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Published on:

April 16, 2025

Viraaj Vashishth

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GST Rules

Guidelines for Deduction and Deposit of TDS by DDO under GST

The advent of Goods and Services Tax (GST) in India altered the tax administration in many ways since with the implementation of GST, Tax Deduction at Source (TDS) came into existence to ensure compliance and transparency in transactions concerning government contracts and supplies. Essentially, under the GST, Drawing and Disbursing Officers (DDOs) are in charge of the deduction and deposit of TDS by DDO under GST. The Department's adherence to the provisions ensures smooth tax collection, checking tax evasion, and facilitating seamless input tax credit (ITC) for the suppliers.

TDS under GST is governed by Section 51 of the CGST Act of 2017. Under this provision, tax to be deducted at source under GST is imposed on certain entities namely government departments and public sector undertakings (PSUs) for payment made to suppliers. TDS in the event of non-compliance may attract penalties and legal consequences. This article gives a full overview of the deduction and deposit of TDS by DDO under GST, which outlines legal provisions, procedural requirements, and compliance obligations.

Read About: Difference Between TDS and TCS

Legal Provisions for TDS under GST

Applicability and Relevant Legal Framework

As per Section 51 of the CGST Act, 2017, the following persons shall be TDS deductors under the GST: A department or establishment of the inside control of the Central Government or State Government; Local authorities; Government departments; Public Sector Undertakings; Societies established under the Society Registration Act, 1860 and wholly or partly financed by the Central Government or State Government.

Threshold Limit for TDS Deduction

The TDS shall be levied on all contracts if the sum total of supplies covered under the contract exceeds INR 2.5 lakh (excluding GST and cess). In the event of a supply not crossing this limit, no TDS is applicable.

Rate of TDS under GST

As per Goods and Service Tax law, TDS rate will be applicable as follows: If the supply is inter-state then TDS will be deducted at the rate of 2% and if the supply is intra-state then TDS will be deducted at the rate of 1%.

Type of Supply	TDS Rate	Breakdown
Intra-State Supply	2%	1% CGST + 1% SGST
Inter-State Supply	2%	2% IGST

It must be noted that TDS is not applicable in the case of exempt supplies of goods and services or when the recipient is unregistered under GST.

TDS Deduction Process by DDO

The deduction of TDS and deposit by the DDO under GST is to be done at the time of making payment to the supplier. The deduction is in respect of the taxable value of supply excluding GST and cess. For example, if a government department awards a contract worth Rs.5,00,000 +GST@18%, TDS would be deducted on Rs.5,00,000 only, excluding the GST amount.

Example Calculation

1. Total Invoice Value: Rs.5,00,000 + 18% GST = Rs.5,90,000‍

2. Taxable Value: Rs.5,00,000‍

3. TDS Deduction (2% of Rs.5,00,000): Rs.10,000‍

4. Net Payment to Supplier: Rs.5,80,000

Upon deduction of tax, the concerned DDO has to remit it to the credit of the concerned government under proper head of account within the time stipulated for compliance with return filing requirements.

Also Read: How to record TDS on the web

Deposit of TDS by DDO

The amount deducted as TDS will be deposited by the DDO for the government before the 10th of the following month. The payment is to be done via the GST portal in the mode prescribed.

Process for Depositing TDS

1. Generate TDS Challan – DDO has to log in to the GST portal and generate a TDS challan (Form GST PMT-06).

2. Deposit the TDS – The amount deducted shall be electronically deposited through net banking, debit card, or authorized branches of the bank.

3. Timely Compliance - Noncompliance with TDS timely would incur interest and penalties.

Failure to deposit the TDS within the prescribed timeline attracts an interest of 18 percent per annum from the due date to the date of payment.

Filing of TDS Returns

After deducting TDS and depositing it, the DDO has to file a TDS return in Form GSTR-7 by the 10th of the next month. Using GSTR-7, the DDO should provide information about:

1. GSTIN of the deductee (supplier)

2. Invoice number and amount deducted

3. TDS deposited details

Even though the portal auto-populates the deducted amount into the supplier's electronic cash ledger, the cash ledger would allow the supplier to utilize this amount for tax payment.

