Tax Collection at Source (TCS) under GST is going to implement w.e.f. 1st October 2018 in India. In this article we are going to discuss all the relevant provisions of TCS.
What is the concept of TCS ?
In simple words, TCS is a same concept as applicable in Income Tax Laws in India. However, In GST, its implementation and applicability of TCS is totally different from that of Income tax.
In GST, there must be three parties involved in the transaction and an E-commerce operator must be a party in transaction and shall stood at the center of these three parties. Thus, three parties includes Supplier, E-Commerce Operator and a Customer of supplies offered by supplier thru such operator.
And, every E-Commerce Operator, who is collecting the consideration of supplies made through it, should collect a portion of amount of Tax from the suppliers who are supplying goods or services or both through such operator. Such collection of portion of Tax is called ‘TCS’.
Any supplies made by E-Commerce operator on its own behalf to any person are out of ambit of TCS.
Who is liable to collect TCS under GST ?
An ‘E-Commerce Operator’ who fulfills all the following conditions is liable to collect TCS :-
- He is not acting as an agent in the transaction (like Travel Agent, etc.);
- He is collecting the consideration of supply of goods or services or both on behalf of supplier; and
- Supplies do not fall in the category as notified u/s 9(5) of CGST Act, 2017.
As per Section 2(45) of CGST Act 2017, “electronic commerce operator” means any person who owns, operates or manages digital or electronic facility or platform for electronic commerce.
And, “electronic commerce” means the supply of goods or services or both, including digital products over digital or electronic network.
“Agent” means a person, including a factor, broker, commission agent, arhatia, del credere agent, an auctioneer or any other mercantile agent, by whatever name called, who carries on the business of supply or receipt of goods or services or both on behalf of another.
What is the rate of TCS to be collected ?
As per CGST Notification CGST-52/2018 and IGST Notification IGST-2/2018 issued on 20.09.2018, rate of TCS is :
CGST : 0.5%
IGST : 1%
SGST/UTGST : 0.5%
What is the value of supply on which TCS to be collected ?
TCS is to be collected on net value of Taxable supplies.
It means, TCS is not required to be collected on any supplies which are not taxable under GST.
Net value of taxable supplies shall mean the aggregate value of taxable supplies of goods or services or both, made during any month by all registered persons through the operator reduced by the aggregate value of taxable supplies returned to the suppliers during the said month.
Further, The value of net taxable supplies is calculated at GSTIN level.
It may be noted again that value of supplies of services will always exclude services notified under section 9(5) of CGST Act. It is because, E-Commerce operator is liable to pay whole amount of tax on such services.
What are the various services notified under Section 9(5) of CGST Act ?
Right now, there are three services are notified under this section:-
(i) services by way of transportation of passengers by a radio-taxi, motorcab, maxicab and motor cycle;
(ii) services by way of providing accommodation in hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes, except where the person supplying such service through electronic commerce operator is liable for registration under sub-section (1) of section 22 of the said Central Goods and Services Tax Act.
(iii) services by way of house-keeping, such as plumbing, carpentering etc, except where the person supplying such service through electronic commerce operator is liable for registration under sub-section (1) of section 22 of the said Central Goods and Services Tax Act.
Services mentioned in (ii) and (iii) are subject to condition that the person supplying such service through electronic commerce operator is liable for registration under sub-section (1) of section 22 of the said Central Goods and Services Tax Act.
Thus, in case, supplier is a registered person under GST, then TCS provisions will also applicable on these services even though such services are notified under Section 9(5).
At what time should the e-commerce operator collect TCS?
TCS is to be collected once supply has been made through the e-commerce operator irrespective of the actual collection of the consideration.
For example, if the supply has taken place through the e-commerce operator on 30th October, 2018 but the consideration for the same has been collected in the month of November, 2018, then TCS for such supply has to be collected and reported in the statement for the month of October, 2018.
It is very common that customers of e-commerce companies return goods. How these sales returns are going to be adjusted?
An e-commerce company is required to collect tax only on the net value of taxable supplies made through it. In other words, value of the supplies which are returned (supply return) may be adjusted from the aggregate value of taxable supplies made by each supplier (i.e. on GSTIN basis).
