Tax Collected At Source ( TCS ) Under Goods and Services Tax

Every e-commerce operator started collecting TCS barring a few exceptions from 1st October 2018. This article will give you information about what is TCS and how it works under GST.

What is TCS under GST

Tax Collected at Source (TCS) under GST means the tax collected by an e-commerce operator from the consideration received by it on behalf of the supplier of goods, or services who makes supplies through the operator’s online platform. TCS will be charged as a percentage on the net taxable supplies.The provision of TCS under GST is dealt under Section 52 of the CGST Act.

Who is liable to collect TCS under GST

Certain operators who own, operate and manage e-commerce platforms are liable to collect TCS. TCS applies only if the operators collect the consideration from the customers on behalf of vendors or suppliers. In other words, when the e-commerce operators pay the consideration collected to the vendors they have to deduct an amount as TCS and pay the net amount. 

Here are few exceptions to the TCS provisions for the services provided by an e-commerce platform: 

• Hotel accommodation/clubs (unregistered suppliers) 
• Transportation of passengers – radio taxi, motor cab or motorcycle 
• Housekeeping services like plumbing, carpentry etc. (unregistered suppliers)

For example – M/s.XYZ stores (a proprietorship) is selling garments through Flipkart. Flipkart, being an e-commerce operator, before it makes the payment of consideration collected on behalf of XYZ, will be liable to deduct TCS.

When will the liability of collecting TCS arise 

TCS will be collected by e-commerce operators while making a payment to the vendor. This payment will be the consideration collected on the vendor’s behalf for the supplies made by him via the online portal. This tax will be collected on the net value of taxable supplies.

What is the rate applicable under TCS

The dealers or traders supplying goods and/or services through e-commerce operators will receive payment after deduction of TCS @ 0.5% via CGST Notification 15/2024 dated 10th July 2024. (earlier it was 1% up to 9th July 2024 implemented as notified by the CBIC in Notification no. 52/2018 under CGST Act and 02/2018 under IGST Act). 

This means for an intra-state supply TCS at 0.5% will be collected, i.e 0.25 % under CGST and 0.25% under SGST. Similarly, for a transaction between the states, the TCS rate will be 0.5%, i.e under the IGST Act.

Registration requirements under TCS provisions of GST

The e-commerce operators liable to collect TCS have to compulsorily register under GST and there is no threshold limit exemption for it. Also, the sellers supplying goods through the online portal of e-commerce players are also mandatorily required to get registered under GST except for a few exceptions. 

Registration conditions are as follows:   

a. Every e-commerce operator who is required to collect TCS must mandatorily register under GST 

b. Every person who supplies through an e-commerce operator, except those who make supplies notified under section 9 (5) of CGST Act. 
 

Section 9 (5) mentions the following supplies – Transporting passengers by a radio-taxi and motorcycle OR providing accommodation in hotels, guest houses, for residential or lodging purposes (unregistered suppliers) OR services of house-keeping, such as plumber, carpenter etc( unregistered suppliers). 
 

In all three cases, the e-commerce operator shall pay GST, meet the compliances. Therefore, suppliers don’t have to register if they provide these services listed in 9 (5), provided they do not cross the Rs.20 lakh (or Rs.40 lakh) threshold for registration. 
 

c. Also, note that suppliers of services making 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). 

d. Suppliers of goods selling through an e-commerce platform are not exempt from registration. 

e. An e-commerce company must register itself in GST in every state it supplies goods or services to.

Due date for depositing TCS

TCS will be deducted during the month in which the supply is made. It will be deposited within 10 days from the end of the month of supply to the credit of the government. 

Payment of the tax collected will be made in the following manner: 

a. IGST & CGST will be paid to the central government 

b. SGST to respective state governments

How to compute taxable value of the supplies for TCS

The value for the collection of the tax will be the ‘Net Value Of Taxable Supplies.’ This net taxable value will be calculated as under :

The total value of taxable supplies of goods and/or services (other than notified services under GST law by all registered persons) Less: Taxable supplies returned to the suppliers through the e-commerce operator =Net value of Taxable Supplies

For example – M/s.XYZ Ltd, a registered supplier is supplying goods through an e-commerce operator. It has made supplies of Rs.55,00,000 in the month of Sep 2018. The goods returned were worth Rs.5,00,000 to XYZ Ltd. during the month of Sep 2018. Here, the net value of taxable supplies for TCS collection will be Rs.50,00,000 and TCS @ 1%, i.e Rs.50,000 will be deducted by the e-commerce operator. Hence, the final payment to be made to the supplier is Rs.49,50,000.

Which form can one use to file TCS returns

e-Commerce operators have to file GSTR-8 by 10th of the next month in which the tax was collected. This return will only be filed once the tax collected has been deposited to the respective credit of the government. For instance, the due date for GSTR-8 for Dec 2021 is on 10th Jan 2022.

Using GSTR-8 data by e-commerce sellers in GSTR-2A

The details submitted by the operators in GSTR 8 will be available to all the suppliers in GSTR 2A. The supplies will be available GSTR 2A after the due date of filing GSTR-8. Note that these credit details will not be available in GSTR-2B return. The tax collected will be reflected in the electronic cash ledger of the respective suppliers. The suppliers can claim the credit accordingly after matching and reconciling their supplies with the details in GSTR 2A. 
 

GSTR 8 cannot be revised once it is filed. Any discrepancy found while matching and reconciling the supply data and GSTR 2A will be communicated to the operator and the supplier. If the discrepancy is not rectified within the given time period, then the tax amount will be added to the liability of the supplier. The supplier will have to pay the difference along with the interest, if any.
 

e-Invoicing Impact on TCS and e-Commerce Operators

The e-invoicing system is also available to e-commerce operators (ECO) to report invoices to the Invoice Registration Portal (IRP), that were raised by them on behalf of their online suppliers.
 

The e-commerce operators shall follow a detailed procedure to integrate their ERP system with the sandbox of the IRP. To know more about the details, read our article on “e-Invoicing Impact on TCS and e-commerce operators under GST”.

Impact of the TCS provisions

From the e-commerce operators viewpoint, they must register under GST in every state in which they operate before 1st Oct 2018, which is the effective date of implementing TCS provisions. The ERP systems have to be well integrated to apply these provisions in the day to day businesses smoothly. Moreover, the working capital of the suppliers selling through an e-commerce operator will be blocked until they file their return and claim the excess taxes paid. This can prevent SMEs vendors from selling goods or supplying services on the online portal. 

From 1st January 2022, all the e-commerce aggregators into food delivery services or cloud kitchens will be liable to pay tax on services provided through them. However, restaurants with accommodation with a tariff per unit of more than Rs.7,500 per day are kept out of the scope. Also, this new provision does not apply to the supplies which are covered under Sec 52. As per the update available on 21st December 2021, the scope of passenger transport motor vehicles under Sec 9(5) is expanded to include service rendered through omnibus and any other motor vehicle, but not just radio taxi or cab.

From the government’s viewpoint, tax evasion will significantly reduce since the tax will be collected at each and every transaction.  

For related articles, do check out:

• TDS and TCS under GST: A complete overview of the concepts
• TDS and TCS credit received details 
• All you need to know about GSTR-8
• GST Registration for e-Commerce operators