GST Section 51: TDS Provisions, Applicability, Rules and Latest Amendments Explained

Section 51 of the CGST Act mandates Tax Deduction at Source (TDS) to ensure better compliance and broaden the tax base under GST. It requires specified entities like government departments, local authorities, governmental agencies, and other notified bodies—including certain PSUs, societies, and scrap purchasers—to deduct 1% TDS on payments exceeding ₹2.5 lakhs under a single contract for taxable goods or services.

TDS must be paid to the government within 10 days of the month’s end, and a certificate must be issued. The deducted amount is credited to the supplier’s electronic cash ledger, with provisions for interest on delays, procedures for refunds, and specific exemptions like inter-PSU and certain Defence supplies. The section has undergone amendments and notifications, notably including scrap supply recipients (2024) and omitting clause (4) in 2021, reinforcing TDS as a compliance mechanism in the GST framework.

GST Section 51: TDS Provisions, Applicability and Exemptions (Updated 2025)

GST Section 51 mandates Tax Deduction at Source (TDS) under specific conditions to ensure compliance and broaden the tax base. This section, along with its associated rules and notifications, outlines the obligations of certain entities (deductors) to deduct tax from payments made to suppliers (deductees) for taxable goods or services or both.

Key Provisions of GST Section 51: Tax Deduction at Source

Section 51(1): Scope and Applicability of TDS

This subsection empowers the Government to mandate specific entities to deduct tax. The “deductor” entities include:

• A department or establishment of the Central Government or State Government.
• Local authorities.
• Governmental agencies.
• Such other persons or categories of persons as the Government may notify based on the Council’s recommendations.

These deductors are required to deduct tax at a rate of one percent (1%) from payments made or credited to suppliers (“deductee”) for taxable goods or services or both. This deduction is applicable only when the total value of the supply under a single contract exceeds ₹2,50,000.

Important Proviso: No deduction is to be made if the location of the supplier and the place of supply are in a State or Union territory different from the State or Union territory of registration of the recipient.

Explanation: For the purpose of calculating the TDS, the value of the supply is to be taken as the amount excluding Central Tax, State Tax, Union Territory Tax, Integrated Tax, and Cess indicated in the invoice.

Section 51(2): Payment of Deducted Tax to Government

The amount of tax deducted under Section 51 must be paid to the Government by the deductor within ten days after the end of the month in which the deduction was made. The manner of payment will be as prescribed by rules.

Section 51(3): TDS Certificate

A certificate of tax deduction at source must be issued by the deductor in a prescribed form and manner. This subsection was substituted with effect from January 1, 2021, by the Finance Act 2020.

Section 51(4): Omitted

This subsection was omitted with effect from January 1, 2021, by the Finance Act 2020.

Section 51(5): Credit for Deducted Tax

The deductee can claim credit for the tax deducted. This credit will be reflected in their electronic cash ledger, based on the return furnished by the deductor under Section 39(3), in the manner prescribed.

Section 51(6): Interest on Failure to Pay TDS

If a deductor fails to pay the deducted tax to the Government, they will be liable to pay interest in accordance with Section 50(1) (interest on delayed payment of tax), in addition to the amount of tax deducted.

Section 51(7): Determination of Default Amount

The determination of any amount in default under this section will be made in the manner specified in Section 73 (determination of tax not paid or short paid without fraud or suppression) or Section 74 (determination of tax not paid or short paid with fraud or suppression) or Section 74A (inserted with effect from November 1, 2024, by the Finance (No. 2) Act, 2024).

Section 51(8): Refund of Excess or Erroneous Deduction

Any refund to the deductor or the deductee arising from an excess or erroneous deduction will be dealt with in accordance with the provisions of Section 54 (refunds).

Important Proviso: No refund will be granted to the deductor if the deducted amount has already been credited to the electronic cash ledger of the deductee.

Notes on Section 51 of CGST Act 2017

Date of Implementation: Section 51 of the CGST Act, 2017, came into force on October 1, 2018, for persons specified under clauses (a), (b), and (c) of sub-section (1) of Section 51. This was notified vide Notification No. 50/2018-Central Tax, dated September 13, 2018.

Persons Notified under Clause (d) of Section 51(1):

The Central Government, on the recommendations of the Council, has notified the following additional categories of persons as deductors under clause (d) of Section 51(1) vide Notification No. 50/2018-Central Tax, as last amended by Notification No. 25/2024-Central Tax, dated October 9, 2024:

• An authority or a board or any other body:
  • Set up by an Act of Parliament or a State Legislature; or
  • Established by any Government, with fifty-one percent or more participation by way of equity or control, to carry out any function.
• Society established by the Central Government or the State Government or a Local Authority under the Societies Registration Act, 1860.
• Public Sector Undertakings (PSUs).
• Any registered person receiving supplies of metal scrap falling under Chapters 72 to 81 of the First Schedule to the Customs Tariff Act, 1975, from another registered person. (Introduced vide Notification No. 25/2024-Central Tax, dated October 9, 2024).

Exemptions and Exclusions from TDS under Specific Notifications:

Ministry of Defence Authorities: With respect to persons specified under clause (a) of sub-section (1) of section 51, the TDS provisions do not apply to authorities under the Ministry of Defence, other than those specifically listed in Annexure-A, with effect from October 1, 2018.

Inter-PSU Supplies: Nothing in the notification applies to the supply of goods or services or both from a Public Sector Undertaking (PSU) to another Public Sector Undertaking, whether or not a distinct person, with effect from October 1, 2018. (Vide Notification No. 61/2018-Central Tax, dated November 5, 2018).

