Summary: Tax Deducted at Source (TDS) under GST is governed by Section 51 of the CGST Act, 2017 and requires specified recipients to deduct tax at 2% of the taxable value of qualifying supplies. This article explains the categories of deductors, including government departments, local authorities, governmental agencies, public sector undertakings and registered buyers of notified metal scrap. It discusses the ₹2.5 lakh contract-value threshold, the distinction between intra-State and inter-State deductions, exclusions, and the computation of TDS without including GST and cess. It also covers Notification No. 25/2024-Central Tax, which brought registered metal-scrap transactions within the TDS framework from 10 October 2024. The article explains registration, payment, invoice-wise filing of Form GSTR-7, GSTR-7A certificates and the process by which suppliers receive TDS credit in their electronic cash ledgers. It further addresses mandatory monthly returns, sequential filing, interest, penalties, the three-year filing restriction and late-fee relief under Notification No. 23/2024-Central Tax. A numerical example, compliance checklist, recent-change table and practical FAQs explain how deductors and suppliers can manage GST TDS compliance.
GST TDS under Section 51 and GSTR-7: Who Deducts, How Much and By When
- Introduction
- Who Must Deduct GST TDS
- When to Deduct: Threshold, Rate and Exclusions
- Cases Where No GST TDS Is Deducted
- Example: GST TDS on a Works Contract
- Registration, Payment and Filing GSTR-7
- 1. Register as a GST TDS Deductor
- 2. Deposit the GST TDS
- 3. File Form GSTR-7
- 4. Download the TDS Certificate in GSTR-7A
- Mandatory Nil Returns and Sequential Filing
- Late Fee, Interest and Other Consequences
- For the Supplier: Using the TDS Credit
- Recent Changes at a Glance
- Monthly Checklist for Deductors
- Frequently Asked Questions
- Is GSTR-7 Due on the 10th Even if the 10th Is a Holiday?
- Is TDS Deducted on the GST Amount?
- We Are a Private Company That Only Buys Copper Scrap. Do We Need a Separate Registration?
- What Happens to TDS Deducted from an Unregistered Supplier?
- Can a Missed GSTR-7 for an Old Month Be Skipped?
Introduction
GST TDS is 2% of the taxable value, deducted by specified recipients from payments to suppliers and reported in Form GSTR-7 by the 10th of the following month. It is governed by Section 51 of the CGST Act, 2017 and Rule 66 of the CGST Rules.
Three changes since late 2024 have made compliance stricter. GSTR-7 must now be filed every month even when nothing was deducted. Returns must be filed in sequence. From the September 2025 period, deductions are reported invoice by invoice. The scope also widened in October 2024 to registered buyers of metal scrap, so many private businesses are now deductors for the first time.
This article explains who deducts, when, how the return works and what a supplier must do to use the credit.
Who Must Deduct GST TDS
Section 51(1) and Notification 50/2018-Central Tax, as amended, require these persons to deduct:
- A department or establishment of the Central Government or a State Government
- A local authority, such as a municipal corporation or panchayat
- A governmental agency
- An authority, board or other body set up by Parliament, a State Legislature or a government, with 51% or more equity or control held by a government
- A society set up by the Central Government, a State Government or a local authority under the Societies Registration Act, 1860
- A public sector undertaking
- From 10 October 2024, a registered person who receives a supply of metal scrap falling under Chapters 72 to 81 of the Customs Tariff (Notification 25/2024-CT)
The seventh category matters most for private businesses. A manufacturer, foundry or trader that buys iron, steel, copper, aluminium or other metal scrap from a registered supplier is now a GST TDS deductor. Purchases of the same scrap from an unregistered supplier fall under reverse charge instead (Notification 06/2024-CT (Rate)), not TDS.
When to Deduct: Threshold, Rate and Exclusions
TDS applies when the total value of taxable supply under one contract exceeds ₹2,50,000, excluding GST and cess. The test is on the contract, not on each invoice: a contract of ₹6 lakh billed in three invoices of ₹2 lakh each attracts TDS on every invoice.
| Supply | Deduction |
|---|---|
| Supplier and recipient in the same State | 1% CGST + 1% SGST (or UTGST) |
| Supplier and recipient in different States | 2% IGST |
| Value it is calculated on | Taxable value in the invoice, excluding GST and cess |
Cases Where No GST TDS Is Deducted
No TDS is deducted when:
- the contract value is ₹2,50,000 or less
- the location of the supplier and the place of supply are in a State other than the recipient’s State of registration (proviso to Section 51(1)); the deduction would not match the supplier’s tax head
- one government department, local authority or governmental agency supplies to another (Notification 61/2018-CT)
- the supplier is unregistered, since the credit can only reach a GSTIN
- the supply is wholly exempt; in a mixed contract, only the taxable part is counted (Circular 76/50/2018-GST)
Example: GST TDS on a Works Contract
Example. A municipal corporation in Madurai awards a Madurai contractor a works contract of ₹4,00,000 plus 18% GST (₹72,000). TDS = 2% of ₹4,00,000 = ₹8,000, split as ₹4,000 CGST and ₹4,000 SGST. The contractor is paid ₹4,64,000 and the ₹8,000 reaches the contractor’s electronic cash ledger once accepted.
Registration, Payment and Filing GSTR-7
The monthly cycle runs in four steps, all due by the 10th of the month after the deduction.
