TCS Under Section 52 of CGST Act: Single Transaction With Multiple e-Commerce Operators

Tax Collection at Source (TCS) is a provision under Section 52 of the Goods and Services Tax (GST) Act, which mandates Electronic Commerce Operators (ECOs) to collect tax on certain supplies made through their platform. 

Continue reading as we discuss the TCS liability when there are multiple ECOs involved in a transaction.

Applicability of TCS under Section 52

All ECOs, excluding agents, are required to collect TCS from the net value of taxable supplies made by suppliers through their platform when they collect the consideration on behalf of the supplier, with a few exceptions.

ECOs are required to collect TCS at the rate of 1% on the net value of taxable supplies made by the suppliers. For instance, if a product is sold at Rs. 1000, the ECO would collect Rs. 10 (1% of Rs. 1000) as tax. Suppliers can claim credit of the TCS amount in their electronic cash ledger based on the details reflected in the monthly statement filed by the ECO.

Challenges Faced When Multiple E-Commerce Operators Are Involved In Single Transaction

In the present platform-centric model of e-commerce, a single ECO typically operates both the buyer interface and seller interface. The ECO collects the consideration from the buyer, and deducts the TCS, which is then credited to the GST cash ledger of the seller, and the balance is then passed on to the seller after deducting the ECO’s service charges.

With the introduction of the Open Network for Digital Commerce (ONDC) Network and other similar setups, multiple ECOs can be involved in a single transaction, i.e. one ECO providing an interface to the buyer and another ECO providing an interface to the seller. In such cases, the buyer-side ECO may collect the consideration, deduct their commission, and pass on the remaining amount to the seller-side ECO. 

This has led to ambiguity regarding the ECO responsible for TCS deduction under Section 52 of the CGST Act, as both the buyer-side ECO and the seller-side ECO qualify as ECOs under Section 2(45) of the CGST Act.

Circular On TCS Under Section 52 Of The CGST Act For Single Transaction With Multiple E-Commerce Operators

Circular No. 194/06/2023-GST provides clarity and consistency on TCS liability under Section 52 of the CGST Act, 2017. Here are two instances that the CBIC clarified on the ECO liable for collecting TCS when there are multiple ECOs involved:

Instance 1: When multiple ECOs are involved in one transaction and the supplier-side ECO is not the actual supplier, who is liable for compliances under Section 52, including TCS collection?

Clarification: In such cases, the responsibility for compliances under Section 52 of the CGST Act, including TCS collection, falls on the supplier-side ECO. This is because the supplier-side ECO ultimately releases the payment to the supplier for the specific supply made through their platform. 

For example, if the buyer-side ECO collects payment from the buyer, he will deduct the commission fees and forward the balance to the seller-side ECO. The seller-side ECO will then release the payment to the actual supplier after deducting their fees/commissions. Consequently, the seller-side ECO will also be required to collect TCS, if applicable, and remit it to the government as per Section 52 of the CGST Act.

Instance 2: In a situation where multiple ECOs are involved in a single transaction, and the supplier-side ECO is the actual supplier, who is liable for compliances under Section 52, including TCS collection?

Clarification: In this scenario, the responsibility for collecting TCS lies with the buyer-side ECO when making payment to the supplier. For instance, the buyer-side ECO collects payment from the buyer, deducts its fees, and remits the balance to the supplier (who is also an ECO as per the definition in Section 2(45) of the CGST Act). In this situation, the buyer-side ECO will be required to collect TCS, if applicable, and pay it to the government under Section 52 of the CGST Act.