Inter-Deductor Supplies (with exception): Nothing in the notification applies to the supply of goods or services or both, which takes place between one person to another person specified under clauses (a), (b), (c) and (d) of sub-section (1) of Section 51 of the said Act, except the person referred to in clause (d) of this notification (i.e., registered person receiving supplies of metal scrap). (Vide Notification No. 25/2024-Central Tax, dated October 9, 2024).

Annexure ‘A’: Code Numbers Allotted to Principal Controllers/Controllers of Defence Accounts

This annexure provides a detailed list of specific Defence Accounts offices that are subject to TDS provisions, indicating that other Defence authorities are generally exempt unless explicitly mentioned. The list includes:

Amendments and Key Dates

• October 1, 2018: Section 51 of the CGST Act 2017 came into force.
• January 1, 2021: Section 51(3) (TDS certificate) and Section 51(4) (omitted) were substituted/omitted by the Finance Act 2020.
• November 1, 2024: Section 51(7) was amended to include “or section 74A” by the Finance (No. 2) Act, 2024.
• October 9, 2024: Notification No. 25/2024-Central Tax further amended the list of notified persons under clause (d) of Section 51(1) to include registered persons receiving supplies of metal scrap.

FAQs on GST Section 51 TDS

What is GST Section 51?
GST Section 51 mandates Tax Deduction at Source (TDS) by specified entities on payments made to suppliers for taxable goods or services, ensuring tax compliance.

Who is required to deduct TDS under Section 51?
Government departments, local authorities, government agencies, and other notified bodies like PSUs, societies, and scrap buyers are required to deduct TDS.

At what rate is TDS deducted under GST Section 51?
TDS is deducted at 1%—0.5% CGST and 0.5% SGST (or 1% IGST for inter-state supplies).

When is TDS applicable under GST?
TDS applies when the total value of taxable supply under a single contract exceeds ₹2,50,000 (excluding taxes and cess).

Is TDS applicable on exempted or non-taxable supplies?
No, TDS under Section 51 is only applicable to taxable supplies of goods and/or services.

What is excluded from the contract value while calculating TDS applicability?
Central tax, State tax, Union territory tax, Integrated tax, and cess are excluded from the value for TDS calculation.

What is the due date for depositing deducted TDS to the Government?
The deductor must deposit the deducted amount within 10 days from the end of the month in which the deduction was made.

Is the deductor required to issue a TDS certificate?
Yes, the deductor must issue a TDS certificate in the prescribed form and manner to the deductee.

Where is the deducted TDS reflected for the supplier?
The deducted TDS is credited to the electronic cash ledger of the deductee (supplier) based on the return filed by the deductor.

Can the deductee claim credit of TDS deducted?
Yes, the deductee can claim credit for the TDS amount reflected in their electronic cash ledger.

What happens if the deductor fails to deposit the TDS amount?
The deductor is liable to pay interest on the delayed amount as per Section 50(1) of the CGST Act.

What is the consequence of excess or erroneous deduction of TDS?
Refund can be claimed by the deductor or deductee under Section 54, but no refund is granted to the deductor if the amount is already credited to the deductee’s ledger.

Are inter-PSU transactions liable for TDS?
No, supplies between Public Sector Undertakings are exempt from TDS provisions.

Are Ministry of Defence entities liable for TDS?
Only specific Defence authorities listed in Annexure-A are liable; others are exempt.

Is TDS applicable on advance payments?
Yes, TDS is applicable on advance payments if the value of the contract exceeds ₹2,50,000.

Can TDS be deducted on GST-inclusive invoice value?
No, TDS must be calculated on the taxable value excluding GST and cess components.

Are unregistered suppliers subject to TDS under GST?
No, TDS is applicable only on supplies made by registered suppliers.

Are TDS provisions applicable to imports?
No, imports are outside the scope of GST TDS under Section 51.

What are the recent amendments in Section 51?
Amendments include the addition of Section 74A for determination (effective Nov 1, 2024), and the inclusion of registered metal scrap buyers as deductors (effective Oct 9, 2024).

What form is used for filing TDS returns under GST?
Form GSTR-7 is used by deductors to file TDS returns under GST.

Is there any penalty for non-filing of TDS returns?
Yes, late fees and interest are applicable for non-filing or delayed filing of GSTR-7.

Are supplies between different government entities subject to TDS?
No, supplies between government entities under Section 51(1)(a), (b), (c), and (d) are generally exempt, except for certain scrap transactions.

Can TDS be adjusted or modified in subsequent invoices?
No, TDS once deducted must be deposited; adjustments must be handled via refund provisions if needed.

Is there any TDS threshold limit per invoice?
No, the threshold is based on the total value of supply under a single contract, not individual invoices.

What happens if TDS is deducted but not reflected in the supplier’s cash ledger?
The deductor must ensure accurate filing of GSTR-7 for the credit to reflect; discrepancies may need rectification or clarification with GST authorities.

GST Section 51 plays a vital role in strengthening tax compliance by mandating TDS on high-value transactions involving specified entities. By ensuring timely deduction and deposit of tax, it not only streamlines revenue collection for the government but also promotes transparency in business dealings.

With clear rules, defined responsibilities for deductors and deductees, and specific exemptions, Section 51 serves as an effective tool in the overall GST framework, fostering greater accountability and efficiency in India’s indirect tax system.