TDS and Income Tax TDS apply simultaneously. The department must deduct GST TDS (2% of taxable value excluding GST) and report it in GSTR-7, AND deduct Income Tax TDS (e.g., 10% under Section 194J for professional fees) and report it in Form 26Q. These are separate obligations with separate filing, deposit, and compliance requirements.

For example, if a government department pays Rs. 10,00,000 plus GST 18% (Rs. 1,80,000) to a consultant, the department would deduct:

• GST TDS: 2% of Rs. 10,00,000 = Rs. 20,000 (reported in GSTR-7)
• Income Tax TDS: 10% of Rs. 10,00,000 = Rs. 1,00,000 (reported in Form 26Q)
• Net payment to consultant: Rs. 11,80,000 - Rs. 20,000 (GST TDS) - Rs. 1,00,000 (IT TDS) = Rs. 10,60,000

Best Practices for TDS Compliance Under GST

Maintaining robust TDS compliance under GST requires systematic processes and regular monitoring. Here are the best practices that deductors and suppliers should follow to ensure seamless compliance.

1. Maintain a comprehensive contract register. Track all contracts with their values, supplier GSTINs, TDS applicability, deduction dates, and GSTR-7 filing status. This register serves as the single source of truth for all TDS obligations and is invaluable during audits.
2. Verify supplier GSTIN before every deduction. Before deducting TDS, verify that the supplier's GSTIN is active and valid on the GST portal. Deducting TDS against an incorrect or inactive GSTIN creates reconciliation issues and delays credit for the supplier.
3. Compute TDS on taxable value, never on gross invoice value. Always exclude GST components (CGST, SGST, IGST, Cess) from the base value before computing TDS. Computing TDS on the gross value (including GST) results in excess deduction and requires correction.
4. File GSTR-7 well before the 10th deadline. Do not wait until the last day. Portal congestion, technical issues, or payment processing delays on the deadline day can result in late filing. Aim to file by the 5th or 6th of the following month.
5. Reconcile TDS deducted with GSTR-7 filed. After each GSTR-7 filing, reconcile the TDS amounts in the return with your contract register and payment records. Catch and correct discrepancies in the next month's filing through the amendment section.
6. Communicate with suppliers proactively. Inform suppliers about TDS deductions promptly. Share copies of the GSTR-7A certificate (available on the portal after filing) and respond to supplier queries about TDS credit discrepancies quickly.
7. Monitor the Rs. 2.5 lakh threshold carefully. For ongoing contracts or rate contracts, track cumulative payments to determine when the threshold is crossed. Set up alerts when contract values approach the threshold to ensure TDS is deducted from the appropriate point.
8. Separate TDS deductor compliance from regular GST compliance. If your entity has both regular GST registration and TDS deductor registration, maintain separate processes and teams (or at least separate checklists) for each. The compliance requirements, timelines, and forms are different.
9. Train accounts and procurement teams together. TDS compliance under GST sits at the intersection of accounts (for computing and depositing TDS) and procurement (for contract management and threshold monitoring). Ensure both teams understand their roles in the TDS process.
10. Use the DoAide GST Bot for real-time guidance. When in doubt about TDS applicability, rates, thresholds, or procedures, get instant answers from the DoAide GST Bot rather than risking non-compliance based on assumptions.

Related GST Resources

TDS under GST intersects with several other aspects of GST compliance. Explore these related guides for a comprehensive understanding:

• GST Return Filing: GSTR-1 & GSTR-3B Guide 2026 — Understand how suppliers report TDS credits in their regular returns.
• Input Tax Credit (ITC) Rules Under GST 2026 — Learn how TDS credits interact with the broader ITC framework.
• GST Registration Process 2026 — Step-by-step guide including TDS deductor registration (Form REG-07).
• Reverse Charge Mechanism (RCM) Under GST 2026 — Understand the interplay between RCM and TDS obligations.
• GST Composition Scheme Guide 2026 — How composition dealers interact with TDS provisions.
• E-Way Bill Under GST: Rules & Guide 2026 — Transportation documentation for goods supplied to government entities.
• GST Audit Checklist for Small Businesses — Ensure your TDS records are audit-ready.
• How to Claim ITC on Capital Goods Under GST — ITC rules for capital goods purchased by government entities.
• GST Return Filing Deadlines 2026-27 — Complete calendar including GSTR-7 due dates.

Frequently Asked Questions