TDS on GST @ 2% where taxable service exceeds Rs.250000/-

Hi Arun — this is a good and important question regarding TDS under GST provisions in the case of inter-governmental service contracts.

Let’s break it down clearly:

✅ Context Summary:

• State Government Transport Department provides transport services (mail conveyance) to the Central Government (likely Department of Posts or similar).

• A service agreement exists.

• Bill amount exceeds ₹2,50,000.

• You're asking: Should GST TDS @ 2% be deducted under such circumstances?

🧾 Relevant GST Provision:

📘 Section 51 of CGST Act – TDS under GST:

TDS @ 2% (1% CGST + 1% SGST or 2% IGST) is to be deducted by specified persons when:

• Payment is made to a supplier of taxable goods or services, and

• Contract value exceeds ₹2.5 lakh (excluding GST), and

• Both supplier and recipient are registered under GST

✅ Who are required to deduct TDS under GST?

As per Section 51, the following are required to deduct TDS:

• Central Government

• State Government

• Governmental Agencies

• Local authorities

• Public sector undertakings

• Certain notified bodies

So, in your case:

• Central Govt is the recipient and is liable to deduct TDS under GST.

• State Govt Transport is the supplier of service.

⚠️ Is TDS under GST applicable in your case?

✅ Yes, TDS under GST @ 2% is applicable, if all of the following are true:

So, if the transport service is not in exempt category under GST, TDS @ 2% should be deducted.

🟨 But is this transport service exempt under GST?

As per GST Exemption Notifications (esp. Notification No. 12/2017 – Central Tax (Rate)):

Certain transport services (like public transportation of passengers, or goods transport by Govt for non-commercial use) may be exempt.

However, if the State Transport is charging GST on the bill (which it likely is, if the service is for business or contract basis), then it's taxable, and TDS applies.

✅ Final Answer:

📌 Additional Notes:

• TDS should be deducted on the amount excluding GST (i.e., on the taxable value only).

• TDS must be deposited with the government and reported in GSTR-7 by the deductor (Central Govt).

• The deductee (State Transport) can view it in their GSTR-2A and claim the amount.