TDS by DDOs Under GST: Deduction & Deposit Guidelines India adopted the Goods and Services Tax framework that added TDS requirements under Section 51 of the CGST Act, 2017. The Drawing and Disbursing Officer serves as the main stakeholder required to comply with this provision. The following blog provides an in-depth exploration of TDS by DDOs under GST through an examination of deduction regulations along with deposit standards and required compliance deadlines and the outcomes of non-compliance.
People who work in government positions alongside DDOs and professionals who manage public sector finance need complete understanding of this guidance for proper GST compliance.
What is TDS under GST? The government employs TDS (Tax Deducted at Source) under GST to gather tax directly from sources where income or payments occur. Per Section 51 of the CGST Act, several registered entities must execute tax deductions of 2% (1% CGST plus 1% SGST or 2% IGST) from their payments made to taxable suppliers of goods or services when the supply value exceeds ₹2.5 lakhs, but excludes GST tax.
Who is a DDO (Drawing and Disbursing Officer)? The Drawing and Disbursing Officer (DDO) service is a designation held by authorized governmental and public sector employees who control budget expenditures and payment disbursements in various entities. A key responsibility of DDOs under GST includes performing TDS deduction for their organizations, followed by TDS deposit to the relevant authorities.
Applicability of TDS Under GST for DDOs TDS under GST applies to the following categories of entities:
A department or establishment of the Central Government or the State Government
Local authorities (e.g., municipalities, panchayats)
Governmental agencies
Public sector undertakings
Societies established by the Central or State Governments
Authorities or Boards constituted by the government act
These bodies, through their DDOs, must deduct TDS when making payments to vendors or contractors if:
The contract value exceeds ₹2.5 lakhs , and
The supply is taxable under GST .
Don’t miss out on Section 194J - TDS on Professional Fees
TDS Deduction Rate & Threshold Particulars Details TDS Rate under GST 2% (1% CGST + 1% SGST) or 2% IGST Threshold Limit ₹2.5 lakhs (excluding GST) Type of Supply Taxable goods/services Payment Condition Deducted at the time of payment or credit, whichever is earlier
Note: TDS is not applicable where the supplier is unregistered or the supply is exempt from GST.
TDS Deduction Scenarios When TDS is Applicable
A municipal corporation awards a contract of ₹3.5 lakhs (excluding GST) for road repair to a registered contractor.
A government department procures IT services worth ₹5 lakhs from a GST-registered software company.
When TDS is NOT Applicable
The supply value is ₹2.2 lakhs (excluding GST).
The supply is fully exempt from GST.
The supplier is not registered under GST.
Deposit of TDS by DDOs Once the tax is deducted, it must be deposited by the DDO through the prescribed electronic method.
Steps for Deposit:
Login to GST Portal
Generate a Challan in Form GST PMT-06 for the amount of TDS deducted.
Deposit the TDS amount through online banking, NEFT, RTGS, or over-the-counter modes using the generated challan.
Ensure payment within 10 days from the end of the month in which the deduction was made.
Due Date for Deposit Month of Deduction Due Date for Deposit April 10th May July 10th August
Important: Delays in deposit attract interest and penalties under GST laws.
Filing of TDS Returns by DDOs The DDO must file Form GSTR-7
GSTR-7 Return Overview Return Name Purpose Frequency Due Date GSTR-7 To report TDS deducted under GST Monthly 10th of next month
Key Details to Include in GSTR-7:
GSTIN of the deductor (DDO)
GSTIN of the deductee (supplier)
Contract/invoice details
Amount paid
TDS deducted and deposited
After filing GSTR-7, the deducted amount is reflected in the electronic cash ledger of the supplier, allowing them to claim credit.
Certificate of TDS: Form GSTR-7A Upon successful filing of GSTR-7, the portal automatically generates a TDS certificate in Form GSTR-7A . This certificate must be made available to the supplier as proof of TDS deduction.
Contents of GSTR-7A: Name and GSTIN of deductor and deductee
Invoice-wise details of the transaction
Amount of tax deducted and deposited
Date of deposit
The certificate should be issued within 5 days from the date of deposit . Failure to issue it can attract a penalty of ₹100 per day , subject to a maximum of ₹5,000 .
Interest and Penalties for Non-Compliance Non-Compliance Consequence Non-deduction of TDS Interest @ 18% per annum Late deposit of TDS Interest @ 18% per annum Non-filing of GSTR-7 Late fee ₹100/day (CGST) + ₹100/day (SGST), max ₹5,000 Not issuing GSTR-7A certificate ₹100/day, up to ₹5,000
Practical Challenges for DDOs DDOs often face the following challenges in complying with TDS under GST:
Identifying applicable vendors and transactions
Delays in access to GSTINs of vendors
Technical errors during challan generation
Lack of awareness about TDS return deadlines
To overcome these, departments should organize regular training and maintain updated vendor databases with GSTINs.
Best Practices for DDOs Under GST Verify GST Registration of suppliers before initiating payment.
Monitor contract values regularly to check TDS applicability.
Ensure timely deduction and deposit of TDS within the due date.
Maintain proper documentation, including invoices, challans, and GSTR-7A certificates.
Set reminders for return filing to avoid penalties.
TDS Adjustment and Refunds If TDS has been deducted in excess or error:
The deductor cannot claim a refund.
Only the deductee (supplier) can claim a refund of the excess amount after filing returns.
If the TDS amount is not credited to the supplier due to incorrect GSTIN or wrong details, rectification in the GSTR-7 may be required.
Relevant Legal Provisions Provision Description Section 51 of CGST Act TDS provisions under GST Rule 66 of CGST Rules Details of GSTR-7 and GSTR-7A Notification No. 50/2018 – CT Notifies applicability of TDS Circular No. 65/39/2018-GST Clarification on TDS by DDOs
TDS Under GST vs TDS Under Income Tax Feature GST TDS Income Tax TDS Governing Law CGST Act, 2017 Income Tax Act, 1961 Deduction Rate 2% (1% CGST + 1% SGST) or 2% IGST Varies (1% to 10% or more) Applicability Threshold ₹2.5 lakhs (excluding GST) ₹30,000 (varies by section) Return Form GSTR-7 Form 26Q, 24Q, etc.
Conclusion The proper tax compliance under GST depends on DDOs who perform their role effectively to maintain efficient tax administration through transparent processes. Knowledge of GST procedures regarding deduction, deposits, returns, and certificate handling allows DDOs to prevent penalties while maintaining timely supplier payments.
Timely action, proper documentation, and digital literacy are the keys to smooth TDS compliance under GST for DDOs.
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FAQs 1. Who is responsible for TDS deduction under GST in government departments? Drawing and Disbursing Officers from government departments hold responsibility for TDS deduction, together with GST payment deposition.
2. What is the threshold limit for TDS deduction under GST? The contractor needs to perform TDS deduction on taxable supplies that exceed ₹2.5 lakhs (not including GST) contract value.
3. How can a DDO deposit the TDS amount under GST? The TDS amount needs to be deposited by DDOs on the GST portal through Form GST PMT-06, following the monthly 10th deadline.
4. What is Form GSTR-7, and who should file it? Public Departments must use Form GSTR-7 for filing GST TDS deduction return statements each month.
5. What happens if a DDO fails to file GSTR-7 on time? Non-timely filing of GSTR-7 leads to penalties totalling up to a maximum of ₹5000, which comprises s₹100 for each CGST and SGST item.
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