1. Register as a GST TDS Deductor
Register. A government deductor needs GST registration as a TDS deductor in Form GST REG-07, whatever its turnover (Section 24(vi)). A registered buyer of metal scrap reports under its existing GSTIN.
2. Deposit the GST TDS
Deposit. Pay the TDS through a challan in Form GST PMT-06 into the electronic cash ledger, under the right heads (CGST and SGST, or IGST).
3. File Form GSTR-7
File GSTR-7. Report each deduction: the supplier’s GSTIN, and from the September 2025 tax period, the invoice number, date, taxable value and tax deducted for each invoice. Corrections to earlier months go in the amendment table of a later return. The GSTN advisory dated 26 September 2025 confirms the introduction of invoice-wise reporting.
4. Download the TDS Certificate in GSTR-7A
Certificate. Filing GSTR-7 makes a TDS certificate in Form GSTR-7A available to the supplier on the portal.
Mandatory Nil Returns and Sequential Filing
Two filing rules introduced from 1 November 2024 catch many deductors out:
- Nil returns are compulsory. Section 39(3), as substituted, requires GSTR-7 for every month whether or not any tax was deducted. Before this, the portal treated a nil return as optional.
- Returns go in sequence. A month’s GSTR-7 cannot be filed until every earlier month, from October 2024 onwards, has been filed.
Late Fee, Interest and Other Consequences
A late GSTR-7 costs ₹50 a day (₹25 CGST + ₹25 SGST), capped at ₹2,000 a return (₹1,000 under each Act), under Notification 23/2024-CT. When the tax deducted for the month is nil, the late fee is waived in full.
| Default | Consequence |
|---|---|
| GSTR-7 filed late | Late fee as above |
| TDS deducted but paid late | Interest at 18% a year from the 11th until payment (Section 50) |
| TDS not deducted or not paid | Tax is recoverable from the deductor with interest, and penalty proceedings can follow (Section 122) |
| GSTR-7 not filed for 3 years after its due date | The return can no longer be filed (Section 39(11)) |
Because filing is sequential, one missed month also blocks every later return until it is filed. A deductor who has stopped making deductions should still file nil returns, or cancel the TDS registration if it is no longer required.
For the Supplier: Using the TDS Credit
The TDS deducted is the supplier’s money, but it reaches the cash ledger only after the supplier accepts it.
- After the deductor files GSTR-7, the entries appear on the supplier’s portal under Services > Returns > TDS and TCS Credit Received.
- The supplier accepts each correct entry, or rejects a wrong one, and files the form for that month.
- Accepted amounts are credited to the electronic cash ledger. They can pay output tax, interest or late fee, or be claimed as a refund.
- A rejected entry goes back to the deductor, who corrects it in a later GSTR-7.
Suppliers should still report the full invoice value and output tax in GSTR-1 and GSTR-3B; TDS is a credit against the tax, not a reduction of it. A mismatch between the deductor’s GSTR-7 and the supplier’s books is the most common reason for notices on TDS credit, so reconcile GSTR-7A with receivables each month.
Recent Changes at a Glance
| From | Change | Source |
|---|---|---|
| September 2025 tax period | GSTR-7 reported invoice by invoice instead of one total per supplier | Notification 09/2025-CT; GSTN advisory of 26 September 2025 |
| 1 November 2024 | GSTR-7 compulsory every month, nil included; returns filed in sequence from October 2024 | Section 39(3) as substituted; Notification 17/2024-CT |
| 1 November 2024 | Late fee structure re-notified: ₹25 a day under each Act, cap ₹1,000 each, nil-TDS months waived | Notification 23/2024-CT |
| 10 October 2024 | Registered buyers of metal scrap (Chapters 72 to 81) must deduct TDS | Notification 25/2024-CT |
Monthly Checklist for Deductors
- List every contract whose taxable value exceeds ₹2,50,000, and every metal scrap purchase from a registered supplier
- Check the supplier’s GSTIN is active and the State of supply, before deducting
- Deduct 2% of the taxable value from each payment under those contracts
- Pay the TDS through PMT-06 by the 10th
- File GSTR-7 invoice-wise by the 10th; file a nil return if nothing was deducted
- Confirm GSTR-7A is visible to each supplier
Frequently Asked Questions
Is GSTR-7 Due on the 10th Even if the 10th Is a Holiday?
The statute fixes the 10th. Extensions come only by notification, so file earlier when the 10th falls on a holiday.
Is TDS Deducted on the GST Amount?
No. It is 2% of the taxable value, excluding CGST, SGST, IGST and cess.
We Are a Private Company That Only Buys Copper Scrap. Do We Need a Separate Registration?
No separate TDS registration is needed. Notification 25/2024-CT applies to registered persons, who deduct and file GSTR-7 under their existing GSTIN.
What Happens to TDS Deducted from an Unregistered Supplier?
It should not be deducted. A purchase of metal scrap from an unregistered supplier falls under reverse charge instead.
Can a Missed GSTR-7 for an Old Month Be Skipped?
No. Filing is sequential from October 2024, so the missed month must be filed, with late fee, before later months can be filed.
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Author: CA. Garry Arockia Marlen, B.Com, ACA, is the Founder of Garry & Associates, Chartered Accountants, Madurai. He works on GST, income tax, audit and company law compliance.
Disclaimer: This article explains the law as of 3 November 2026 for general information. It is not professional advice for any specific case. Readers should check the current notifications on the CBIC and GST portals before acting.
