India GST: What is Tax Deducted at Source (TDS) and Tax Collected at Source (TCS)?

Janhavi Wagh -


Tax Deducted at Source (TDS)

TDS stands for Tax Deducted at Source. It is a process to keep an eye on the transactions of the supply of goods and services by making the buyer of such transaction deduct a small amount to be paid to the supplier and deposit the amount with the Government. In such a case, the supplier takes into account the deducted amount and makes the balance payment of tax to the Government.

Under the GST regulation, TDS is to deducted at the rate of 2% on payments made to the supplier of taxable goods and services (1% CGST and 1% SGST in case of intrastate supply and 2% IGST in case of the interstate supply). TDS can be deducted only when the value of supply under a contract of taxable goods and services exceeds 2,50,000. The following people/entities are liable to deduct TDS are:

  • Government Agencies
  • Local Authorities
  • Department of Central Government
  • Department of State Government
  • An establishment of State and Central Government
  • The person notified by the Central or State Government on the recommendation of the GST Council

Tax Collected at Source (TCS)

TCS means Tax Collected at Source. It is a process where the tax is collected by the e-commerce operator when a supplier sells goods and services through its portal, and the payment received by the e-commerce operator. TCS will be charged and collected at the rate of 1% (0.5% CGST and 0.5% SGST) for intrastate supply and (IGST 1%) will be levied in case of interstate supply. Every e-commerce operator must register under GST. The sellers referred to as TCS are:

  • Partnership Firms
  • Central Government
  • State Government
  • Statutory Authority
  • Local Authority
  • Company

Similarly, there are only a few buyers that are liable to pay TCS to sellers such as:

  • Public Sector Companies
  • State Government
  • Central Government
  • Clubs (sports and social)
  • Embassy of High Commission

Few of the exemptions under TCS are; when the goods aren't bought for trading purposes and some other purposes like personal use, manufacturing, production, etc.

The TCS has to deposit within seven days from the last month in which the tax was collected. If the tax is not paid to the Government on the due date, then he will be liable to pay interest of 1% per month.

Lastly, in simple words, TDS is an expense deducted by payer or buyer, and TCS, on the other hand, is an income collected by payee or seller.