AI Overview...
TDS Deducted on Goods under GST Act: Essential Guide for Businesses
Disclaimer: This blog post provides general information based on judicial precedents and statutory provisions. It is not legal advice. Consult a qualified professional for advice specific to your situation. Legal outcomes may vary based on facts.
In the complex world of Goods and Services Tax (GST) in India, Tax Deducted at Source (TDS) plays a crucial role in ensuring tax compliance, especially for transactions involving goods and works contracts. If you're a business dealing with government contracts, e-commerce, or interstate supplies, understanding TDS deducted on goods under GST Act is vital to avoid penalties, claim credits, and manage cash flow effectively.
This post breaks down key rules, court rulings, and practical insights drawn from landmark judgments. We'll cover deduction mechanisms, eligibility for credits, refunds, and common pitfalls.
What is TDS under GST and When Does it Apply to Goods?
Under Section 51 of the CGST Act, 2017, specified persons (e.g., government departments, PSUs) must deduct TDS at 2% (1% CGST + 1% SGST/UTGST) or 2% IGST on payments to suppliers for taxable supplies exceeding ₹2.5 lakh per contract.
- Key Trigger: Applies to net value (excluding GST) of goods or services supplied.
- For Goods: Common in works contracts where goods transfer occurs during execution. Deduction is on the payment made or credited, not the full invoice value.
- Threshold: No deduction if total payment ≤ ₹2.5 lakh.
TDS certificates (Form GSTR-7) allow suppliers to claim credit, but mismatches or improper deductions often lead to disputes. Mintoo Das, S/o. Lt. Barindra Das VS State Of Assam, rep. By The Special Secy. To The Govt. Of Assam, Public Works Deptt. - 2023 Supreme(Gau) 1348
Works Contracts: Special Considerations for Goods
Works contracts involving transfer of property in goods (e.g., construction) are treated as supply of services under GST, but TDS applies to the goods component indirectly.
- Courts have ruled states cannot levy sales tax on interstate or exempt transfers in works contracts, limiting TDS scope. Gannon Dunkerley And Company: Larsen And Toubro VS State Of Rajasthan: Union Of India - 1992 Supreme(SC) 842
- Bihar Finance Act Example: Section 25-A held ultra vires for deducting tax on labour charges or interstate goods transfers. LARSEN AND TOUBRO LTD. VS STATE OF BIHAR - 1999 Supreme(Pat) 604
The State Legislature is not competent to impose sales tax on the transfer of property in goods involved in the execution of works contract which constitutes a sale in the course of... LARSEN AND TOUBRO LTD. VS STATE OF BIHAR - 1999 Supreme(Pat) 604
Claiming TDS Credit and Transitional Provisions
Suppliers can claim TDS as input tax credit (ITC) via GSTR-2A/2B reconciliation. However, challenges arise in transitions from VAT to GST.
Transitional Credit for TDS
- KVAT to GST: TDS under Kerala VAT cannot be carried forward as ITC under Section 140(1) CGST and Rule 117. It's not 'input tax' per Sections 2(62)/(63). Apply for refund instead. Fins Engineers And Contractors (P) Ltd. VS Superintendent, Central Tax & Central Excise Ayyanthole - 2023 Supreme(Ker) 974
- Telangana GST: Unutilized VAT TDS rejected for GST credit carry-forward. M/s.P and C Projects Private Limited Vs The Assistant Commissioner
TDS cannot be considered as input tax credit under Section 140 of the CGST/SGST Act. Fins Engineers And Contractors (P) Ltd. VS Superintendent, Central Tax & Central Excise Ayyanthole - 2023 Supreme(Ker) 974
Multi-State Works Contracts
For projects spanning states (e.g., Telangana-Maharashtra), TDS must be bifurcated by place of supply (Section 12 IGST). Improper full deduction to one state blocks credits.
- Court directed refund of excess TDS upon proof of liability discharge. M/s. L and T PES JV vs Assistant Commissioner of State Siricilla And 5 Others - 2024 Supreme(Online)(Tel) 40507
- Liability based on actual work executed in each state, not contract allocation.