In other words, if two suppliers “A” and “B” are making supplies through an e-commerce operator, the “net value of taxable supplies” would be calculated separately in respect of “A” and “B”.
If the value of returned supplies is more than supplies made on behalf of any of such supplier during any tax period, the same would be ignored in his case.
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.
Whether TCS is to be collected on import of goods or services or both?
TCS is not liable to be collected on any supplies on which the recipient is required to pay tax on reverse charge basis. As far as import of goods is concerned since same would fall within the domain of Customs Act, 1962, it would be outside the purview of TCS. Thus, TCS is not liable to be collected on import of goods or services.
Under multiple e-commerce model, Customer books a Hotel via ECO-1 who in turn is integrated with ECO-2 who has agreement with the hotelier. In this case, ECO-1 will not have any GST information of the hotelier. Under such circumstances, which e-commerce operator should be liable to collect TCS?
TCS is to be collected by that e-Commerce operator who is making payment to the supplier for the particular supply happening through it, which is in this case will be ECO-2.
Whether TCS is to be collected in respect of supplies made by the composition taxpayer?
As per section 10(2)(d) of the CGST Act, 2017, a composition taxpayer cannot make supplies through e-commerce operator. Thus, question of collecting TCS in respect of supplies made by the composition taxpayer does not arise.
REGISTRATION
Is it mandatory for e-commerce operator to obtain registration?
Yes. As per section 24(x) of the CGST Act, 2017, every electronic commerce operator has to obtain compulsory registration irrespective of the value of supply made by him.
Further, registration for TCS would be required in each State / UT as the obligation for collecting TCS would be there for every intra-State or inter-State supply. In order to facilitate the obtaining of registration in each State / UT, the e-commerce operator may declare the Head Office as its place of business for obtaining registration in that State / UT where it does not have physical presence.
E-Commerce operator has to obtain separate registration for TCS irrespective of the fact whether e-Commerce operator is already registered under GST as a supplier or otherwise and has GSTIN.
Whether a supplier of goods or services supplying through e-commerce operator would be entitled to threshold exemption?
As per Section 24(ix) of the CGST Act, 2017, every person supplying goods through an e-commerce operator shall be mandatorily required to register irrespective of the value of supply made by him.
However, a person supplying services, other than supplier of services under section 9 (5) of the CGST Act, 2017, through an e-commerce platform are exempted from obtaining compulsory registration provided their aggregate turnover does not exceed INR 20 lakhs (or INR 10 lakhs in case of specified special category States) in a financial year. Government has issued the notification No. 65/2017 – Central Tax dated 15th November, 2017 in this regard.
Now the question arises whether E-Commerce operator will allow an unregistered person to supply services through its platform. The answer is ‘NO’. If he do so, then how he will comply with TCS provisions where GSTIN is mandatory.
Foreign e-commerce operator do not have place of business 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?
Where registered supplier is supplying goods or services through a foreign e-commerce operator to a customer in India, such foreign e-commerce operator 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.
Payments and Returns
Whether payment of TCS through Input Tax Credit of operator for depositing TCS as per Section 52 (3) of the CGST Act, 2017 is allowed?
No, payment of TCS is not allowed through Input Tax Credit of e-Commerce operator.
What is the time within which such TCS is to be remitted by the e-commerce operator to the Government account?
The amount collected by the operator is to be paid to appropriate government within 10 days after the end of the month in which the said amount was so collected.
Is the e-commerce operator required to submit any statement? What are the details that are required to be submitted in the statement?
Yes, every operator is required to furnish a statement, electronically, containing the details of outward supplies of goods or services effected through it, including the supplies of goods or services returned through it, and the amount collected by it as TCS during a month within 10 days after the end of such month in FORM GSTR-8.
The operator is also required to file an annual statement by 31st day of December following the end of the financial year in which the tax was collected in FORM GSTR-9B.
Whether interest would be applicable on non-collection of TCS?
As per section 52(6) of the CGST Act, 2017, interest is applicable on omission as well in case of incorrect particulars noticed. In such a case, interest is applicable since it is a case of omission. Further penalty under section 122(vi) of the CGST Act, 2017 would also be leviable.
Source : 28092018- FAQs_on_TCS
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