Beyond regular GST payment on outward supplies, certain notified persons are also required to deduct or collect a small percentage of tax at the source of a transaction — this is TDS and TCS under GST, distinct in purpose and mechanics from income tax TDS/TCS, even though the underlying concept of 'tax at source' is similar.

TDS under GST (Section 51)

TDS under GST applies to specified deductors — government departments, local authorities, government agencies, and certain other notified persons (such as public sector undertakings and specified authorities) — when they make payment to a supplier for taxable goods or services under a contract exceeding ₹2.5 lakh (excluding tax).

The rate is 2% (1% CGST + 1% SGST for intra-state supply, or 2% IGST for inter-state supply) on the payment made or credited to the supplier, excluding the GST component itself.

•      The deductor must deposit the TDS with the government by the 10th of the following month and file Form GSTR-7 monthly, reporting the deduction details

•      A TDS certificate (Form GSTR-7A) is made available to the supplier through the portal

•      The deducted amount reflects in the supplier's Electronic Cash Ledger and can be used to pay their own GST liability, or claimed as a refund if not needed

TCS under GST (Section 52)

TCS applies specifically to e-commerce operators, who are required to collect tax at source on the net value of taxable supplies made through their platform by other suppliers (not on the e-commerce operator's own direct supplies, if any).

The current rate is 0.5% (0.25% CGST + 0.25% SGST for intra-state supply, or 0.5% IGST for inter-state supply), effective from a July 2024 amendment which reduced it from the earlier 1% rate.

•      'Net value of taxable supplies' is computed as the aggregate value of taxable supplies made through the platform by all registered suppliers, reduced by the aggregate value of taxable supplies returned to those suppliers during that month

•      The e-commerce operator must deposit TCS with the government by the 10th of the following month and file Form GSTR-8 monthly

•      The collected amount reflects in the seller's Electronic Cash Ledger, usable to offset their own GST liability

Key Differences Between TDS and TCS under GST

•      TDS is deducted by the buyer (a government body or notified entity) when paying the supplier; TCS is collected by the e-commerce platform when settling payment to the seller on the platform

•      TDS applies based on a per-contract value threshold (₹2.5 lakh); TCS applies based on the net value of supplies through the platform, without a similar per-transaction threshold

•      TDS rate is 2%; TCS rate is 0.5%

•      TDS filing is via GSTR-7; TCS filing is via GSTR-8

Frequently Asked Questions

Q1. Does an individual online seller need to separately pay TCS?

A. No — the e-commerce operator (like the marketplace platform) itself collects TCS at the time of settling payments to the seller; the seller simply receives a slightly lower payout initially and gets a corresponding credit in their cash ledger to offset against their own GST liability.

Q2. Can TDS/TCS credited amounts be used to pay regular GST liability?

A. Yes, both TDS and TCS amounts are credited to the supplier's Electronic Cash Ledger and can be used exactly like a cash deposit to discharge their own output tax liability, or claimed back as a refund if not needed.

Q3. What is the current GST TCS rate for e-commerce operators?

A. 0.5% of the net value of taxable supplies (reduced from the earlier 1%, with effect from July 2024).

Q4. What is the current GST TDS rate for notified deductors?

A. 2% (split as 1% CGST + 1% SGST for intra-state, or 2% IGST for inter-state) on payments exceeding ₹2.5 lakh per contract, excluding the GST component.

Q5. Do TDS/TCS deductors need to file separate returns?

A. Yes — TDS deductors file Form GSTR-7 monthly, and e-commerce operators collecting TCS file Form GSTR-8 monthly, both reporting the amounts deducted/collected and depositing them with the government.

Q6. Is TDS under GST the same as TDS under Income Tax?

A. No, they are entirely separate — GST TDS applies to GST liability on specified contracts by notified deductors, while Income Tax TDS applies to income tax liability on various types of payments; a single transaction can potentially attract both, deducted under their respective separate laws.