Court Rulings on TDS Disputes Involving Goods
Indian courts have clarified TDS applications, often quashing arbitrary demands.
Aadhaar-PAN Linking and TDS
- Section 139AA Income Tax Act: Mandatory Aadhaar seeding with PAN upheld to curb black money. TDS credit per Form 26AS, no adjustment for sales returns if replaced goods compensate. Binoy Viswam VS Union of India - 2017 4 Supreme 673 Shri Gopikishan Pallod vs Income Tax Officer - 2025 Supreme(Online)(ITAT) 3476
TDS credit in income tax must be allowed based on amounts specified in Form 26AS, irrespective of sales return adjustments when properly supported by evidence. Shri Gopikishan Pallod vs Income Tax Officer - 2025 Supreme(Online)(ITAT) 3476
E-Way Bill and TDS Linkages
Goods transport without e-way bills led to seizures, but courts intervened:
- No penalty if e-way unenforceable (e.g., 01.02.2018-31.03.2018). Godrej Consumer Product Ltd. VS State of U. P. - 2023 Supreme(All) 2542 Anchor Health VS Additional Commissioner - 2023 Supreme(All) 2359
- TDS/e-way mismatches don't justify detention without intent to evade. Sahib Furniture VS State of U. P. - 2023 Supreme(All) 2821
Penalty Waivers for Authority Errors
- Taxpayers not liable for departmental mistakes, e.g., NOIDA's wrong tax head allocation despite payment. Compensation ordered. Surender Gupta vs Appellate Authority State Gst/Additional Commissioner Grade-Ii - 2025 Supreme(All) 2318 Surender Gupta vs Appellate Authority State Gst/Additional Commissioner Grade-Ii - 2025 Supreme(All) 2346
Practical Compliance Tips for TDS on Goods
To navigate TDS deducted on goods under GST Act:
- Verify Deductor Status: Confirm if payer is TDS-obligated (e.g., govt entities).
- Reconcile GSTR-7: Match deductions in your GSTR-2A.
- Invoice Properly: Show GST separately; TDS on net value. Mintoo Das, S/o. Lt. Barindra Das VS State Of Assam, rep. By The Special Secy. To The Govt. Of Assam, Public Works Deptt. - 2023 Supreme(Gau) 1348
- Claim Refunds Promptly: For excess/wrong-state TDS, file under Section 54.
- Works Contract Bifurcation: Apportion goods value per HS codes or work location.
- Avoid Penalties: Extended limitation (Section 73) needs proof of willful evasion. Mere non-disclosure insufficient. Technocom vs Union of India, Represented by Secretary Ministry of Finance, Department of Revenue - 2026 Supreme(Online)(Gau) 3144
| Scenario | TDS Rate | Credit Availability |
|----------|----------|---------------------|
| Intra-state Goods | 2% (1%+1%) | Yes, via GSTR-2A |
| Inter-state Goods | 2% IGST | Yes, post-reconciliation |
| Works Contract | On net payment | Bifurcate by state |
| Exempt Goods | Nil | N/A |
Refunds and Interest on Delayed TDS
- Interest: 6% under Section 56 CGST on delayed refunds, not higher unless proviso applies. Union Of India VS Willowood Chemicals Pvt. Ltd. - 2022 Supreme(SC) 356
- J&K GST: Strict 30-day appeal condonation limit; no extension beyond. Multi Trading Agencies, Drangbal vs Union Territory of Jammu & Kashmir through Commissioner, Sales Tax, Kashmir Srinagar. - 2024 Supreme(J&K) 390
Key Takeaways
- TDS on goods under GST ensures compliance but must respect exemptions, interstate limits, and place of supply rules. Gannon Dunkerley And Company: Larsen And Toubro VS State Of Rajasthan: Union Of India - 1992 Supreme(SC) 842
- Courts protect taxpayers from overreach, emphasizing proportionality and evidence. Justice K. S. Puttaswamy (Retd. ) VS Union of India - 2018 7 Supreme 129
- Transitional TDS credits limited; prefer refunds.
- Always reconcile via GST portal and retain Form 26AS/GSTR-7 proofs.
