Section 51: Who Must Deduct TDS, and the ₹2.5 Lakh Threshold

Section 51 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.

GST TDS looks simple — 2% over ₹2.5 lakh. Almost every dispute is about something else: whether the payer is a deductor at all, whether the threshold was tested on the right amount, and whether one of the three provisos switched the obligation off.

Section 51(1) lets the Government mandate (a) a department or establishment of the Central or State Government, (b) a local authority, (c) Governmental agencies, or (d) notified persons to deduct tax at 1% from payment made or credited to a supplier of taxable goods or services, where the total value of such supply under a contract exceeds ₹2,50,000. With the State levy it is 1% + 1%, and under section 20 of the IGST Act, 2% on an inter-State supply. TDS came into force on 01.10.2018 by Notification No. 50/2018-Central Tax dated 13.09.2018, which also notifies the persons in clause (d).

The notified deductors under clause (d)

Notification No. 33/2017-Central Tax dated 15.09.2017, superseded by Notification No. 50/2018-Central Tax dated 13.09.2018 and amended by Notification No. 25/2024-Central Tax dated 09.10.2024 (w.e.f. 10.10.2024), notifies:

• (a) an authority, board or any other body — (i) set up by an Act of Parliament or a State Legislature, or (ii) established by any Government — with 51% or more participation by way of equity or control, to carry out any function;
• (b) a Society established by the Central Government, a State Government or a local authority under the Societies Registration Act, 1860;
• (c) Public sector undertakings; and
• (d) any registered person receiving supplies of metal scrap falling under Chapters 72 to 81 of the First Schedule to the Customs Tariff Act, 1975, from another registered person.

The 51% question, answered. Circular No. 76/50/2018-GST dated 31.12.2018 (S. No. 4) clarifies that the words "with 51% or more participation by way of equity or control, to carry out any function" apply to both items (i) and (ii) of clause (a). "Consequently, the provisions of section 51… are applicable only to such authority or a board or any other body set up by an Act of parliament or a State legislature or established by any Government in which fifty-one per cent. or more participation by way of equity or control is with the Government."

Note that 51% is not 90%. The exemption definitions of Governmental Authority and Government Entity use 90%. A body can be a TDS deductor and still fail those tests. Governmental Authority and Government Entity →

The threshold, and how to test it

The test: "When the total value of taxable goods or services or both, under a contract, exceeds ₹2,50,000 (excluding central tax, State tax, UT tax and IGST and cess indicated in the invoice)."

Three features do the work.

Per contract, not per invoice and not per year. The Handbook's example: "M/s Ram Brothers entered into 2 contracts for supply of goods to a Department of Govt. valued at ₹2,20,000 and ₹2,10,000. Here, tax is not required to be deducted as each taxable supply under a contract is not exceeding ₹2,50,000, even though their joint value is more than ₹2,50,000."

On taxable value only. "When there is a common contract for taxable supply as well as exempted supply, but the value of taxable supplies is not exceeding ₹2,50,000 under that contract", no deduction arises.

The Handbook's worked example: M/s Ram Brothers supplies printed material of ₹2,10,000 and books of ₹1,00,000 on one invoice of ₹3,10,000 plus GST. "In this case, tax shall not be deductible as taxable value of goods is less than the threshold of ₹2,50,000. Books are exempted" — under Notification No. 12/2017-CT(R), now superseded by Notification No. 10/2025-Central Tax (Rate) dated 17.09.2025.

Excluding GST. The Explanation to section 51(1): the value of supply is "the amount excluding the central tax, State tax, Union territory tax, integrated tax and cess indicated in the invoice."

And a drafting nuance the Handbook flags. "TDS applies on 'taxable goods or services' supplied and not on 'all taxable supplies'. Please note that 'taxable supplies' is defined in section 2(108) which covers all supplies that are 'leviable' to tax (even if exempt by notification under section 11). However, 'taxable goods and services' require inquiry into whether the goods or services are taxable or exempt. If they are exempt, then TDS will not apply."

The rate, and the two heads

Section 21 of the UTGST Act applies the CGST TDS provisions mutatis mutandis to Union territory tax.

