Tax Collected At Source ( TCS ) Under Goods and Services Tax

Tax Collection at Source in respect of GST means an amount of tax collected by the e-commerce operators from the proceeds transferable to actual sellers. Let us get a clear understanding of the complete scenario with a case study
Suppose, there is a seller named M/s XYZ who sells his goods through Amazon For ? 1,20,000. In this case, the customer will place a purchase request on Amazon and will remit money i.e ? 1,20,000 to Amazon. Further Amazon will give pre-decided consideration to actual seller M/s XYZ (say ? 1,00,000). Now on this payment made by Amazon to the actual seller, it is bound by law to keep 1% amount i.e. ? 1000 in this case, with itself in name of Tax Collected at Source i.e. TCS under GST.

Contents :-

What is the purpose behind introducing TCS in GST?

The purpose of implementing TCS in GST can be inferred from its applicability to e-commerce operators. Actually, hundreds and thousands of small seller sell upon these e-trade platforms in today’s time. These e-commerce operators are trade giants who are traceable and it is easy to impose responsibility on them. Hence, the government made them accountable to collect a minimum amount in name of tax before transferring the proceeds to each of these sellers. This will help in tracking all those small sellers who otherwise would have been out of tax authorities reach. Also, to take the refund of tax so collected they would file timely returns and disclose business transactions which will also enhance the compliance procedure under GST framework.


Who is liable to Collect Tax at Source under GST?

E-Commerce Operators (not being an agent) are the specified category of the person, who is required to collect TCS under GST. Some common day to day examples of e-commerce operators around us are Amazon, Flipkart, Snapdeal etc.


Is there any threshold limit for Collecting Tax at Source?

The tax has to be collected irrespective of the amount involved in a transaction. Unlike TDS, there is no limit of ? 2.5 Lakhs.


Is it mandatory for E-commerce operators to get registered in GST?

Yes, every e-commerce operator has to get mandatory registration under Goods and Service Tax. Section 24(x) of CGST Act,2017 mandates the same irrespective of the value of supply made by such operator.


How the value of the transaction shall be calculated for the collection of tax at source?

The value of a transaction for the purposes of TCS shall be “Net Value of Taxable Supply”. It can be calculated as

Particulars Amount
The aggregate monthly value of taxable supplies of goods and/or services [ except under u/s 9(5) on which E-commerce operator is required to pay complete tax in RCM ] xxx
Less: Monthly value of taxable supply returned xx
Net Value of Taxable Supply xxx

For eg:
Say M/s XYZ sold goods through Amazon amounting to ? 15 Lakhs and customers made a return for goods amounting to ? 2 Lakhs. In this case, Amazon shall collect tax for M/s XYZ at ? 13 Lakhs i.e. “Net Value of Taxable Supply” computed as under

Particulars Amount
The aggregate monthly value of taxable supplies of goods and/or services [ except under u/s 9(5) on which E-commerce operator is required to pay complete tax in RCM ] 15,00,000
Less: Monthly value of taxable supply returned 2,00,000
Value of Net Taxable Supply 13,00,000

Is Value of Net Taxable Supply required to be taken at gross level?

The Value of Net Taxable Supply is required to e taken at GSTIN level and not at gross level.


What if my sales return in a period are more than outward supply for a period?

In case the returns in a period exceed the outward supply and resulting Value of Net Taxable Supply is negative the same shall not be reported. Neither it has any impact on future periods also.


What shall be the rate of Tax Collection?

The rate of TCS shall be

  • CGST – 0.5%
  • SGST – 0.5%
  • IGST – 1%

The same has been specified in Notification number 52/2018 – Central Tax


When does the tax need to be collected on a transaction?

Tax collection shall be done during the month in which supply was made, irrespective of actual collection. For instance, Supply made in the month of Jan and payment was received in Feb. In such a situation the tax shall be collected in Jan itself.


Till what date TCS should be paid to the government?

Tax collected shall be deposited to the government by the 10th of following month. Which means if the tax has been collected for the month of Jan it shall be deposited with the government latest by 10th Feb.


Which section governs TCS applicability under GST?

Section 52 under CGST Act, 2017 governs the applicability of TCS under GST.


From which date provisions of TCS are made applicable in India?

The provisions of TCS, as specified under section 52 of CGST Act 2017 are made effective from 1st October 2018. Notification number 51/2018 – Central Tax has been issued in respect of the same.


How credit for TCS can be taken by the actual supplier?

The TCS will reflect in e-Cash ledger of the actual supplier and can further be used for making payment of taxes or interest etc.


Whether excess TCS can also be claimed as a refund?

Yes, after adjusting all your tax liabilities, the remaining amount can be claimed as refund. The refund provisions as laid down under section 54(1) of CGST Act,2017 shall apply.


Can TCS to be deposited adjusted from ITC?

