TDS and TCS provisions under GST

Concept of TDS and TCS

• The concept of TDS is familiar term under Income-Tax law, which means Tax deduction at source. TDS is an advance tax is being collected by the principal agent or employer under different sections of the Income-Tax Act. After collection of TDS, the deductor makes payment to the Government in every quarter.
• Similarly, the concept of TCS was available in the Sates VAT laws.TCS was levied and collected on sale value of the certain commodities as notified by the State tax authority.

TDS and TCS under GST

• GST law makers have incorporated the both concept of TDS and TCS under GST law to track the business transaction and generate revenue.
• The government introduced provisions that will make mandatory for e-commerce companies to collect tax at source to help track the sellers on platforms such as Amazon and Flipkart.
• Similarly, public sector companies will have to deduct GST at the specified rate when they make payments, which will again help keep tabs on those providing services or goods to them.

The Central Government has appointed the 1st day of October 2018, as the date on which the provisions Tax deduction at source and Tax collection at source shall come into force.

Tax Deduction at Source (TDS) under Section 51 of the CGST Act, 2017 read with Rule 66 of the CGST Rules, 2017

Who is required to deduct TDS (Deductor)?

Following persons are required to deduct TDS

• A department or an establishment of the Central Government or State Government;
• Local authority;
• Governmental agencies;
• Such persons or category of persons as may be notified by the Government.

Persons notified under Section 51(1)(d):

1. an authority or a board or any other body, -

1. set up by an Act of Parliament or a State Legislature; or
2. established by any Government,

with 51% or more participation by way of equity or control, to carry out any function;

1. Society established by the Central Government or the State Government or a Local Authority under the Societies Registration Act, 1860 (21 of 1860);
2. Public sector undertakings

When and from whom TDS is required to be deducted (Deductee)?

TDS is to be deducted on payments made to the supplier of taxable goods and/or services, where the total value of such supply, under an individual contract, exceeds Rs.2,50,000/-.

No deduction of Tax is required when the location of supplier and place of supply is different from the State of the registration of the recipient.

What is the rate of TDS?

TDS is to be deducted at the rate of 1% [i.e. 2% for CGST+SGST/UTGST or IGST] from the payment made or credited to the deductee.

What is the value of supply?

For the purpose of TDS specified above, the value of supply shall be taken as the amount excluding CGST, CGST/UTGST, IGST and cess indicated in the invoice.

What are the registration requirements for TDS deductors?

A person who is liable to deduct TDS has to compulsorily register and there is no threshold limit for this. The registration under GST can be obtained without PAN and by using the existing Tax Deduction and Collection Account Number (TAN) issued under the Income Tax Act. Thus it can be said having TAN is mandatory.

The form for TDS deductor registration is Form GST REG-07

When and to whom should the TDS be paid?

TDS shall be paid within 10 days from the end of the month in which tax is deducted. The payment shall be made to the appropriate government which means:

• The Central Government in case of the IGST and the CGST
• The State government in case of the SGST

Which form is required to file the TDS return?

The person deducting tax is required to file a TDS return in form GSTR-7 within 10 days from the end of the month. When GSTIN of the unregistered supplier is not available, their name can be mentioned. The robustness of the system reflects these filled-in details in the electronic ledger of the supplier.

What are the provisions relating to issue of TDS certificates?

The deductor shall furnish to the deductee a certificate in Form GSTR-7A, within 5 days of crediting the amount so deducted to Government, mentioning therein:

• contract value,
• rate of deduction,
• amount deducted,
• amount paid to the Government
• Such other particulars in such manner as may be prescribed

What is the benefit of TDS to the deductee (Supplier)?

• There will an automatic reflection in the electronic ledger of the deductee (supplier) once the deductor files his/her returns.
• The deductee can claim credit in his electronic cash ledger of this tax deducted and use it for payments of other taxes.

What is the Interest/ Late Fee for non-compliance?

In case of Non-payment of TDS within time:
Interest @18% per annum is payable in addition to the amount of tax deducted.

In case of Failure to furnish TDS Certificate:
Late fee of INR 100/- per day from the day after the expiry of five days period until the failure is rectified, subject to a maximum amount of INR 5,000/-

(i.e. INR 200/- per day subject to maximum of INR 10,000/- for CGST+SGST/UTGST)

How is Refund of TDS possible under GST?

• If any excess amount is deducted and paid to the government, a refund can be claimed.
• However, if the deducted amount is already added to the electronic cash ledger of the supplier, the amount so added cannot be got back as a refund by the deductor.
• Deductee can claim a refund of tax subject to refund provisions of the act.

Collection of tax at Source (TCS) under Section 52 of the CGST Act, 2017 read with Rule 67 of the CGST Rules, 2017

Who is required to collect TCS?

• Every electronic commerce operator ('operator'), not being an agent, shall collect TCS at prescribed rate when taxable supplies are made through it by other suppliers and the consideration with respect to such supplies is to be collected by the operator.
• Procedure:

There are many e-commerce operators, like Amazon, Flipkart, Jabong, etc. operating in India. These operators display on their portal products as well as services which are actually supplied by some other person to the consumer. The goods or services belonging to other suppliers are displayed on the portals of the operators and consumers buy such goods/services through these portals. On placing the order for a particular product/service, the actual supplier supplies the selected product/ service to the consumer. The price/consideration for the product/service is collected by the operator from the consumer and passed on to the actual supplier after the deduction of commission by the operator.

• The Government has placed the responsibility on the operator to collect TDS from the supplier.
• This shall be done by the operator by paying the supplier, the price of the product/ services, less the amount of TDS.

What is the rate of TCS?

TCS is to be deducted at the rate not exceeding 1% of the net value of taxable supplies of the goods/services supplied through the portal of the operator

What is the meaning of 'Electronic Commerce Operator' and 'Electronic Commerce'?

• 'Electronic commerce operator' means any person who owns, operates or manages digital or electronic facility or platform for electronic commerce
• 'Electronic commerce' means the supply of goods or services or both, including digital products over digital or electronic network

What is the meaning of 'Net value of taxable supplies'?

'Net value of taxable supplies' shall mean the aggregate value of taxable supplies of goods or services or both, other than services notified under sub-section (5) of section 9, 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

Net Value of Taxable Supplies = [(Aggregate Value of Taxable Supplies of Goods + Services) - (Section 9(5) services)] - [Aggregate Value of Returned Taxable Supplies of Goods]

What are the provisions relating to registration of TCS collector?

Every e-commerce operator is required to compulsorily register in GST irrespective of threshold limits.

This clause is amended vide the CGST Amendment Act, 2018 to restrict applicability of compulsory registration to only those cases of e-commerce operator who is required to collect TCS under Section 52 [yet to be notified].

• It is mandatory for every person who supplies goods/services through an operator to get registered under GST.
• The form for TCS Collector registration is Form GST REG-07.

When and to whom should the TCS be paid?

The amount of TCS shall be paid to the Government by the operator within 10 days after the end of the month in which such collection is made.

What are the provisions relating to TCS Statement?

• The operator is 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 Form GSTR-9B 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 or the actual date of furnishing relevant annual statement, whichever is earlier.

What are the provisions relating to ITC to the supplier?

The tax collected by the operator shall be credited to the cash ledger of the supplier who has supplied the goods/services through the operator. The supplier can claim credit of the tax collected and reflected in the return by the Operator in his [supplier's] electronic cash ledger.

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.
• 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 suppler.
• The supplier will have to pay the differential amount of output tax along with interest.