TDS Under GST: Meaning, Rate, Applicability & Example

• Introduction to TDS in GST
• When and who is liable to deduct TDS under GST
• TDS rate in GST
• TDS under GST with example

Introduction to TDS in GST

Tax deducted at source introduced in GST is a mechanism to track the transaction of supply of goods and/or services by making the recipient of such supply to deduct a small percentage of amount to be paid to the supplier of such goods and/or services and deposit the same with the government.

The supplier in such cases takes into account the amount so deducted and makes the balance payment of tax to the government.

TDS vs TCS under GST: key differences

Under GST, TDS (Tax Deducted at Source) is deducted by specified entities such as government departments or notified bodies when making payments to suppliers, while TCS (Tax Collected at Source) is collected by e-commerce operators on supplies made through their platforms. TDS ensures tax deduction at the time of payment, whereas TCS applies at the time of supply through online marketplaces. Additionally, TDS is deposited by the deductor and reflected in GSTR-7, while TCS is reported by e-commerce operators in GSTR-8. In short, TDS applies to contract-based payments, while TCS applies to online sales transactions.

When and Who is Liable to Deduct TDS Under GST

• When to deduct?
  
  
  • The base on which TDS is deductible if the aggregate value of the contract exceeds a sum of Rs. 2.5 lacs
    
    
  • For the purpose of determining the value of Rs. 2.5 lacs, taxable value has to be taken.

Note: Taxable value is the value prior to tax computation or the value on which tax is proposed to be calculated.

• Who is liable to deduct TDS under GST?

The deductors of tax at source can be one or more of the following:

• • Department of Central or State Government.
    
    
  • An establishment of the central or state Government.
    
    
  • Governmental agencies.
    
    
  • Local authority.
    
    
  • Such category of persons as may be notified by Central or State Governments on the recommendation of GST Council.

TDS registration under GST: step-by-step process

To register for TDS under GST, eligible entities must follow a structured process on the GST portal. First, visit the GST portal and select “New Registration”, then choose the category as Tax Deductor. Enter required details such as PAN, mobile number, and email ID for verification. After OTP authentication, fill in business details, authorized signatory information, and office address. Upload necessary documents, submit the application using DSC or EVC, and receive the GSTIN for TDS registration upon approval. This registration is mandatory for entities required to deduct TDS under GST.

TDS Rate in GST

The provisions laid in the act reads a rate of 2%, which would be required to be deducted and deposited from the payments made or credited to the supplier of taxable goods and services as may be notified by the Central or State Governments on the recommendation of GST Council.

TDS Under GST With Example

A better understanding of TDS provisions under GST could be claimed from the example given below :

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