Tax Deducted at Source (TDS) under GST is a critical compliance requirement for businesses and government entities. Introduced to curb tax evasion, GST TDS applies to specified transactions exceeding ₹2.5 lakhs. Whether you’re a contractor, supplier, or taxpayer, understanding how to deduct TDS on GST bills ensures seamless compliance and avoids penalties. This guide simplifies complex rules, including TDS rates (2%), applicability, exemptions, and tools like GSTCalculatorPro.com to automate calculations. You’ll also learn to claim TDS credits, handle GST rent bills, and use Tally for accurate filings. Stay ahead with the latest GST notifications, circulars, and real-world examples. Let’s dive in!
nnnnWhat is TDS on GST? Legal Framework and Key Concepts
nnnnTDS under GST mandates deductors (e.g., government agencies, large businesses) to withhold 2% (1% CGST + 1% SGST) from payments to suppliers when contract values exceed ₹2.5 lakhs. Governed by Section 51 of the CGST Act, this applies to taxable goods/services, excluding exempt supplies. Key documents include:
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- GST TDS Notification PDF: Outlines deductors’ responsibilities. nnnn
- Circulars: Clarify procedural aspects like return filing (GSTR-7). nnnn
- Exemption List: Individuals making personal-use supplies are exempt. n
Use GSTCalculatorPro.com to instantly determine TDS liability, ensuring error-free compliance.
nnnnGST TDS Applicability: Who Needs to Deduct and When?
nnnnTDS applies if:
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- The deductor is a government agency, PSU, or entity notified under Section 51. nnnn
- The payment relates to contracts exceeding ₹2.5 lakhs (excluding GST). nnnn
- The supplier isn’t on the GST TDS exemption list. n
Example: A ₹3 lakh contract (excluding GST) attracts TDS of ₹6,000 (2% of ₹3 lakh). The deductor pays ₹2,94,000 to the supplier and deposits ₹6,000 to the government.
nnnnKey Resource: Download the GST TDS applicability notification from the GST portal for sector-specific rules.
nnnnHow to Calculate TDS on GST Invoice: Formulas and Examples
nnnnFormula:
nnnnTDS=2%×(Invoice Value−GST)TDS=2%×(Invoice Value−GST)
nnnnExample:
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- Invoice Amount: ₹5,00,000 (including ₹90,000 GST) nnnn
- Taxable Value: ₹4,10,000 nnnn
- TDS: 2% of ₹4,10,000 = ₹8,200 n
Also Read:
nnnnReverse GST Calculation Formula 2025: Step-by-Step Guide
nnnnHow to Cancel GST Registration in 2025
nnnnLatest GST Rate Changes 2025: Impact on Businesses and Consumers
nnnnStep-by-Step Guide to Deduct TDS on GST Bills Online
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- Register as a Deductor: Obtain a TAN and enable TDS functionality on the GST portal. nnnn
- Deduct TDS at Invoice Generation: Subtract 2% from the taxable value (excluding GST). nnnn
- File GSTR-7: Report deductions by the 10th of the following month. nnnn
- Issue TDS Certificate (Form GSTR-7A): Share with the supplier within 5 days of filing. n
Online Tools: Platforms like PFMS (Public Financial Management System) automate TDS deductions for government transactions.
nnnnDeducting TDS on GST Rent Bills: Special Rules
nnnnFor rent payments exceeding ₹2.5 lakhs/month:
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- Deduct 2% TDS on the rent amount (excluding GST). nnnn
- Journal Entry:n
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- Debit: Rent Expense (₹2,45,000) nnnn
- Credit: TDS Payable (₹5,000) nnnn
- Credit: Cash/Bank (₹2,45,000) n
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Note: GST on rent is paid separately by the tenant.
nnnnUsing Tally for GST TDS Deduction: A Practical Tutorial
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- Enable TDS in Tally: Go to Gateway > F11 > Accounting Features > Enable TDS. nnnn
- Create a TDS Nature: Select GST under “Deductee Type”. nnnn
- Deduct TDS on Invoices:n
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- Open the supplier invoice. nnnn
- Under “Tax Details”, enter TDS rate (2%) and base amount. n
nnnn - File GSTR-7 Directly: Export data from Tally to GST portal. n
GST TDS Exemptions and Threshold Limits
nnnnExemption List Includes:
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- Individuals purchasing for personal use. nnnn
- Suppliers under composition scheme. nnnn
- Agricultural produce traders. n
Threshold: ₹2.5 lakhs per contract (not annual turnover).
nnnnHow to Claim TDS Deducted on GST: Process for Suppliers
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- Verify TDS Credit: Check Form GSTR-2A/2B for reflected TDS. nnnn
- Reconcile with Books: Match GSTR-7A with your records. nnnn
- Adjust Liability: Claim credit while filing GSTR-3B. n
Refund Eligibility: Excess TDS is credited, not refunded in cash unless output liability is negative.
nnnnCommon Mistakes to Avoid in GST TDS Deduction
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- Deducting TDS on GST-inclusive amount. nnnn
- Missing GSTR-7 deadlines (penalty: ₹200/day). nnnn
- Forgetting to issue GSTR-7A. n
Solution: Automate with Gst Calaulator.
nnnnGST TDS Refunds: Myths and Realities
nnnnMyth: TDS can be refunded as cash.