An e-commerce operator who is required to deposit tax collected at the source cannot pay it from the Input Tax Credit available.


Which GST Return is filed by E-commerce operator?

E-commerce operator is required to file two Goods and Service Tax Return, which are

  • GSTR 8 – this monthly return shall be filed by each E-Commerce Operator collecting taxes under GST. It should be filed by 10th of next month. Which means for the month of Jan it should be filed till 10th of Feb.
  • GSTR 9B – This annual return is required to be filed by E-Commerce Operator by 31st December of the next Financial year. But, the provisions of TCS are made effective form 01.10.2018 and hence no annual return for Financial Year 2017-18 is to be filed.

What are the consequences of non payment of TCS collected?

Any amount not collected or collected but not deposited shall attract

  • Interest – as per section 52 (6) of CGST Act, 2017
  • Penalty – a per section 122 (vi) of CGST Act, 2017

What will be the place of supply for E-Commerce operators providing recharge or ticket booking facilities?
For E-Commerce operators like Paytm which are giving

  • Recharge facilities like talk time, DTH recharge etc, or
  • Charging convenience fee for travel ticket booking etc

In such cases, the place of supply will be the address of the customer as per the records of the supplier of service. The provisions regarding the same are given under section 12 (11) of the IGST Act, 2017.


Can Input Tax credit available to the actual supplier can become ineligible in any case?

Yes, the amount collected as tax from the proceeds to actual supplier needs to be deposited timely to the government. Also, if return by e-commerce operator is not filed by the due dates, the actual supplier would not be able to cliam TCS as his Input Tax Credit in e-cash ledger.


Does TCS apply to Gold?

Yes, though gold is charged to nominal GST rate of 3% and TCS applicability further reduces the supplier’s margin, it has still not been kept out of TCS applicability. TCS applies to gold normally.


What are the additional powers available with tax officers in relation to TCS?

Requisite Tax Officer can serve notice on supplier and ask for information required. The supplier would be required to produce all such information before the officer within 15 working days from the date on which notice was served.


Registration

Can a supplier making supply through E-commerce operator avail threshold exemption?

The benefit of threshold exemption under GST can be better understood by categorizing suppliers as

Supplier of Goods

As per section 24(ix) of the CGST Act,2017 the supplier of goods shall take mandatory registration under GST. No matter how much is the amount of supply made, supplying goods through e-commerce platform requires registration.

Supplier of Services

A supplier of services can avail the benefit of threshold exemption. They are required to take registration if value of supply exceeds ? 20 Lakhs ( ? 10 Lakhs in case of the Noth Eastern States, excluding J&K). But, this benefit is not available to those covered under RCM as per Section 9(5) of CGST Act, 2017. Notification Number 65/2017 – Central Tax


Is separate registration for TCS is required by E-Commerce Operators?

Yes, even if an E-Commerce Operators already has a GSTIN, it would be required take separate registration for TCS.


Whether multiple registrations for TCS would be required by the E-Commerce Operator?

In case an operator makes interstate supply or intrastate supplies at multiple places, it would be required to take multiple registrations in each State / Union Territory where it is required to collect the tax. But, to facilitate the same there is an option to declare Head Office as its place of business for obtaining various registrations in different State / UT.


What is the applicability of TCS on foreign e-commerce operators selling in India?

If a registered supplier makes supply in India through a foreign e-commerce operator, such an operator is required to take mandatory registration. The main problem arising, in this case, would be no place of business in India. To resolve the same an agent in India can be appointed by such foreign e-commerce operator.


NO TCS

Do exempt supplies also qualify for TCS?

No, TCS is not required to be collected on exempt supplies.


Will tax be collected if supply is made by a Composite dealer?

The question of collecting tax at source form composite dealer does not arise. Because, as per section 10(2)(d) of CGST Act,2017 a Composite dealer cannot make supply through e-commerce operator.


Is TCS applicable even if no consideration for the supply is collected?

If no consideration for the supply is collected by the E-Commerce operator he shall not collect any tax at source as per Section 52(1) of CGST Act, 2017.


What is TCS applicability in case of RCM supplies?

Supplies on which recipient is required to pay tax under Reverse Charge are not charged to TCS.


How tax is collected on Import of goods or service or both?

Import falls within the ambit of Customs Act, 1962 and is not covered under GST. Since it is not in the purview of GST there is no option for collecting the tax.


Does MMT, Goibibo and alike E-Commerce operators have to collect tax?

Liability to collect TCS is on e commerce operator who is finally rendering money to the actual supplier. In this case there are two possibilities

  • If MMT, Goibibo, Yatra etc directly pay amount to concerned hotel etc they should collect tax at source but,
  • If they operate through some other E- commerce operator who finally gives amount of consideration to supplier than that second e-commerce operator shall collect tax in this case.
CA Abhishek Soni

Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Tax2Win.in. Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.