GSTR-7: GST TDS Return for Deductors 2026

GSTR-7 is the monthly return through which a specified deductor reports the GST tax deducted at source on payments made to suppliers, deposits that tax with the government, and lets the supplier claim it back as a cash credit. If you run a government office, a municipal body, or a notified agency that pays vendors, this return is the form that turns your TDS deduction into a credit the supplier can actually use. This guide walks through who deducts, how the 2% works with a rupee example, the step-by-step filing, the September 2025 invoice-wise change, late fees, and how the supplier claims the money.

Section 51 of the CGST Act, 2017 names the persons who must deduct GST TDS. These are not ordinary businesses. The category covers a department or establishment of the Central or State Government, local authorities, governmental agencies, and other bodies, authorities, boards, public sector undertakings, and societies that the government has specifically notified. A private firm paying another private firm does not deduct GST TDS.

A deductor must take a separate GST registration as a TDS deductor (using Form REG-07) even if it is already registered as a normal taxpayer, because the TDS role carries its own GSTIN and its own monthly return.

There is an important carve-out built into Section 51 itself. No TDS is deducted where the location of the supplier and the place of supply are in a State or Union territory different from the State of registration of the recipient. In plain terms, if a Delhi-registered department buys from a Maharashtra supplier whose place of supply is also Maharashtra, the recipient could not have used that input anyway, so the law does not require deduction. Supplies between two notified TDS deductors are also exempt from deduction.

The 2% is calculated on the value of the supply, excluding the GST charged on the invoice. Take a municipal body that awards a single works contract to a contractor for ₹10,00,000 plus 18% GST.

The deductor pays the contractor ₹11,60,000 and deposits ₹20,000 with the government as TDS. The contractor does not lose this ₹20,000; it shows up in the contractor's electronic cash ledger once the GSTR-7 is filed. Note the threshold test looks at the contract value of ₹2.5 lakh, not each running bill, so splitting one contract into smaller invoices does not avoid deduction.

1. Log in to the GST portal with the TDS deductor GSTIN and open Services, then Returns, then the return for the relevant month.
2. Enter the deduction details invoice by invoice (see the next section) against each deductee's GSTIN, capturing the value on which tax was deducted and the integrated, central, and State tax amounts.
3. Pay the tax so the deducted amount sits in the cash ledger, ready to offset the liability in the return.
4. File GSTR-7 with DSC or EVC on or before the 10th of the month following the deduction.
5. Issue GSTR-7A: once GSTR-7 is filed, the system generates the TDS certificate in Form GSTR-7A for each deductee. The deductor makes this available to the supplier as proof of the tax deducted and deposited.

The TDS so deposited reflects in the supplier's auto-drafted TDS and TCS credit statement and in the supplier's GSTR-2A.

This is the single biggest recent shift. Through Notification No. 09/2025-Central Tax dated 11 February 2025, the government amended GSTR-7 to require invoice-wise reporting. From the September 2025 tax period (filed by 10 October 2025), a deductor can no longer report one consolidated TDS figure per deductee. Each invoice on which TDS is deducted must be reported separately, with its own invoice number, value, and tax. This tightens the match between what the deductor reports and what the supplier sees, so reconcile your bills against your TDS register before filing.

A related discipline applies from 1 November 2024 under Notification No. 17/2024: sequential filing. You cannot file a later month's GSTR-7 if an earlier month's return is still pending. Even in a month with no deduction, file a Nil GSTR-7 to keep the chain unbroken.

Two separate charges can bite if you slip.

• Late fee: The base late fee under Section 47 is ₹100 per day under CGST plus ₹100 under SGST. For GSTR-7 this is reduced to ₹25 per day under CGST and ₹25 under SGST, that is ₹50 per day, capped at ₹1,000 each under CGST and SGST (₹2,000 in total) per return, per Notification No. 23/2024-Central Tax dated 8 October 2024 (which superseded the earlier 22/2021 relief and runs from 1 November 2024). For a Nil GSTR-7, the late fee stands fully waived.
• Interest: If you deduct the tax but deposit it late, interest at 18% per annum runs on the delayed amount from the day after the due date until you actually pay.

The cheaper risk is always the late fee; the costlier and unavoidable one is the 18% interest on tax you have already taken from the supplier but not yet handed over.

The supplier (deductee) is the one who gains. Once you file GSTR-7, the deducted tax flows into the supplier's auto-drafted TDS and TCS credit statement on the portal. The supplier accepts the entries, and on acceptance the amount is credited to the supplier's electronic cash ledger. From there the supplier can use it to pay output GST or claim a refund of the balance. So the supplier never loses the 2%; it simply moves from your deduction into the supplier's cash ledger as usable money. If your invoice-wise figures do not match the supplier's records, the supplier may reject the entry, which is exactly why the September 2025 invoice-level detail matters.

• Testing the ₹2.5 lakh threshold against each running bill instead of the whole contract value.
• Calculating 2% on the invoice total including GST instead of on the supply value alone.
• Forgetting to file a Nil GSTR-7, which then blocks the next month under sequential filing.
• Deducting where the Section 51 proviso (different-State place of supply) actually exempts the transaction.
• Reporting consolidated figures after September 2025 instead of invoice-wise.
• Not issuing the GSTR-7A certificate, leaving the supplier without proof to accept the credit.

Government departments and establishments, local authorities, governmental agencies, and notified bodies such as certain PSUs and societies. Ordinary private businesses do not deduct GST TDS even on large contracts.

TDS applies when the total value of a single contract for a taxable supply exceeds ₹2.5 lakh, counting only the supply value and excluding the GST shown on the invoice.

By the 10th of the month following the month in which the tax was deducted. Sequential filing applies, so you must file each month in order, including Nil returns.

It is the system-generated TDS certificate the deductor issues to the deductee, showing the value on which tax was deducted and the tax deposited. The supplier uses it as proof when accepting the credit.

From the September 2025 tax period, GSTR-7 must be filed invoice-wise rather than as consolidated totals, under Notification No. 09/2025-Central Tax dated 11 February 2025.

No. After the deductor files GSTR-7, the amount appears in the supplier's TDS and TCS credit statement, and on acceptance it is credited to the supplier's electronic cash ledger to pay GST or claim as a refund.

If you are setting up as a deductor or a supplier dealing with government buyers, start with how to apply for GST registration. To understand how the deducted credit interacts with your input tax, read the GST Invoice Management System and ITC guide. For correcting outward supply details that feed reconciliation, see GSTR-1A amendment of outward supplies, and at year end consult the GSTR-9 annual return guide. If a government department withholds information about your contract or payment, you can use our AI RTI draft tool to frame a request. For a broader grounding in citizen rights and information law, read The RTI Playbook.

• Section 51, CGST Act, 2017, CBIC tax repository.
• Notification No. 09/2025-Central Tax dated 11 February 2025 (invoice-wise GSTR-7).
• Notification No. 23/2024-Central Tax dated 8 October 2024 (GSTR-7 late-fee cap and Nil waiver).
• GSTR-7 return filing, due date, format, applicability and late fees, ClearTax.
• TDS under Section 51 of GST, applicability, rate and GSTR-7.