The article provides a comprehensive practical checklist on TDS and TCS under GST, covering statutory provisions, applicability, compliance, and recent updates. TDS under Section 51 and TCS under Section 52 became effective from 01-10-2018, with a significant expansion from 10-10-2024 introducing TDS on metal scrap (Chapters 72–81) in B2B transactions. Government entities, PSUs, and notified bodies must deduct TDS on taxable supplies exceeding ₹2.5 lakh, while e-commerce operators collect TCS at 1% on net taxable supplies. The checklist explains registration (REG-07), deduction timing, rates, return filing (GSTR-7/GSTR-8), and credit flow to suppliers’ electronic cash ledger. It also highlights exclusions like inter-state place-of-supply mismatches and non-taxable supplies. Practical guidance covers ERP setup, reconciliation, and audit readiness. The new scrap TDS provision broadens compliance obligations for businesses. Overall, the framework emphasises accurate classification, timely compliance, and reconciliation to avoid disputes and ensure smooth GST credit flow.
1. Statutory framework and when TDS / TCS started
TDS and TCS under GST are not new concepts; they are built into the CGST Act itself, but were made operational a little later.
TDS under GST is governed by section 51 of the CGST Act, 2017, read with corresponding SGST provisions and Rule 66 of the CGST Rules.
TCS under GST is governed by section 52 of the CGST Act, 2017 and Rule 67.
Both section 51 (TDS) and section 52 (TCS) were notified to come into force from 01‑10‑2018 by Notification Nos. 50/2018‑CT and 51/2018‑CT dated 13‑09‑2018.f
From 10‑10‑2024, there is a third pillar: the Government expanded TDS to metal scrap supplies between registered persons by issuing Notification No. 25/2024‑Central Tax dated 09‑10‑2024, amending Notification 50/2018‑CT.
So, today we have three legs of the regime:
Section 51 TDS – classic Government‑linked deductors.
Section 52 TCS – e‑commerce operators collecting consideration.
Section 51 TDS – metal scrap (Chapters 72–81) in B2B supplies from 10‑10‑2024.
2. Classic section 51 TDS – “who, when, how much”
2.1 Who must deduct (Government‑linked entities)
Section 51(1) read with Notification 50/2018‑CT specifies the deductors. In practice, they are:
Departments or establishments of Central Government.
Departments or establishments of State Governments.
Local authorities.
Governmental agencies.
Such persons or categories of persons as notified – essentially:
Authorities, boards, bodies set up by Act of Parliament/State Legislature or established by Government,
With 51% or more Government participation by equity or control,
Societies established by Government or local authorities under the Societies Registration Act,
Public sector undertakings (PSUs).
For these categories, compulsory GST registration as TDS‑deductor is required under section 24(vi), irrespective of turnover.
2.2 Registration as TDS deductor – REG‑07 checklist
Registration for TDS is separate from normal GST registration and is TAN‑based. A quick checklist for your staff:
Obtain TAN under the Income‑tax Act, 1961.
Apply online in Form GST REG‑07 on the portal, selecting “Tax Deductor”.
No threshold: registration is purely category‑based, not turnover‑based.
A separate GSTIN is issued as TDS‑deductor, distinct from any normal GSTIN of the same entity.
In practice, you can instruct government clients to maintain separate books or cost centres for the TDS‑GSTIN to avoid mixing up transactions.
2.3 When to deduct – conditions and threshold
Key points for “when”:
TDS applies on payments to suppliers of taxable goods or services or both; exempt and non‑GST supplies are outside TDS.
Threshold: value of taxable supply under a single contract exceeds ₹2,50,000, excluding GST and cess.
The explanation to section 51 clarifies that “value of supply” for TDS is exclusive of tax components.
There is an important exclusion built into the scheme:
Where the location of supplier and place of supply are in a State different from the State of registration of the recipient, TDS is not to be deducted, because otherwise the recipient will not get corresponding ITC.
2.4 How much to deduct – rate and base
Rate of TDS under section 51 is 2% of taxable value.
Intra‑State: 1% CGST + 1% SGST / UTGST.
Inter‑State: 2% IGST.
Base is always the taxable value excluding GST and cess.
Example 1 – Works contract for a Municipality
Contract value (taxable supply): ₹5,00,000.
GST @ 18%: ₹90,000.
Gross invoice value: ₹5,90,000.
TDS under section 51 = 2% of ₹5,00,000 = ₹10,000, not on ₹5,90,000.