The deposit deadline: "Tax shall be deposited within 10 days after the end of the month in which deduction was made" — section 51(2), through FORM GSTR-7.

And it must be paid in cash. Per rule 85(4), the amount deducted under section 51, the amount collected under section 52, reverse charge liability, section 10 liability, and any interest, penalty, fee or other amount "shall be paid by debiting the electronic cash ledger."

The three provisos that switch the obligation off

One — between specified persons. Inserted in Notification No. 50/2018 by Notification No. 73/2018-Central Tax dated 31.12.2018, applicable w.e.f. 31.12.2018, and later replaced to read: "Nothing in this notification shall apply to the supply of goods or services or both, which takes place between one person to another person specified under clauses (a), (b), (c), and (d) of sub-section (1) of Section 51, except the person referred to in clause (d) of this notification."

Two effects. Supplies between government bodies, local authorities, Governmental agencies and notified persons carry no TDS. But metal scrap under clause (d) is expressly outside that relief — "supplies involving metal scrap dealers under clause (d) are explicitly not exempt and continue to attract TDS. However, if any of these entities, when registered, receives supply of Metal Scrap from another registered person, TDS provisions shall be applicable."

Two — PSU to PSU. By Notification No. 61/2018-Central Tax dated 05.11.2018, the notification does not apply to "the supply of goods or services or both from a public sector undertaking to another public sector undertaking, whether or not a distinct person, with effect from the 1st day of October, 2018."

Three — Ministry of Defence. By Notification No. 57/2018-Central Tax dated 23.10.2018, nothing in the notification applies to "the authorities under the Ministry of Defence, other than the authorities specified in the Annexure A and their offices, with effect from the 1st day of October, 2018."

Read the Defence proviso carefully. It is an exclusion with an inclusion list — the authorities named in Annexure A do deduct.

Registration, and why it is separate

Section 24(vi) compels registration of a deductor, "whether or not separately registered", with no threshold. And the Handbook records the privilege that goes with it: "The deductor has a privilege of obtaining registration under GST without having required to obtain PAN. He can obtain registration using his Tax Deduction and Collection Account Number (TAN)" — the proviso to section 25(6).

A separate registration is required even for an existing registrant. "Yes, deductor is required to get a separate registration as TDS deductor by using his PAN/TAN." Government registration →

Key takeaways

• Deductors: (a) Central/State Government departments and establishments, (b) local authorities, (c) Governmental agencies, (d) notified persons.
• Clause (d) covers bodies with 51% or more Government participation — applying to both limbs, per Circular No. 76/50/2018-GST — Societies, PSUs, and since 10.10.2024 registered buyers of metal scrap.
• 51% ≠ 90% — the exemption definitions use a different threshold.
• Threshold: ₹2,50,000 per contract, on taxable value excluding GST — separate contracts are not aggregated.
• Exempt supplies are outside the threshold computation and outside TDS entirely.
• Rate: 1% + 1% intra-State, 2% IGST inter-State; deposited within 10 days, in cash under rule 85(4).
• No TDS between specified persons, PSU to PSU, or for Ministry of Defence authorities outside Annexure A — but metal scrap is carved out of the first relief.
• Registration under section 24(vi) is separate, has no threshold, and may be taken on a TAN.

Read next

• The TDS Proviso: When No Deduction Is Required
• TDS on Metal Scrap: Clause (d) and the Council History
• GSTR-7: Tables 3 and 4, and the 2025 Changes

Disclaimer: Positions stated as on 5 September 2026, based on sections 2(108), 24(vi), 25(6) and 51 of the CGST Act, 2017, section 20 of the IGST Act, 2017, section 21 of the UTGST Act, 2017, rules 66 and 85(4) of the CGST Rules, 2017, Notification Nos. 33/2017, 50/2018, 57/2018, 61/2018, 73/2018 and 25/2024-Central Tax, and Circular No. 76/50/2018-GST, as reproduced in the ICAI Handbook on Government Supplies under GST (Including TDS Provisions), updated to 15 April 2026.