Reality: Excess TDS is adjusted against future tax liabilities via Form GST PMT-09.
GST TDS vs. Income Tax TDS
nnnn| Parameter | GST TDS | Income Tax TDS |
|---|---|---|
| Rate | 2% | 1-10% (varies) |
| Applicability | Govt/notified entities | All businesses |
| Threshold | ₹2.5 lakh per invoice | Varies (e.g., rent: ₹50k) |
| Return Form | GSTR-7 | Form 26Q |
FAQ Section
nnnHow do I deduct TDS on GST?
TDS on GST is deducted at the specified rate (e.g., 2% for goods, 1% for services) on the total invoice value, including GST, and deposited to the government.
Is TDS deducted on amount including GST?
Yes, TDS is deducted on the total amount, including GST, if applicable, as per the contract or agreement terms.
How to claim TDS on GST?
Claim TDS on GST by filing your GST returns and reflecting the TDS amount in GSTR-7. The deducted TDS will be credited to your electronic cash ledger.
What’s the TDS rate under GST?
2% (1% CGST + 1% SGST).
How to use Tally for GST TDS?
Enable TDS feature and enter details in supplier invoices.
How to deduct TDS on GST bill in Tally?
In Tally, enable GST and TDS features, create a ledger for TDS, and select the TDS nature while recording the transaction to auto-calculate TDS on the GST bill.
How to calculate TDS in GST invoice?
Calculate TDS on the total invoice value, including GST, at the applicable rate (e.g., 2% for goods, 1% for services).
How to deduct TDS in bill?
Deduct TDS at the specified rate from the total bill amount, including GST, and issue a TDS certificate to the payee.
How to deduct TDS on GST rent bill?
Deduct TDS at 10% on the rent amount, including GST, if the rent exceeds the specified threshold under the Income Tax Act.
Can GST TDS be refunded?
Yes, GST TDS can be claimed as a refund by filing GST returns and reflecting the TDS amount in your electronic cash ledger.
How do I deduct TDS from amount?
Deduct TDS at the applicable rate from the total payment amount, including GST, and deposit it to the government within the due date.
How do I claim TDS deducted?
Claim TDS by filing your income tax returns and providing the TDS certificate (Form 16/16A) issued by the deductor.
How do I claim TDS on an invoice?
Reflect the TDS amount in your GST returns (GSTR-7) and ensure the deductor provides a TDS certificate for your records.
What is the journal entry for TDS under GST?
Debit the expense account, credit the vendor account for the net amount, and credit TDS payable account for the TDS amount.
How do I deduct GST from total?
To remove GST, divide the total amount by (1 + GST rate). For example, for 18% GST, divide by 1.18.
How to pay GST TDS online?
Pay GST TDS online via the GST portal using the Challan (Form GST DRC-03) under the “TDS Deducted” category.
What is the TDS mechanism for GST?
TDS under GST is deducted at 2% (goods) or 1% (services) on payments exceeding ₹2.5 lakh to suppliers, excluding exempt supplies.
How to file TDS return?
File TDS returns using Form 26Q (for non-salaried payments) or Form 24Q (for salaries) on the Income Tax e-filing portal.
What is the turnover limit for TDS?
TDS under GST applies if the total turnover of the deductor exceeds ₹2 crore in the previous financial year.
How do I deduct GST tax?
GST is not deducted like TDS. It is collected by the supplier and remitted to the government.
What is the formula for GST?
GST = (Original Cost × GST%) / 100. For example, for 18% GST on ₹1,000, GST = ₹180.
How do I pay TDS deduction?
Pay TDS deductions via the Income Tax e-payment portal using Challan 281 and deposit the amount within the due date.
Who is eligible for GST refund?
Exporters, taxpayers with excess ITC, or those with inverted duty structures are eligible for GST refunds.
Who pays GST, buyer or seller?
The seller collects GST from the buyer and remits it to the government.
What is the 80 20 rule in GST?
The 80-20 rule allows suppliers with 80% of invoices uploaded by recipients to claim provisional input tax credit for the remaining 20%.
How to calculate GST challan amount?
Calculate GST challan amount by applying the applicable GST rate to the taxable value and adding cess, if applicable.
What happens if GST is not paid by buyer?
If GST is not paid, the supplier cannot claim input tax credit, and the buyer may face penalties and interest for non-compliance.
Conclusion
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nnnMastering TDS deduction on GST bills ensures compliance and builds trust with suppliers. Use tools like GST Calculator to simplify calculations, file returns, and avoid penalties. Bookmark this guide for quick reference, and stay updated with GST notifications!
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