3. New TDS on metal scrap – goods covered, and why plastic scrap is outside
From 10‑10‑2024, the Government has moved metal scrap into the mainstream TDS net, beyond Government entities.
3.1 Legal background
Notification No. 25/2024‑Central Tax dated 09‑10‑2024 amends Notification 50/2018‑CT and inserts a new clause for scrap transactions.
The new clause brings under section 51 “any registered person receiving supplies of metal scrap falling under Chapters 72 to 81 in the First Schedule to the Customs Tariff Act, 1975, from another registered person”.
Effective date: 10‑10‑2024.
Thus, from that date, ordinary registered businesses buying metal scrap (not just Government) face TDS obligations.
3.2 Who must deduct on metal scrap
The following are now liable to deduct TDS on scrap, subject to threshold and other conditions:
Any registered buyer of metal scrap (Chapters 72–81) from a registered supplier, in a B2B transaction.
This is in addition to the existing Government‑linked deductors.
Standard TDS conditions (taxable supply, contract‑wise threshold, place‑of‑supply exclusion) continue to apply unless specifically overridden.
3.3 What scrap is covered – and plastic explicitly outside
The notification is very specific in scope:
Covered: metal scrap classified under Chapters 72 to 81 of the Customs Tariff Act, 1975.
Chapter 72: Iron and steel (melting scrap, turning and borings, re‑rollable scrap, etc.)
Chapters 73–76: Articles of iron/steel, copper and copper alloy scrap, aluminium scrap, etc.
Chapters 78–81: Lead, zinc, tin and other base‑metal scraps.
Not covered: plastic scrap, because plastics fall under Chapter 39, which is outside Chapters 72–81.
So, as of now, plastic scrap is not included in this special scrap‑TDS provision. You may still have classic section 51 TDS if the buyer is a Government deductor and the other conditions are met, but there is no independent plastic‑scrap TDS like there is for metal scrap.
3.4 Rate, threshold and practice example
Rate: 2% of taxable value, same as other section 51 TDS (1% CGST + 1% SGST / UTGST, or 2% IGST).
Threshold: ₹2,50,000 per contract, exclusive of GST – the same threshold as the classic TDS scheme.
Example 2 – Steel scrap to a manufacturer
Supplier A (registered scrap dealer) sells steel melting scrap (Chapter 72) to Buyer B (registered manufacturer).
Taxable value: ₹3,00,000; GST @ 18%: ₹54,000; Invoice total: ₹3,54,000.
Contract value > ₹2.5 lakh, scrap under Chapters 72–81, B2B, both registered.
From 10‑10‑2024, Buyer B must deduct TDS @ 2% on ₹3,00,000 = ₹6,000 and pay balance ₹3,48,000 to the supplier, and deposit ₹6,000 as TDS under section 51.
You can add sector‑specific disputes here – for example, whether rejected finished goods sold as scrap still fall in scrap headings of Chapters 72–81 or in finished goods headings – and any AAR / AAAR or writs on this point.
4. Compliance by taxpayers – registration, payment and adjustment in returns
4.1 Registration and master‑data (TDS)
For both Government deductors and scrap buyers who are liable to deduct:
Get TAN under the Income‑tax Act.
Apply in GST REG‑07 as “Tax Deductor” and obtain a separate TDS‑GSTIN.
Configure ERP / Tally so that:
TDS‑GSTIN and regular GSTIN are clearly separated.
Suppliers are flagged as “TDS‑applicable” where relevant (works contracts, scrap suppliers).
Contract values and chapters (72–81) are captured for scrap supplies.
4.2 Step‑wise deduction and payment checklist
You can use the following standard operating procedure with your staff:
Identify liable supplies
Government deductor: taxable works contracts / services / supplies where contract value > ₹2.5 lakh (exclusive of GST).
Scrap deductor: B2B supplies of metal scrap (Chapters 72–81) between registered persons where contract value exceeds ₹2.5 lakh, effective 10‑10‑2024.taxupdates.
Check place‑of‑supply condition
Do not deduct TDS if location of supplier and place of supply are in a State different from the recipient’s registration State, as clarified by CBIC and commentaries.
Compute TDS amount
TDS = Taxable value × 2% (split into CGST/SGST or IGST).
Timing of deduction
Deduct at the earlier of payment or credit in books, in line with section 51(2) and practical departmental instructions.
Deposit and return filing
Deposit TDS to Government within 10 days after end of the month in which deduction is made.
