Chapter X - Payment of tax
Section 51
Section 51: Tax deduction at source
Section 51 governs CGST tax deduction at source by mandated government bodies and notified persons for specified taxable contracts.
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Need advice on Section 51?
This article is for general information. Refer to the Central Goods and Services Tax Act, 2017 official text for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
(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.
(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.
(3) A certificate of tax deduction at source shall be issued in such form and in such manner as may be prescribed.
(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 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.
Introduction
GST TDS applies only to the classes mandated by the Government under this section. The Act states a CGST-side deduction rate of one percent for contracts whose taxable supply value exceeds ₹2.5 lakh, subject to the statutory place-of-supply exception.
Key takeaways
Who deducts
The Government may mandate Central or State departments or establishments, local authorities, government agencies and other notified persons or categories to deduct. Check the current notification before treating a buyer as a deductor.
Contract threshold and value
The contract value of taxable supplies must exceed ₹2.5 lakh. For this test and deduction, the invoice-indicated CGST, SGST, UTGST, IGST and cess are excluded from supply value.
Location exception
No deduction is made when both supplier location and place of supply are in a State or Union territory different from the recipient’s registration State or Union territory.
Deposit and credit
Deducted tax is paid to Government within ten days after the month of deduction. The deductee claims cash-ledger credit based on the deductor’s section 39(3) return, in the prescribed manner.
Who deducts
The Government may mandate Central or State departments or establishments, local authorities, government agencies and other notified persons or categories to deduct. Check the current notification before treating a buyer as a deductor.
Contract threshold and value
The contract value of taxable supplies must exceed ₹2.5 lakh. For this test and deduction, the invoice-indicated CGST, SGST, UTGST, IGST and cess are excluded from supply value.
Location exception
No deduction is made when both supplier location and place of supply are in a State or Union territory different from the recipient’s registration State or Union territory.
Deposit and credit
Deducted tax is paid to Government within ten days after the month of deduction. The deductee claims cash-ledger credit based on the deductor’s section 39(3) return, in the prescribed manner.
Practical checklist
Do
- Verify the buyer’s notified deductor status.
- Check taxable contract value excluding listed taxes and cess.
- Test supplier location, place of supply and recipient registration location.
- Reconcile deduction, deposit and deductor return to cash-ledger credit.
Avoid
- Use an old notification or portal date without checking the relevant tax period.
Frequently asked questions
Does every private business deduct GST TDS?
No. Section 51 applies to mandated categories; notification status and the contract and location tests must be checked.
Need help applying this provision to your situation?
Contact BizeneedLast updated 10 October 2026