DID you KNOW? Concept of TAX COLLECTED AT SOURCE (TCS) and practical issue under GST

What is TCS?

This article will help you to solve your problems related to 2 important areas under GST.

1) Concept of TCS and related Provision
2) Practical problem/doubts

1) What is TCS?

TCS is a tax which is collected by the electronic commerce operator (ECO) from buyer who places an order online and made a payment to online seller (who delivered the products or services) after deducting Commission and TCS @ 1%.

Concept of TCS on GST is applicable from 1st October, 2018.

2) Who is an ECO?

As per Section 2(45) of the CGST Act, 2017, ECO means any person who owns, operates or manages digital or electronic facility or platform for electronic commerce.

Example-

Amazon and Flipkart operators in selling of goods
Uber, Ola, Swiggy, Urban Clap in selling of Services

3) What is Electronic commerce?

As per Section 2(44) of the CGST Act, 2017, electronic Commerce means the supply of goods or services or both, including digital products over digital or electronic network.

4) What is the rate of TCS?

TCS is deducted at 1% (0.5% CGST & 0.5% SGST or 1% IGST)

5) On which Value TCS is to be levied?

VALUE = NET SALES.

Let’s discus with Example

ParticularsValue
Sales Return1000
Less- Sales Return 100
Net Sales 900

So, TCS is deducted at 1% (0.5% CGST & 0.5% SGST or 1% IGST) on Rs.900/-

TCS = Rs.9.

Therefore ECO (Amazon) will remit the amount say Commission on above is charged Rs.100

Amount Remitted by ECO = Rs900-Rs100 –Rs9 = Rs.791/- to Online Seller

6) When TCS is NOT liable to be collected?

  1. Supply NOT affected through E-Commerce Operator
  2. Exempted Supplies affected through E-Commerce Operator
  3. Activities as per Schedule III of the Act (which shall be treated NEITHER AS A SUPPLY OF GOODS NOR A SUPPLY OF SERVICES)

7) What are the STATUTORY requirements for TCS to be fulfilled by collector?

GST Return GSTR8 is to be filled

Due dates of Return 10th of Next Month

NO requirement to issue TCS Certificate

It will be deposited within 10 days from the end of the month of supply.

8) Is it mandatory for e-commerce operator to obtain registration?

Yes. GST registration is mandatory without any threshold limit.

9) List of Problem was addressed under this article.

S.NOProblemSolution
1. Should the ECO get registered State-wise?Registration is required in EACH State/UT where tax collectors are located, where it does NOT have physical presence. However, Registration can be taken using the head office address as the place of business.
2. Foreign ECO do not have place of business (POB) in India since they operate from outside. But their supplier and customers are located in India. So, in this scenario will the TCS provision be applicable to such e-commerce operator and if yes, how will foreign e-commerce operator obtain registration?IF registered supplier is supplying goods or services through a foreign ECO to a customer in India, such foreign ECO would be liable to collect TCS on such supply and would be required to obtain registration in each State / UT. If the foreign e-commerce operator does not have physical presence in a particular State / UT, he may appoint an agent on his behalf.
3. Is TCS to be collected on charges?Convenience/other charges are NOT “Service provided through ecommerce operatoru/s 52(1), NO TCS needs to be made.
4.If Sales return are > Sales. So, negative amount to be reported?Negative amount cannot be declared. There will be NO impact in next tax period also.
5.Whether TCS is to be collected in respect of supplies made by the composition taxpayer?A composition taxpayer cannot make supplies through e commerce operator (ECO) Thus, the question of collecting TCS in respect of supplies made by the composition taxpayer does not arise.
6.Whether TCS to be collected on supplies on which the recipient is required to pay tax on reverse charge basis?No, TCS is NOT required to be collected on supplies on which the recipient is required to pay tax on reverse charge basis.
7.Is it necessary for e-Commerce operators who are already registered under GST and have GSTIN, to have separate registration for TCS as well?Yes,
They have to obtain separate registration for TCS whether such ECO is already registered and have GSTIN.
8.Whether value of net taxable supplies (Net Sales) to be calculated at gross level or at GSTIN level?GSTIN level
9.At what time should the ECO collect TCS?Point of Collection when supply has been made through the ecommerce operator even though actual collection of the consideration is received or not.

For example, if the supply has taken place through the ECO portal on 30th October, 2021 but the consideration has been collected in the of November 2021 month, then TCS for such supply has to be collected and reported in the return for the month of October, 2021.

Readers may forward their feedback/suggestion & queries at
cajayprakashpandcompany@gmail.com or Leave your thoughts in comment section in order to help other member/readers.

BIO of Author:-

The author, CA Jayprakash Pandey is a practicing Chartered Accountant (Founder of Jayprakash P & Company) having Office at Mumbai, with more than 5 years of professional cum practical experience, Direct Tax, International Taxation, Indirect Tax & FEMA related advisory, litigation & compliance matters.

Disclaimer:
The purpose of this is to share knowledge and it is for education purpose only. This does NOT constitute NOR does this form part of neither it is to be construed as, A LEGAL OPINION. The analysis is solely based on the reading abilities of the Author. They may be correct/incorrect as per you. No representation or warranty, express or implied, is made or given in respect of any information provided. UNDER NO circumstances should any recipient rely on this communication as a basis for any legal decision. The views expressed are of personal to the author. They do not reflect the views of any organization he may be directly/indirectly associated with. Neither author nor any of its affiliates accepts any legal liability, or responsibility, for, or provides any assurance or guarantee of accuracy, authenticity, completeness, correctness, dependability, reliability, suitability or timeliness of, any part of this article. The contents of this article are based only on the understanding of the Law, Rules, Notifications, etc. of the author and THEY ARE NOT BASIS FOR ANY LEGAL OPINION.

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