Businesses handling goods supplies should audit TDS regularly to prevent disputes. Stay updated via GST Council notifications, as rules evolve. For tailored guidance, engage a GST expert.
Sources & Citations: Insights drawn from Supreme Court, High Court judgments including Aadhaar case (privacy-TDS linkages) Justice K. S. Puttaswamy (Retd. ) VS Union of India - 2018 7 Supreme 129, works contract tax limits Gannon Dunkerley And Company: Larsen And Toubro VS State Of Rajasthan: Union Of India - 1992 Supreme(SC) 842, and GST-specific rulings M/s. L and T PES JV vs Assistant Commissioner of State Siricilla And 5 Others - 2024 Supreme(Online)(Tel) 40507.
Search Results for "TDS Deducted on Goods under GST Act: Key Rules"
1992 0 Supreme(SC) 842 • India - Supreme Court
YOGESHWAR DAYAL, S. C. AGRAWAL, M. H. KANIA, A. S. ANAND, J. S. VERMA
involved in execution of works contraction which no tax is livable Section are not required to be deducted from turnover - High ... it enables tax being imposed on deemed sales resulting from transfer of property in goods whether as goods or in some other form ... by Section central Sales Tax Act on goods declared to be of special importance in inter State trade or commerce Section central Sales ... percentage of the value of the....
2018 7 Supreme 129 • India - Supreme Court
DIPAK MISRA, A. M. KHANWILKAR, ASHOK BHUSHAN, A. K. SIKRI, D. Y. CHANDRACHUD
Other Subsidies, Benefits and Services) Act, 2016 – Section 29 r/w Regulation 3, 28 – Section 29 imposing restrictions on sharing ... the Consolidated Fund of India – Section 7 of Aadhaar Act does not declare the expenditure incurred on services, benefits or subsidies ... Other Subsidies, Benefits and Services) Act, 2016 – Sections 2(d), 2(h), 8, 10 and 32 r/w Regulations 18, 20 and#HL_E....
2017 4 Supreme 673 • India - Supreme Court
on the ground that it will not eradicate the menace 100% – Such kind of menace requires taking multiple actions and at the same ... Scheme with the enactment of the Aadhaar (Targeted Delivery of Financial and other subsidies, benefits and services) Act, 2016 – ... Act requiring linking of Aadhar with PAN being tested on the touchstone of Articles 14 and 19 only. ... (5A) Every person receiving any sum or income or ....
• India - Karnataka
top:580pt; left:179pt">or cause to be deducted ... GST at 18% on <p style="position:absolute; white-space:pre; margin:0; padding:0; top:130pt; left: ... <strong>GST at 18% on the <p style="position:absolute; white-space:pre; margin:0; padding:0; top:291pt; left
2002 7 Supreme 334 • India - Supreme Court
of certain items of tax deducted at source as the appellant-assessee was unable to produce documentary evidence, though it had furnished ... Income Tax Act, 1961-Sections 142(1) and 143-Kar Vivad Samadhan Scheme, 1998-Sections ... of bad debt = Rs. 68,02,046.00) have been deducted by the Assessing Authority, indicating that he agrees with the Assessee s claim ... of certain items of tax deducted at#HL_END....
• India - Delhi High Court
RAJNISH BHATNAGAR
(A) Criminal Procedure Code, 1973 - Section 438 - Central Goods and Services Tax Act, 2017 - Anticipatory bail application - Petitioners ... ... ... (B) Arrest and Prosecution - Powers under GST Act - Arrest powers to be exercised with circumspection; required determination ... They are directors of a company under investigation for alleged fraudulent Input Tax Credit worth Rs.22.42 Crores, base....
2025 0 Supreme(All) 2318 • India - IN THE HIGH COURT OF ALLAHABAD
Hon'ble Piyush Agrawal,J.
(A) Goods and Services Tax Act, 2017 - Sections 39, 61, and 73 - Writ petition challenging orders regarding GST payment and penalty ... ... ... Findings of Court: ... The court found that the petitioner had legitimately paid GST, and NOIDA's error should not penalize ... - Petitioner, head of Hindu Undivided Family, paid GST but was penalized due to NOIDA's error in tax head - ....
