What is TCS under GST?
TCS (Tax Collected at Source) refers to tax which is collected by the e-commerce operator (ECO) when a vendor supplies some goods or services through the online marketplace and the payment for such supply is collected by the e-commerce operator.
Through section 52 of the CGST Act, 2017, it is the responsibility of the ECO to collect the tax @1% from the supplier. This amount is computed on the net value of the goods and services supplied through the portal of the operator.
Thus, for Rs. 100 payable by the ECO to the vendor, Re. 1 will be deducted and deposited as TCS under GST in the account of such online vendor and Rs. 99 will be transferred to him in the bank as consideration after deduction of charges, commission, etc. due to the ECO.
Thus, the 1% is to be collected on the net value of taxable supplies, which means the supplies during a month net of sales returns. This value is also exclusive of the GST element and is net taxable value of supplies.
Please note that this requirement under GST laws is independent of TDS provisions under section 194-O of the Income Tax Act, as applicable on ECOs. The both should not be confused to be the same and both must be independently complied with.
TCS provisions do not apply though on the following vendors or service providers through ECO:
- hotel accommodation or clubs
- transportation of passengers, radio taxis
- housekeeping services such as plumbing, carpentry.
How is the TCS distributed among CGST/SGST or IGST?
Similar to other GST provisions, intra-state supply would require TCS deposition as 0.5% CGST and 0.5% SGST. However, for inter-state supplies, it is 1% IGST.
What is the Registration Required by ECO?
From 01-Apr-2020, ECOs have been allowed to apply for TCS registration based on their registered head office address. Earlier, physical presence was necessary in that state to obtain a GST Registration for TCS and the law provided that an e-commerce company must register itself in GST in every state it supplies goods or services to.
Form REG-07 is to be filed online for registration as Tax Deductor or Collector in GST. This is an online application from the GST Portal. The pdf draft is linked here for reference only.
The ECO should mandatorily get all of its own warehouses and store locations registered under GST as additional places of business (if in the same state as the office) or as other independent GST registration.
What if a Vendor does not have a GST Number?
The threshold limit of Rs. 20 lakh (Rs. 10 lakh for special category states) does not apply to vendors selling on ECOs. Thus, it is mandatory for all such vendors to have a GSTIN.
How is such TCS to be deposited with the Government?
The tax collected is to be deposited by the 10th of the following month, during which such tax is collected.
What are the GST Returns to be filed?
The ECO is to furnish a monthly TCS Return in Form GSTR-8 by the 10th of the following month, in which such liability is discharged.
Any errors in one GSTR-8 may be corrected in the subsequent GSTR-8, but no later than the due date of GSTR-8 for September following the end of the relevant financial year.
Further, the ECO is also required to file an Annual Return of the same by 31-Dec immediately after the end of the relevant financial year.
All the vendors listed on the ECO will be able to see the credit of such TCS credit deposited to their account in Part C of the Form GSTR-2A on their GST Portal.
The tax collected shall be credited to the cash ledger of the supplier who has supplied the goods or services through the Operator. The supplier can claim credit of such TCS from his electronic cash ledger.
What reconciliations would be necessary for such records?
The details filed by the ECO in GSTR-8 will be matched by the details filed by each such vendor in their respective GST returns. In case of any mismatch or discrepancy, both ECO and the vendor may get a notice from the department.
A Deputy Commissioner of GST can issue a notice to an ECO at any time seeking him to furnish details relating to volume of goods or services supplied, stock of goods lying in the warehouses, etc.
The ECO will have to respond within 15 days of such notice providing all these details, failing which a penalty up to Rs. 25000 may be imposed u/s 122.
Further Reading: FAQs on E-Commerce by CBIC
