TDS and TCS under GST

GST TDS and TCS are not income-tax TDS

Many owners confuse these with income-tax TDS (deducted on rent, contracts, professional fees) and income-tax TCS. They are separate laws with separate returns. The GST versions are narrow: TDS applies only when you sell to specified government-type buyers, and TCS only when you sell through an e-commerce operator. For income-tax TDS, see TDS basics for business owners.

GST TDS under Section 51

Who deducts: government departments, local authorities, government agencies and other persons notified (such as certain public sector bodies).

When: on payments to a supplier where the total value of taxable supply under a single contract exceeds ₹2,50,000 (excluding GST).

Rate: 2% of the taxable value: 1% CGST + 1% SGST for an intra-state supply, or 2% IGST for an inter-state supply.

Return: the deductor files GSTR-7 monthly and issues a TDS certificate.

Example. You supply furniture worth ₹5,00,000 + 18% GST (₹90,000) to a municipal office in your state. The office deducts ₹5,000 CGST + ₹5,000 SGST and pays you ₹5,80,000. You still pay the full ₹90,000 output tax, but ₹10,000 comes back to your cash ledger once you accept the TDS entry.

GST TCS under Section 52

Who collects: e-commerce operators that let sellers supply through their platform.

On what: the net value of taxable supplies made through the platform (sales less returns), excluding supplies on which the operator itself pays tax under Section 9(5).

Rate: a notified percentage of net taxable value, split CGST/SGST or IGST. The rate was reduced in 2024; confirm the current figure on cbic-gst.gov.in before you reconcile.

Return: the operator files GSTR-8 monthly, showing each seller's GSTIN.

Sellers on marketplaces should read GST for e-commerce sellers for registration and reporting points.

How the supplier claims the credit

1. After the deductor or operator files, log in to gst.gov.in.
2. Go to the TDS and TCS credit received section under Returns.
3. Check each entry against your invoices and payment advices.
4. Accept the correct entries and reject wrong ones (the deductor or operator then corrects them in a later return).
5. File the acceptance. The amount moves to your electronic cash ledger.
6. Use the cash ledger balance to pay GST in GSTR-3B, or claim a refund of excess balance.

The flow into the cash ledger is explained in GST electronic ledgers.

When TDS does not apply, and a checklist for government orders

TDS is not deducted on every payment from a government buyer. The ₹2,50,000 test is per contract and on taxable value, so a series of small, separate purchase orders may each fall below it. Exempt supplies are not counted. There is also no deduction where the supplier's location and the place of supply are in a state other than the one where the government buyer is registered.

Before you supply to a government office or notified body:

• Confirm the buyer's GSTIN, as TDS deductors have their own registration.
• Note in the order file whether the contract value crosses the TDS threshold.
• Invoice the full GST as usual; TDS never reduces your output tax.
• Ask for the TDS certificate and keep it with the payment advice.
• Check the credit on the portal in the month after payment, not at year end.

Booking it in your accounts

If the TDS receivable ledger keeps growing month after month, credits are not being accepted. Check the portal.

Common problems

• Wrong GSTIN in the deductor's return: the credit does not show up. Ask the deductor to amend it.
• Amount differs from your record: usually because TDS was worked out on the tax-inclusive amount. Reject and ask for correction.
• Marketplace TCS higher than expected: returns processed in the next month reduce net value later, so match TCS month by month with the settlement report.
• Party ledger shows a short receipt: book the TDS part, or the buyer will appear to owe you money they do not owe.

This is general information, not tax advice.

Tracking it with Cashflow OS

The receipt and the GST TDS receivable entry are made in TallyPrime. Cashflow OS syncs them, so on your phone you can see the receivable ledger balance and the party's bill-wise outstanding, which shows clearly when a bill was settled partly by TDS. The cash ledger and the acceptance itself are on the GST portal; Cashflow OS does not access them.