Tax deduction at source
Section 51, CGST Act
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Section 51 requires notified persons (government departments, PSUs, local authorities, certain bodies) to DEDUCT TAX AT SOURCE (TDS) at 2% (1%+1%) where a contract’s taxable value exceeds Rs 2.5 lakh, deposit it, and file a monthly return (GSTR-7); the supplier claims it in the cash ledger.
What this means in practice
The parts that actually decide cases — the things a practitioner checks first.
Two per cent (1 CGST + 1 SGST) where the taxable value of a CONTRACT exceeds Rs 2.5 lakh – the test is the contract value, not the individual invoice or payment.
No deduction where the supplier’s location and the place of supply are in a State different from that of the recipient – the classic exclusion that stops TDS on inter-State supplies to a department registered elsewhere.
From 10-10-2024 a registered person receiving supplies of METAL SCRAP from another registered person must also deduct under section 51 (Notification 25/2024-Central Tax) – this pulled ordinary businesses, not just government bodies, into TDS.
GSTR-7 is due monthly by the 10th and must be filed even for a nil month since 16-08-2024; the deductee sees the credit in his cash ledger.
Tax is deducted on the value EXCLUDING the GST shown on the invoice.
Questions people actually ask
Real questions we get on this provision, answered straight.
We buy metal scrap from registered dealers. Do we deduct TDS?+
Yes, since 10 October 2024. A registered recipient of metal scrap from a registered supplier deducts two per cent under section 51 and files GSTR-7 monthly. This is separate from the reverse charge on scrap from unregistered suppliers.
How this provision is built
The skeleton, clause by clause — useful when a notice cites a specific sub-clause.
The exact words of the law
3,759 characters, uneditedReproduced from the CBIC text. We explain it above — but you should always be able to read it yourself.
Read the full provision+
(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 . 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. * 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. 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. 01 st 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.
High Court cases on this section
Judgments in our index that cite this provision. Being listed does not make a case good law — it may have been appealed or distinguished since. Read it before relying on it.
Tvl Sreenivasa Balaji Papers Private Limited Represented by its Director R Keerthana v. Assistant Commissioner (ST),
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M/s.Shree Ganesh Ventures v. The Assistant Commissioner (ST),
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M/S.HARITHA BIO PRODUCTS INDIA PVT LTD v. The Assistant Commissioner (ST)
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Amit Trading Company v. State Tax Officer,
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What changed, and when
The amendment trail, newest first — because the version that applies to your case depends on the period.
2017-07-01 · Commenced
Provision as originally enacted in the CGST Act, 2017 (Act 12 of 2017) and brought into force w.e.f. 01-07-2017.
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Where this comes from
Text reproduced from the Central Board of Indirect Taxes and Customs, as available on 2026-09-05. The explanation and practice notes above are GSTZone’s own, written for this hub. If you spot anything out of date, tell us and we’ll fix it — this hub is checked daily against CBIC.
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