Table of Contents
Table of Contents
Last updated: 21 August 2026 · Written and reviewed by CA Meet Dhrangadhariya, CSM & Co LLP
Quick summary
TDS and TCS exist under income tax too, but GST has its own, separate versions - section 51 (tax deducted at source) and section 52 (tax collected at source) - aimed at two different groups: large government-linked buyers, and e-commerce platforms. Neither has anything to do with income tax TDS/TCS, and compliance for one does not cover the other.
New to terms such as “deductee” or “electronic cash ledger”? See the technical terms explained in simple words further down.
Under section 51 of the CGST Act, 2017, the Government can require these categories (the “deductor”) to deduct TDS:
Over time, this has also been extended by notification to public sector undertakings, societies set up by a Government and registered under the Societies Registration Act, 1860, and authorities or boards set up by Parliament, a State Legislature, or a Government with majority government ownership.
Example: A State Government department awards a road-repair contract worth Rs 10 lakh to a civil contractor. Since the contract value exceeds Rs 2.5 lakh, the department deducts 1% CGST + 1% SGST (Rs 20,000 total) from each payment made under the contract, and must deposit it by the 10th of the following month, reported through GSTR-7.
Government contracts, especially large civil works, are routinely sub-contracted down through several layers - a main contractor to a sub-contractor, and often again to a smaller local contractor or labour supplier. Before GST, many of these smaller sub-contractors stayed outside the tax net entirely. Because TDS is deducted at the first payment point and flows through the contract chain, it pushes every tier of a sub-contracted project toward GST registration and compliance, since a sub-contractor needs to be registered to claim the TDS credit sitting in their electronic cash ledger.
Under section 52 of the CGST Act, 2017, every electronic commerce operator (not acting purely as an agent) must collect TCS, where it collects the payment on behalf of other suppliers selling through its platform - this covers marketplaces such as Amazon, Flipkart and similar platforms, on behalf of the sellers using them.
Example: A seller on an e-commerce platform receives a Rs 10,000 order inclusive of tax, with a platform commission of Rs 200, and a Rs 1,000 return in the same month. TCS is calculated on the net value - the order amount including the commission, less the return - at the current notified rate, and credited to the seller’s electronic cash ledger once the operator files GSTR-8.
Both provisions exist to bring hard-to-track parts of the economy - unorganised sub-contracting chains, and the fast-growing e-commerce sector - under closer tax visibility, without adding a separate tax. The deducted or collected amount is not an extra cost to the supplier; it is simply collected in advance and credited back against their own GST liability once the deductor or operator reports it.
Whether you are a government contractor dealing with TDS deductions on your payments, or an online seller trying to reconcile TCS credited by a marketplace against your own GSTR-3B, getting the monthly matching right avoids cash flow surprises and notices later. Please reach out to our team and we will be happy to assist with TDS/TCS compliance, GSTR-7 and GSTR-8 filing, and reconciliation.
| Term | What it means |
|---|---|
| Deductor | The person or entity (a government body, in the TDS context) required to deduct tax from a payment before making it. |
| Deductee | The supplier from whose payment TDS is deducted. |
| Net value of taxable supplies | The total value of taxable sales made through an e-commerce platform in a month, minus the value of any goods or services returned in that same month - the figure TCS is actually calculated on. |
| Electronic cash ledger | The online account on the GST Portal that holds a taxpayer’s cash deposits and TDS/TCS credits, used to pay GST liabilities. |
| FORM GSTR-7 | The monthly return filed by a TDS deductor, reporting the tax deducted and deposited. |
| FORM GSTR-8 | The monthly statement filed by an e-commerce operator, reporting TCS collected and deposited. |
A department or establishment of the Central or State Government, a local authority, a Governmental agency, or any other person or category of persons the Government notifies - collectively called “the deductor” under section 51 of the CGST Act.
1% CGST plus 1% SGST (or 2% IGST on an inter-State payment), deducted from the payment to a supplier of taxable goods or services, where the total value of the supply under a contract exceeds Rs 2.5 lakh. No deduction is made if the supplier’s location and the place of supply are in a different State or Union Territory from where the recipient is registered.
Every electronic commerce operator (other than one acting purely as an agent) that collects the payment on behalf of other suppliers selling through its platform, under section 52 of the CGST Act.
0.25% CGST plus 0.25% SGST (or 0.5% IGST), on the net value of taxable supplies made through the platform in a month. This was reduced from the earlier 1% rate with effect from 10 July 2024.
Both TDS (section 51) and TCS (section 52) must be paid to the Government within 10 days after the end of the month in which the deduction or collection was made - TDS is reported in FORM GSTR-7, and TCS in FORM GSTR-8.
Automatically, in their electronic cash ledger, once the deductor files their GSTR-7 (for TDS) or the e-commerce operator files their GSTR-8 (for TCS) - the supplier does not need to separately claim it.
This article is for general informational purposes only and should not be considered professional advice. Please consult a qualified expert for advice tailored to your specific situation. The author and website owner are not liable for any errors or actions based on this content.