Concept of Tax Collected at Source(TCS) under GST

TCS [TAX COLLECTION AT SOURCE]
{Section 52 of CGST Act, 2017}

Objective behind introduction of TCS:

TCS refers to the tax which is collected by the Electronic Commerce Operator when a supplier supplies some goods or services through its portal and the payment for that supply is collected by the Electronic Commerce Operator (ECO).

Section 52 provides for the collection of tax at source in certain circumstances. The section specifically lists out the tax collecting persons who are mandated by the Central Govt to collect tax at source, the rate of collection of tax, and the procedure for remittance of tax collected.

Who is liable to collect TCS?

Every Electronic Commerce Operator (ECO), not being an agent, has been mandated to collect tax at source (TCS) from the net value of taxable supplies made through it by other suppliers, whenever the ECO collects the consideration on behalf of the supplier.

What is the rate of TCS?

Every electronic commerce operator, not being an agent, shall collect an amount calculated @ 0.5% of the net value of intra-State taxable supplies made through it by other suppliers where the consideration with respect to such supplies is to be collected by the said operator.

Note: Sec.20 of the IGST Act provides that in case of Tax Collection at source, the operator shall collect tax at such rate not exceeding 2% as may be notified on the recommendations of the council of the net value of taxable supplies.

But at present this rate has been notified @ 1%.

Eg: Suppose a product is sold at Rs.1000/- through an ECO by a supplier. The operator would collect tax @1% of the net value of Rs.1000/- i.e. Rs.10/- (Inter State Supply)

Deposit of TCS by ECO to Government:

The TCS amount collected by the ECO has to be remitted to the Government Treasury within 10 days after the end of the month in which the collection was made.

Eg: If the TCS has been collected in the month of May, the amount has to be remitted into the Government Treasury on or before 10th June.

Filing of Monthly & Annual Statements by ECO:

An electronic statement has to be filed by the ECO containing details of the outward supplies of goods and/ or services effected through it, including the supplies returned through it and the amount collected by it as TCS during the month within 10 days after the end of each month in which supplies are made. [Sub-section (4)]

Additionally, the ECO is also mandated to file an Annual Statement on or before 31st day of December following the end of the financial year. [Subsection (5)]

Rectification in Monthly Statement by ECO:

If the ECO discovers any discrepancy on his own not being the result of any scrutiny, inspection or enforcement proceedings, he has to rectify the statement. However, the limit for rectification is earlier of the two:

(i) Due date for filing statement for the month of September following the end of the financial year. OR

(ii) Actual date of furnishing of relevant annual statement. Interest provisions are applicable. [Sub-section (6)]

Claim of Credit by Supplier:

Supplier can claim credit of the TCS amount in his electronic cash ledger. This amount should reflect in the monthly statement filed by the e-commerce operator. [Sub-section (7)].

Matching of details of supplies:

The details of the supplies, including the value of supplies, submitted by every operator in the statements will be matched with the details of supplies submitted by all such suppliers in their returns. [Sub-section (8)]

If there is any discrepancy in the value of supplies, the same would be communicated to both of them. If such discrepancy in value is not rectified within the given time, then such amount would be added to the output tax liability of such supplier succeeding the calendar month in which the discrepancy is communicated, where outward supplies furnished by operator is more than the value as shown by supplier.

The supplier will have to pay the differential amount of output tax along with interest from the date such tax was due till the date of its payment. [Subsections 9 To 11].

Notice to the Operator:

An officer not below the rank of Deputy Commissioner can issue notice to an operator, asking him to furnish details relating to volume of the goods/services supplied, stock of goods lying in warehouses/godowns etc. [Sub-section (12)]

The operator is required to furnish such details within 15 working days. [Subsection (13)]

In case an operator fails to furnish the information, besides being liable for penal action under section 122, it shall also be liable for penalty up to ` 25,000. [Sub-section (14)]

Concepts relating to TCS Registration:

Section 24(x) of the CGST Act, 2017 makes it mandatory for every e-commerce operator to get registered under GST.

Similarly, section 24(ix) of the CGST Act, 2017 makes it mandatory for every person who supplies goods/services through an operator to get registered under GST.

TCS Statement:

The amount of tax collected by the operator is required to be deposited by the 10th of the following month, during which such collection is made.

The operator is also required to furnish a monthly statement in Form GSTR-8 by the 10th of the following month.

The operator is also required to file an Annual statement in prescribed form by the 31st of December following the end of every financial year.

The operator can rectify errors in the statements filed, if any, latest by the return to be filed for the month of September, following the end of every financial year.

The details furnished by the operator in GSTR-8 shall be made available electronically to each of the suppliers in Part C of FORM GSTR-2A on the common portal after the due date of filing of FORM GSTR-8.

Questions:

Mr. X is a supplier selling his own products through a web site hosted by him. Does he fall under the definition of an ECO? Whether he is required to collect TCS on such supplies?

Ans: As per the definition in Sec.2 (44) and 2(45) of the CGST Act, 2017 Mr. X will come under the definition of ECO.

However according to Sec.52 of the act, TCS is required to be collected on the net value of taxable supplies made through it by other suppliers where the consideration is collected by ECO. In case where someone is selling their own products through a website, there is NO requirement to collect tax at source as per the provisions of this section.

Example: When we purchase a Xiaomi Mobile phone from Mi.Com then the provisions of TCS will not be attracted, whereas when we purchase the same through Amazon.in the provisions of TCS will be attracted.

If we purchase goods from different vendors and are selling them on our own website under our own billing. Is TCS required to collect on such supplies?

Ans: No, according to Sec.52 of the CGST Act, 2017. TCS is required to be collected on the net value of taxable supplies made through it by other suppliers where the consideration is collected by ECO. In this case there are two transactions- where we purchase the goods from the vendors, and we sell it on our own website. For the first transaction, GST is leviable and we need to be paid to our vendor on which credit is available for us and coming to the second transaction it is a supply on our own account and not by other suppliers and there is no requirement to collect TCS. This transaction will attract GST at the prevailing rates.

{Note: Finance Act, 2020 has bought the concept of TDS on Electronic Commerce Operators in the same lines as TCS in existing GST Provisions.

Sec. 194 O of Income Tax Act deals with Payment of certain sums by ECO to E-Commerce Participant- At the time of Credit of amount of sale or services or both to the account of E-Commerce Participant. Tax Rate- 1% Threshold Limit: Rs.500000/-}