Section 51 makes certain buyers — mainly Government bodies — deduct a slice of GST from payments to their suppliers and pay it to the Government. The supplier gets the deduction as a credit in its cash ledger. It is an audit trail on public procurement, not an extra tax.
Key points
- Under section 51(1) of the CGST Act, 2017 a Government department or establishment, local authority, Government agency or notified person must deduct 1% CGST (with 1% SGST, or 2% IGST) from payments to a supplier of taxable goods or services where the value of supply under a contract exceeds Rs. 2.5 lakh, excluding tax.
- No deduction is made where the supplier's location and the place of supply are both in a State or UT other than the recipient's State of registration (proviso).
- The deductor pays the amount by the 10th of the following month, files GSTR-7 and issues a certificate (GSTR-7A); the supplier claims the amount in its electronic cash ledger (section 51(5)).
- Section 51 came into force on 01.10.2018 (Notification 50/2018-Central Tax). From 10.10.2024 registered buyers of metal scrap from registered suppliers must also deduct (Notification 25/2024-Central Tax).
Editor's note: The note above that sub-sections (2) to (8) "have not so far been brought into force" is out of date. Notification No. 50/2018-Central Tax, dated 13 September 2018, superseded Notification No. 33/2017-Central Tax and appointed 1 October 2018 as the date on which section 51 came into force for the persons in clauses (a), (b) and (c) of sub-section (1) and for the persons it notified under clause (d).
The provisions
51(1)Who deducts, and on what
Statutory text
(1) Notwithstanding anything to the contrary contained in this Act, the Government may mandate,-
(a) a department or establishment of the Central Government or State Government; or
(b) local authority; or
(c) Governmental agencies; or
(d) such persons or category of persons as may be notified by the Government on the recommendations of the Council, (hereafter in this section referred to as "the deductor"), to deduct tax at the rate of one per cent. from the payment made or credited to the supplier (hereafter in this section referred to as "the deductee") of taxable goods or services or both, where the total value of such supply, under a contract, exceeds two lakh and fifty thousand rupees:
Provided that no deduction shall be made if the location of the supplier and the place of supply is in a State or Union territory which is different from the State or as the case may be, Union territory of registration of the recipient.
Explanation .-For the purpose of deduction of tax specified above, the value of supply shall be taken as the amount excluding the central tax, State tax, Union territory tax, integrated tax and cess indicated in the invoice.
* Section 51(1) enforced w.e.f. 18-09-2017 with respect to persons special under (a), (b) and (d) of section 51(1). Provisions of sub-sections (2) to (8) of section 51 have not so far been brought into force.
The CBIC note to this section says only sub-section (1) is in force, from 18.09.2017, and that sub-sections (2) to (8) "have not so far been brought into force". That is out of date: Notification 33/2017-Central Tax brought sub-section (1) into force from 18.09.2017 for registration of deductors only, and Notification 50/2018-Central Tax brought the whole section into force from 01.10.2018.
- Notifications 33/2017 and 50/2018-Central Tax — notified deductors; commencement from 01.10.2018
- Notification 25/2024-Central Tax — metal scrap
- Rule 66, CGST Rules; Forms GSTR-7, GSTR-7A
51(2)–(8)Payment, certificate, credit, default and refund
Statutory text
(2) The amount deducted as tax under this section shall be paid to the Government by the deductor within ten days after the end of the month in which such deduction is made, in such manner as may be prescribed.
1[(3) A certificate of tax deduction at source shall be issued in such form and in such manner as may be prescribed.].
(4) 2[****]
(5) The deductee shall claim credit, in his electronic cash ledger, of the tax deducted and reflected in the return of the deductor furnished under sub-section (3) of section 39, in such manner as may be prescribed.
(6) If any deductor fails to pay to the Government the amount deducted as tax under sub-section (1), he shall pay interest in accordance with the provisions of sub-section (1) of section 50, in addition to the amount of tax deducted.
(7) The determination of the amount in default under this section shall be made in the manner specified in section 73 or section 74 3[or section 74A].
(8) The refund to the deductor or the deductee arising on account of excess or erroneous deduction shall be dealt with in accordance with the provisions of section 54:
Provided that no refund to the deductor shall be granted, if the amount deducted has been credited to the electronic cash ledger of the deductee.
1. Substituted by s. 124 of The Finance Act, 2020 (No. 12 of 2020) for -
"(3) The deductor shall furnish to the deductee a certificate mentioning therein the contract value, rate of deduction, amount deducted, amount paid to the Government and such other particulars in such manner as may be prescribed. "
-Brought into force w.e.f. 01st January, 2021 by Notification No. 92/2020-C.T., dated 22-12-2020.
2. Omitted by s. 124 by The Finance Act, 2020 (No. 12 of 2020) -
"(4) If any deductor fails to furnish to the deductee the certificate, after deducting the tax at source, within five days of crediting the amount so deducted to the Government, the deductor shall pay, by way of a late fee, a sum of one hundred rupees per day from the day after the expiry of such five days period until the failure is rectified, subject to a maximum amount of five thousand rupees. "
-Brought into force w.e.f. 01st January, 2021 vide Notification No. 92/2020-C.T., dated 22-12-2020.
3. Inserted by section 127 of The Finance Act (No. 2) Act, 2024 No. 15 of 2024 dated 16.08.2024.
What it means
The deductor pays the amount by the 10th of the following month and files GSTR-7 (section 39(3), including nil returns from 01.11.2024). From 01.01.2021 the certificate is generated on the portal (GSTR-7A) and the late fee for not issuing it in sub-section (4) was dropped. The supplier accepts the amount on the portal and it is credited to its cash ledger, where it can pay tax and other dues.
A deductor that fails to pay over the amount pays interest under section 50(1); the amount is determined under sections 73, 74 or 74A. Excess or wrong deduction is refunded under section 54 — to the deductee if it has been credited to its ledger, otherwise to the deductor.
Statutory text as published on the CBIC tax information portal, as on 11.10.2026; the numbered notes record each amendment. Official source
Common questions
- Who must deduct TDS under GST?
- Government departments and establishments, local authorities, Government agencies and notified persons — including Government-controlled bodies, PSUs and, from 10.10.2024, registered buyers of metal scrap — on contracts of taxable supply above Rs. 2.5 lakh (section 51 CGST).
- What is the GST TDS rate?
- 1% CGST and 1% SGST for intra-State supplies, or 2% IGST for inter-State supplies, of the value excluding tax.
Commentary and case notes checked against the judgments and CBIC sources on 04.10.2026.
What it means
The persons notified under clause (d) (Notifications 33/2017 and 50/2018-Central Tax) are authorities, boards and bodies set up by Parliament or a State legislature or by a Government with 51% or more Government equity or control, societies established by a Government or local authority, and public sector undertakings. From 10.10.2024 Notification 25/2024-Central Tax added registered persons receiving metal scrap (Chapters 72 to 81 of the Customs Tariff) from registered suppliers.
The threshold is the value of supply under a contract, not of each payment. The proviso confines deduction to cases where the supply is taxable in the recipient's State: for an inter-State supply to the deductor, IGST TDS applies; where a supply by an out-of-State supplier is also taxable outside the recipient's State (for instance, a hotel stay elsewhere), there is no deduction.