File GSTR‑7 by 10th of the next month, furnishing GSTIN of suppliers, invoice‑wise taxable value and TDS amount.
TDS certificate – GSTR‑7A
GSTR‑7A certificates are auto‑generated; issue / download for suppliers within 5 days of depositing TDS.
Interest @ 18% under section 50(1) applies for late payment of TDS, and separate late fee may apply for failure to issue TDS certificates within time. This is a common dispute ground and you can support it with relevant judgments on proportionality of penalties.
4.3 How suppliers adjust TDS in the GST portal and returns
Section 51(5) provides that the deductee (supplier) gets credit of TDS in his electronic cash ledger.
Once the deductor files GSTR‑7, TDS amount is reflected as a cash credit in the supplier’s GST cash ledger.
The supplier can use this to pay:
Output tax liability in GSTR‑3B,
Interest, penalty or other amounts payable under GST.
Example 3 – Adjusting TDS in GSTR‑3B
Supplier X has output tax liability for a month of ₹1,50,000.
TDS credited in his cash ledger from a government department = ₹10,000.
In GSTR‑3B, X utilises ₹10,000 from cash ledger and has to pay only ₹1,40,000 through further cash deposit / ITC.
Advise your clients to reconcile monthly:
GSTR‑7 data vs. their purchase ledgers.
GSTR‑7A certificates vs. cash ledger balances.
This reconciliation is particularly important in scrutiny, departmental audits and also in defending notices relating to alleged non‑accounting of TDS credit.
5. TCS under section 52 – e‑commerce operators
5.1 Who must collect TCS
Section 52 is aimed at electronic commerce operators (ECOs) who collect consideration from customers on behalf of suppliers.
Every ECO (other than a mere agent) who collects consideration on behalf of suppliers making supplies through the portal must collect TCS.
Registration as TCS collector is compulsory and separate from registration as a normal supplier.
Litigation often turns on whether an entity is a true ECO within section 2(45) or simply a commission agent; this is where you can weave in relevant AAR / AAAR decisions and High Court writs.
5.2 Scope – what supplies are covered
TCS applies on net value of taxable supplies made through the portal by registered suppliers, where consideration is collected by the ECO.
Excluded from the base:
Exempt supplies.
Non‑GST supplies.
There is no specific list of goods; any taxable goods or services routed through the ECO and collected by it are covered, subject to section 52.
5.3 Rate and computation
Rate notified: 1% of net taxable supplies.
Intra‑State: 0.5% CGST + 0.5% SGST.
Inter‑State: 1% IGST.
Example 4 – Sale through marketplace
Supplier S makes taxable supplies through an ECO for gross value ₹1,00,000 in a month.
Returns / cancellations: ₹10,000.
Net taxable supplies: ₹90,000.
ECO collects TCS @ 1% of ₹90,000 = ₹900, deposits it, and files GSTR‑8; this ₹900 appears as cash credit in S’s electronic cash ledger, which he can use against his GST liability.
5.4 TCS compliance checklist for ECOs
For your internal training:
Obtain TCS registration under GST as ECO.
Configure system to:
Identify taxable vs exempt / non‑GST supplies.
Track returns and cancellations for “net value”.
Collect TCS at the time of making payment to suppliers or at earlier of credit/payment.
Deposit TCS to Government by the 10th of next month and file GSTR‑8 with supplier‑wise details.
Ensure that suppliers are informed and that TCS credits are visible in their cash ledger for reconciliation.
6. Case‑law angles and practical issues (for you to enrich)
Below are the main heads where case law typically arises;
“Value of supply” for TDS base
Whether reimbursements, liquidated damages, electricity, security charges etc. are part of value for TDS in works contracts.
Courts usually fall back on section 15: if the component is intrinsically linked and not a pure disbursement, it may form part of value.
Place of supply vs. TDS deduction
Cases where departments insisted on TDS even though location of supplier and place of supply were different from the recipient’s State.
Judicial trend is to respect the statutory exclusion created to prevent blocked credit.
E‑commerce operator vs. agent
Whether food aggregators, cab aggregators, listing platforms are ECOs or mere agents.
Outcomes decide if section 52 TCS is attracted at all.
Metal scrap disputes (post 10‑10‑2024)
Whether an item is “scrap” under Chapters 72–81 or a finished product.
Whether splitting invoices below ₹2.5 lakh avoids threshold where the underlying contract exceeds it – commentaries warn that once contract exceeds ₹2.5 lakh, TDS applies on full taxable value.
