The concept of TDS in GST (Tax Deducted at Source under Goods and Services Tax) is important for ensuring proper tax compliance in India. Understanding who has to deduct TDS in GST helps businesses, government bodies, and other organizations stay compliant while avoiding penalties.
What is TDS in GST?
TDS in GST means a certain percentage of tax must be deducted at the time of making payments to suppliers. The deducted amount is then deposited with the government. This mechanism helps in easy tax collection and ensures transparency in business transactions.
Who Has to Deduct TDS in GST?
According to Section 51 of the CGST Act, the following entities are required to deduct TDS in GST:
| Category of Deductor | Examples | When TDS Deduction Applies |
|---|---|---|
| Government Departments | Central & State Govt. offices | For payments made to suppliers above ₹2.5 lakh |
| Local Authorities | Municipal corporations, Panchayats | For taxable supply contracts |
| Government Agencies | PSUs, Boards, Authorities | During supplier payments |
| Notified Entities | Agencies notified by Govt. | As per notification rules |
👉 In short, Government departments, local authorities, and government-owned bodies are primarily responsible for deducting TDS in GST.
Rate and Threshold for TDS Deduction in GST
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Rate of TDS in GST: 2% (1% CGST + 1% SGST, or 2% IGST for interstate supplies).
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Threshold Limit: TDS applies only when the total value of supply under a contract exceeds ₹2.5 lakh.
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Exemption: TDS is not required for payments made to unregistered suppliers under certain conditions.
Why TDS Deduction in GST Matters
Deducting and depositing TDS in GST ensures:
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Transparency in supplier payments.
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Proper flow of input tax credit to suppliers.
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Reduction in tax evasion.
Therefore, understanding who has to deduct TDS in GST is essential for both deductors and suppliers to remain compliant.
Conclusion
Only specific bodies such as government departments, local authorities, and notified agencies are responsible for deducting TDS in GST. Businesses dealing with such agencies should be aware of these provisions to ensure proper compliance.
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