Tax Deducted at Source (TDS) is an essential compliance requirement for businesses in India. With the implementation of GST, understanding how to deduct TDS on the GST bill correctly is crucial for smooth tax filings and avoiding penalties. In this guide, we will explain everything about deducting TDS on GST bills in 2025, along with the role of Billing Software, Accounting Software, and MargBooks in simplifying this process.
What is TDS on GST?
TDS on GST is a tax deducted by a specified category of taxpayers while making payments to suppliers for taxable goods or services. The deducted amount is then deposited with the government. This provision helps in tracking transactions and ensures proper tax compliance.
Who is Required to Deduct TDS on GST?
As per the GST law, the following entities are required to deduct TDS:
- Government departments and agencies
- Local authorities
- Public sector undertakings (PSUs)
- Entities registered under GST with contracts exceeding Rs. 2.5 lakh
If you fall under these categories, you must know how to deduct TDS on the GST bill correctly to stay compliant with the law.
Rate of TDS on GST in 2025
As per the latest provisions, the TDS rate under GST remains:
- 1% under CGST
- 1% under SGST
- 2% under IGST (for inter-state transactions)
The TDS is deducted on the taxable value of the supply, excluding GST.
How to Deduct TDS on GST Bill?
If you are liable to deduct TDS on GST, follow these steps:
1. Verify GST Registration of the Supplier
Before making the payment, confirm whether the supplier is registered under GST and whether TDS is applicable to the transaction.
2. Calculate TDS on the Taxable Amount
TDS is deducted on the taxable value of the supply. For example, if the bill amount is Rs. 3,00,000, and the taxable value (excluding GST) is Rs. 2,50,000, then the TDS deduction will be:
- For Intra-State Supply: 1% CGST + 1% SGST on Rs. 2,50,000 = Rs. 5,000
- For Inter-State Supply: 2% IGST on Rs. 2,50,000 = Rs. 5,000
3. Deduct and Deposit TDS
The deducted amount must be deposited with the GST Portal within the prescribed due date.
4. File GSTR-7 Return
Entities deducting TDS must file GSTR-7 by the 10th of the following month to report TDS details. The supplier can claim credit for the deducted TDS once it is reflected in their electronic cash ledger.
5. Issue TDS Certificate (GSTR-7A)
After filing GSTR-7, generate and issue a TDS certificate (Form GSTR-7A) to the supplier within five days of filing.
Common Mistakes to Avoid While Deducting TDS on GST Bill
Many businesses face challenges in TDS deduction due to errors in calculations or non-compliance. Here are some common mistakes to avoid:
- Deducting TDS on the total invoice value instead of the taxable amount
- Failing to deposit TDS on time, leading to penalties
- Not issuing a TDS certificate (GSTR-7A) to the supplier
- Incorrectly classifying an inter-state and intra-state supply
Using Billing Software, Accounting Software, and MargBooks can help automate tax calculations and ensure compliance.
How Billing and Accounting Software Can Help?
Modern businesses use Billing Software, Accounting Software, and MargBooks to simplify tax-related processes, including TDS deductions. Here’s how these tools can help:
1. Automating TDS Calculation
Billing software can automatically calculate TDS on GST bills, reducing manual errors.
2. Generating GST-Compliant Invoices
Proper software ensures that invoices comply with GST regulations, including TDS applicability.
3. Seamless Filing of GSTR-7
With integrated accounting software, businesses can directly file GSTR-7 returns, reducing paperwork.
4. Timely TDS Payment Reminders
Automated systems send alerts for due dates, ensuring businesses avoid penalties for delayed TDS deposits.
5. Issuing TDS Certificates
Some software solutions allow businesses to generate GSTR-7A (TDS certificate) seamlessly.
6. Simplified Accounting with MargBooks
MargBooks, a cloud-based accounting and billing solution, helps businesses streamline TDS calculations and GST compliance. Its user-friendly interface ensures smooth financial management, automatic report generation, and timely filing of returns, making TDS deductions effortless.
Conclusion
Understanding how to deduct TDS on the GST bill in 2025 is crucial for businesses dealing with GST-compliant transactions. By following the correct steps and using the right Billing Software, Accounting Software, and MargBooks, companies can ensure smooth tax compliance without errors. Stay updated with GST regulations, use automation tools, and file returns on time to avoid penalties.If you are looking for a reliable way to manage GST billing and TDS deductions, consider investing in an advanced Accounting Software solution like MargBooks to simplify compliance and financial management.