Consequences of Non-Filing of GSTR-7

The mode of late-filing of GSTR-7 attracts a penalty of Rs.100 per day under CGST and Rs.100 per day under SGST with a ceiling of Rs.5,000 each. If the delay continues, interest may be levied on the amount outstanding.

Issuance of TDS Certificate

Following the GSTR-7 filing, the GST TDS certificate (Form GSTR-7A) should be issued to the deductee (the supplier) within five days from the date of return filing. The contents of the certificate include:

- The amount of TDS deducted

- GSTIN of the deductor and the deductee

- Date of deduction and deposit

If the TDS certificate is not issued within the specified time, a penalty of Rs.100 per day will be levied (maximum Rs.5,000).

Make Sure To Read About: A Simple Guide on How to Claim TDS in India

Refund of TDS under GST

In certain instances, suppliers may qualify for a refund of surplus TDS deducted. The steps for claiming a refund are as follows:

1 .Supplier files claim for refund in Form GST RFD-01.

2. Verification of the tax department regarding validity of claim.

3. Refund processed and credited in the supplier account after approval.

However, refund will not be given if TDS credit has already been utilized by the supplier for tax payment.

Consequences of Non-Compliance

The non-adherence of DDO with the provision deduction and deposit of TDS under GST gives rise to severe consequences, such as:

1. Interest on delayed payment (18% pa).

2. Penalties for non-deposit and late-filing of return.

3. Legal implications for continuous non-compliance.

In order to prevent such issues, it is very necessary for DDOs to ensure timely deduction, deposit, and filing of TDS returns as per GST regulations.

Conclusion

Under GST, deducting and depositing TDS by DDOs is an important compliance requirement under Section 51 of the CGST Act, 2017. Following the prescribed procedures will uphold tax transparency and ITC claims, thus ensuring smooth tax administration.

Government departments, public sector undertakings (PSUs), and other notified entities must ensure timely deduction, deposit, and filing of TDS returns to avoid interest, penalties, and legal contraventions. DDOs ensure proper implementation of GST and prevent tax evasion by adhering to the prescribed procedures.

FAQs

1. What is the Deduction and Deposit of the TDS by DDOs under GST?

TDS Deduction by DDOs DDOs shall make TDS deductions and deposit the amounts into the Government accounts on any payments between Rs 2.5 lakh to R. 2.5 lakhs, as provided for in Section 51 of the CGST Act, for the compliance with the taxes.

2. Who shall deduct TDS under Section 51 of the CGST Act?

The entities deducted at source also called notified bodies under Section 51 of the GST TDS will include government departments, public sector undertakings, local authorities, and any other body notified by the government.

3. What is the TDS rate in GST?

As per the TDS on the GST circular, the TDS rate is 2 percentage points (1% CGST + 1% SGST for intra-state supplies and 2% IGST for inter-state supplies).

4. When should the DDO be depositing TDS under GST?

The tax deducted at source has to be deposited to government officials by the 10th of the subsequent month.

5. How is TDS deposited by DDO under GST?

TDS is deposited via the GST portal using Form GST PMT-06, making it compliant with the deduction and deposit of TDS by DDO under GST.

6. What is Form GSTR-7 in GST TDS compliance?

DDOs are mandated to file GSTR-7 with the objective to record the TDS amount deducted and deposited by them under Section 51 of CGST Act.

7. What if TDS is not deposited in time?

TDS under GST will attract interest at the rate of 18% per annum if there is a delay in its deposit, and the penalty for not filing GSTR-7 applies.

8. What is the GST TDS Certificate (Form GSTR-7A)?

The DDOs are required to issue the GSTR-7A in the case of TDS Certificate 7 by themselves within 5 days of the filing done for GSTR-7 against them confirming the deduction and payment of TDS.