7. Internal practice checklist – ready to share with clients/staff
7.1 Quick matrix of obligations
| Aspect | Sec. 51 TDS – Govt | Sec. 51 TDS – Metal scrap | Sec. 52 TCS – E‑commerce |
| Start date | 01‑10‑2018 | 10‑10‑2024 | 01‑10‑2018 |
| Who deducts / collects | Govt depts, local bodies, Govt agencies, PSUs etc. | Any registered buyer of metal scrap (Ch. 72–81) from registered seller | ECO collecting consideration for suppliers |
| Supplies covered | Taxable goods / services / both (contract‑wise) | Metal scrap in Ch. 72–81 – iron, steel, copper, aluminium, lead, zinc, tin etc. | Any taxable supplies via portal where ECO collects consideration |
| Threshold | Contract value > ₹2.5 lakh (excl. GST) | Contract value > ₹2.5 lakh (excl. GST) | No monetary threshold; 1% on net taxable supplies |
| Rate | 2% (1% CGST + 1% SGST / UTGST, or 2% IGST) | 2% (1% CGST + 1% SGST / UTGST, or 2% IGST) | 1% (0.5% CGST + 0.5% SGST, or 1% IGST) |
| Registration type | REG‑07 – TDS‑deductor GSTIN (TAN‑based) | REG‑07 – TDS‑deductor GSTIN, separate from regular GSTIN | TCS registration; GSTR‑8 filing |
| Return | GSTR‑7 by 10th of next month | GSTR‑7 by 10th of next month | GSTR‑8 by 10th of next month |
| Credit to supplier | Credit in cash ledger, usable in GSTR‑3B | Same – cash ledger credit to supplier | TCS credit in supplier’s cash ledger |
7.2 Working checklist – TDS (Government + metal scrap)
You can circulate this 7‑step checklist as an internal note:
Is the recipient a notified Government entity / PSU or a registered buyer of metal scrap (Ch. 72–81) from a registered person? If yes, proceed.
Is the supply taxable (not exempt, not non‑GST)? If yes, proceed.
For non‑scrap contracts: does the contract value exceed ₹2,50,000 (excluding GST)?
For scrap contracts: does the metal scrap contract exceed ₹2,50,000 (excluding GST)? If yes, TDS applies.
Check location of supplier, place of supply and State of registration of recipient; if a configuration leads to blocked credit as per Government’s own clarification, do not deduct TDS.
Compute TDS = 2% of taxable value (excluding GST / cess), allocate correctly between CGST/SGST or IGST.
Deduct at time of payment or credit, deposit by 10th of next month, and file GSTR‑7 by the same date.
Ensure GSTR‑7A certificates are generated and shared with vendors where necessary, and reconcile with vendors’ cash ledgers during audit.
7.3 Working checklist – TCS (e‑commerce operators)
A parallel 6‑step checklist for ECOs:
Is the entity an ECO under section 2(45), collecting customer consideration for supplies made by third‑party suppliers? If yes, section 52 applies.
Identify all taxable supplies made through the portal; exclude exempt and non‑GST supplies for TCS computation.
For each supplier, compute net value of taxable supplies for the month (gross less returns / cancellations).
Collect TCS at 1% of this net value, split into CGST/SGST or IGST as applicable.
Deposit TCS by 10th of next month and file GSTR‑8 with supplier‑wise details.
Advise suppliers to reconcile TCS credits appearing in their electronic cash ledger with your statements and use them against GST liability.
8. Conclusion – how to brief your clients
In present form, TDS and TCS under GST operate as a three‑pillar system:
Traditional section 51 TDS for Government‑linked entities, on taxable contracts above ₹2.5 lakh.
Section 52 TCS for e‑commerce operators on net taxable supplies.
New section 51 TDS on metal scrap (Chapters 72–81) for B2B scrap supplies between registered persons from 10‑10‑2024.
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For practice, your clients and staff should focus on four simple questions in each case: Who is the deductor/collector, when does the obligation arise (threshold, place‑of‑supply and chapter‑classification conditions), how much to deduct / collect (2% or 1%, on taxable value only), and how the amount travels into the supplier’s electronic cash ledger and is adjusted in GSTR‑3B. A disciplined use of the internal checklists above, supported by selected judgments on section 51 and 52, will greatly reduce disputes, interest and penalties in departmental scrutiny and audit.
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