2025 0 Supreme(All) 2346 • India - IN THE HIGH COURT OF ALLAHABAD
Hon'ble Piyush Agrawal,J.
(A) Goods and Services Tax Act, 2017 - Sections 39 and 61 - The petitioner, as head of a Hindu Undivided Family, challenged orders ... The petitioner paid lease rent and GST, but due to an administrative error, the tax was misallocated. ... GST, which was misallocated by NOIDA. ... The rent received from the said property, is taxable under the Goods & Services #....
2023 0 Supreme(Jhk) 38 • India - Jharkhand
APARESH KUMAR SINGH, DEEPAK ROSHAN
is engaged in manufacturing and selling of aluminum cable and conductor, having its manufacturing unit at Jamshedpur – Petitioner ... Constitution of India, 1950 – Article 226 – JGST Act, 2005 – JVAT Act, 2005 – Section 140(1), 45, 108, ... (T) impugned order passed in revision and Demand Notice are quashed and set aside – Amount, if any, recovered or paid shall be refunded ... forward to next period as Tax Deducted at#....
2023 0 Supreme(All) 2821 • India - Allahabad
PANKAJ BHATIA
(A) UPGST Act - Section 68 and Section 129 - Challenge to tax liability and penalty assessed on goods transported without requisite ... the validity of detention under the UPGST Act. ... ... ... Issues: Whether the petitioner was liable for tax and penalty when possession of necessary documentation was claimed, and ... This Court had entertained the writ petition in view of the fact that the tribunal contemplated....
2023 0 Supreme(Ker) 974 • India - Kerala
DINESH KUMAR SINGH
The petitioner filed TRAN-1 on 14.11.2022 and claimed credit of Rs.59,05,352/- under the SGST Act through table 5 (c) as per Section 140(1) of the SGST Act 2017. This amount of Rs.59,05,352/- was the TDS amount deducted from the contract amount. ... Therefore, I am of the view that the TDS which is tax deducted by the contractor on execution of the contract of the petitioner, cannot be said to be input tax credit. Such tax deducted at source is reflected in the electr....
2023 0 Supreme(Gau) 1348 • India - Gauhati
DEVASHIS BARUAH
Bills/invoices were raised after GST: TDS will be made as per provision of the GST Act, as mentioned in para (b) above relating to supply of goods or services. ... The First would be in case of bills/invoices were raised before GST, deduction of tax at source (TDS) will be made as per provision of the Act of 2003 and in respect of bills/invoices raised after GST, TDS would be made as per the provision of the releva....
2026 0 Supreme(Ker) 204 • India - IN THE HIGH COURT OF KERALA AT ERNAKULAM
HARISANKAR V.MENON
The TDS and other deductions would be on payments made or credited to the supplier excluding GST.13. ... The amount deducted as tax under the provisions of GST Act shall be paid into the Government by the deductor within TEN days after the end of month in which such deduction is made in the prescribed manner.14. ... (2) The value of supply shall include–(a) any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than this Act, the State #HL_ST....
2023 Supreme(Online)(JHK) 7389 • India - High Court of Jharkhand
HON'BLE THE ACTING CHIEF JUSTICE,HON'BLE MR. JUSTICE DEEPAK ROSHAN
Section 17(5) of the GST Act. ... >is not admissible as input tax credit under the GST Act. ... Reliance was also placed upon Section 51(5) of the JGST Act to contend, inter alia, that the under the GST Regime, TDS deducted was required to be credited under the electronic cash ledger and not electronic credit ledger which by ... referred to as ‘GST Act, 2017’ for short] it was also registered under the said #H....
2025 Supreme(Online)(ITAT) 3476 • India - Income Tax Appellate Tribunal (Hyderabad Bench)
Shri Manjunatha, AM, Shri Ravish Sood, JM
No adjustment is required, if the sale return is replaced by the goods by the purchaser as in that case, the seller on which the tax was deducted u/s 194 O of the Act has been compensated with goods replaced. ... The learned Counsel for the assessee, further referring to the provisions of section 52 of the GST Act submitted that as per the GST Act, every electronic commerce operation, not being an agent shall collect an amount calculated at such rate....
Filter by Legal Phrase
