TCS on GST

TCS full form stands for Tax Collection at Source under GST (TCS) is similar to TDS but has a few key differences. TDS is the tax deducted when the recipient of goods or services makes payments under a contract. Except for a few exceptions, every e-commerce operator must begin collecting TCS on October 1, 2018. This article will explain how TCS on GST works.

For example: In contrast, TCS refers to the tax collected by the electronic commerce operator when a supplier supplies goods or services through its portal and the payment for that supply is collected by the electronic commerce operator.

What is TCS on GST?

TCS on GST refers to the tax collected by an e-commerce operator from the consideration received on behalf of the supplier of goods or services who makes supplies via the operator's online platform. TCS is calculated as a percentage of net taxable supplies. Section 52 of the CGST Act deals with the provision of TCS under GST.

Who is responsible for collecting TCS on GST?

TCS is due to certain operators who own, operate, and manage e-commerce platforms. TCS applies only when the operators collect payment from customers on behalf of vendors or suppliers. In other words, when e-commerce operators pay the consideration collected to the vendors, they must deduct TCS and pay the net amount.

Here are a few exceptions to the TCS provisions for e-commerce platform services:

  • Hotels and nightclubs (unregistered vendors)
  • Passenger transport - radio taxi, motor cab, or motorcycle
  • Plumbing, carpentry, and other housekeeping services (unregistered suppliers)

For instance.

Raj stores (a sole proprietorship) sell clothing on Flipkart.

Therefore, Flipkart, as an e-commerce operator, will be required to deduct TCS before making payment of consideration collected on behalf of XYZ.

What is the TCS applicability rate?

Dealers or traders who supply goods and services through e-commerce operators will be paid after a 1% TCS deduction.

The CBIC announced the rate in Notification No. 52/2018 under the CGST Act and 02/2018 under the IGST Act.

This means that TCS at 1% will be collected for intra-state supplies, i.e. 0.5% under CGST and 0.5% under SGST. Similarly, the TCS rates for transactions between states will be 1%, as the IGST Act requires.

Who is responsible for TCS?

E-commerce Operator pays TCS deducted amount to government by completing GSTR-8 Return. Is there a credit available for TCS Deducted?

Registered Selling through E Commerce Portals are entitled to the full credit of TCS deducted by the E-Commerce Operator.

How do I obtain the TCS Credit?

By completing the "TDS and TCS Credit Receivable return" on the GST Portal, Registered Sellers of E-Commerce Portals can obtain full credit for TCS deducted.

TCS Credit Receivable Return Filing Procedure:

  1. Log in to the Portal.
  2. Navigate to Services -> Returns -> TDS and TCS Credit Received.
  3. Choose a financial year and a tax period.
  4. Select Prepare Online.
  5. Navigate to the TCS Credit tab.
  6. Accept or decline the credit.
  7. Use DSC or EVC to file the return.

After completing the return, the credit will be transferred to your Cash Ledgers, which you can use to make tax payments.

Effect of GST under TCS on E-Commerce Operators

To implement TCS on GST, online sellers such as Amazon, Flipkart, and Snapdeal had to change their online payment process and administration or finance department.

They must register for GST in each state where they operate. ERP systems must be well integrated to implement these provisions in day-to-day business operations.

On the other hand, E-tailers or sellers must register for GST to operate on such e-commerce platforms. Furthermore, the working capital of these sellers who supply through an e-commerce operator will be frozen until they file their returns and claim the excess taxes.

TDS and TCS on GST : Benefits

TCS on GST benefits

TDS and TCS on GST provide numerous advantages. The government implemented TDS and TCS in GST to strengthen tax evasion regulation. Sections 51 and 52 of the CGST Act cover the provisions of TDS and TCS under GST, respectively.

Once the deductor files their returns under the TDS system, there will be an automatic reflection in the deductee's or supplier's electronic ledger. The deductee can claim credit for this tax deducted in his electronic cash ledger and use it to pay other taxes at leisure.

TDS significantly aids in bringing unorganised sectors into compliance with tax provisions and preventing fraud.

Similarly, TCS under GST regulates online sellers, keeps track of transactions, and ensures timely tax deposits with the government.

TCS on GST : Registration requirements provisions

TCS on GST registration

E-commerce operators required to collect TCS must register under GST, and there is no threshold limit exemption. Except for a few exceptions, sellers supplying goods through the online portals of e-commerce players are also required to register for GST.

The following are the registration requirements:

  • Every e-commerce operator who is required to collect TCS is required to register with GST.
  • Anyone who makes a supply through an e-commerce operator, except those who make supplies notified under Section 9 (5) of the CGST Act.
    Section 9 (5) lists the following supplies: transporting passengers by radio-taxi and motorcycle OR providing accommodation in hotels, guest houses, for residential or lodging purposes (unregistered suppliers) OR house-keeping services such as plumbers, carpenters, and so on (unregistered suppliers).
    The e-commerce operator must pay GST and comply with all regulations in all three cases. As a result, suppliers are exempt from registration if they provide the services listed in 9 (5) and do not exceed the Rs.20 lakh (or Rs.40 lakh) registration threshold.
  • Also, service providers who make a supply through an e-commerce platform are exempt from registration if their aggregate turnover is less than Rs.20 lakh or Rs.40 lakh (assuming they do not make inter-state supplies).
  • Goods suppliers who sell via an e-commerce platform are not exempt from registration.
  • An e-commerce company must register for GST in each state where it sells goods or provides services.

TCS deposit deadline

TCS deposits are due on the last day of the month in which the supply is made. It will be deposited to the government's credit within 10 days of the end of the month of supply.

The collected tax will be paid in the following ways:

  • The central government will be charged with IGST and CGST.
  • SGST payable to state governments.
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TCS on GST provisions impact

TCS provision

From the perspective of e-commerce operators, they must register for GST in each state in which they operate before October 1, 2018, the effective date of implementing TCS provisions. Therefore, ERP systems must be well integrated to implement these provisions in day-to-day business operations smoothly.

Furthermore, the working capital of suppliers selling through an e-commerce operator will be frozen until they file their returns and claim the overpayment of taxes. This may prevent SMEs from selling goods or providing services through the online portal.

According to the government, tax fraud will be significantly reduced because the tax will be collected at every transaction.

E-commerce sellers using GSTR-8 data in GSTR-2A

The information provided by the operators in GSTR 8 will be made available to all suppliers in GSTR 2A. The supplies will be available in GSTR 2A after the GSTR-8 filing deadline. It should be noted that these credit details will not be available in the GSTR-2B return.

Instead, the tax collected will be reflected in the respective suppliers' electronic cash ledgers. Suppliers can claim the credit after matching and reconciling their supplies with the information in GSTR 2A.

Once filed, GSTR 8 cannot be revised. Any inconsistency discovered while matching and reconciling supply data and GSTR 2A will be communicated to the operator and the supplier.

The tax amount will be added to the supplier's liability if the error is not corrected within the specified time frame. The supplier must pay the difference, as well as any interest.

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Sameep Mohite

About the author

Sameep Mohite is a computer engineer with a passion for GST. He has written many articles on GST, Finance, and Technology topics.

He is a GST expert who writes for GSTHero. He wants to ensure you know what you're paying for and why.

He enjoys explaining complex technical terms in primary, easy-to-understand language.

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