Implications of Tax Collected at Source (TCS) On E-Commerce Industry

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E-Commerce industry has a unique place in the GST regime. Tax collected at source (TCS) provisions were incorporated into the GST act, however, the provisions were not actively notified.

Now E-Commerce – TCS provisions have been notified by the Government on September 13th, 2018 and will be effective from October 1st of 2018.

Summary of the new updates:

    • A separate registration should be obtained by the E-commerce operators (ECO) for the purpose of TCS provisions.
    • E-Commerce operators (ECO) should deduct 2% of TCS on the value of supplies made through its platform and should remit the TCS amount to the government on or before 10th of subsequent month.
    • E-Commerce operator should also furnish a monthly return with the details of TCS collected on or before 10th of Next month. (GSTR 8)

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E-commerce – Tax collected at source new provisions :

E-Commerce is nothing but buying and selling of goods and services over the internet. The following two models of E-Commerce are recognised under the GST Act.

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Tax collected at source provisions applicable to E-Commerce operator

This article provides details on the TCS provisions applicable to E-Commerce operator – For more details of regular invoicing and registration under both the models – please visit the following link:

FAQ on E-Commerce TCS:

  1. Are TCS provisions applicable for all..??

No, they are applicable only for E-Commerce Operators. Not even for all E-Commerce operators, but only for E-Commerce Aggregators.

  1. If E-Commerce operator is operating in both Aggregator and Inventory model – what will happen..?

In that case, TCS provisions will be applicable only for sales executed in Aggregator model. For Inventory model sales – there is no requirement of deducting TCS.

  1. Is E-Commerce operator required to get registration for TCS..?

Yes, E-Commerce operator should obtain a separate registration under GST for TCS purpose. He should also file a separate return (GSTR 8) for TCS purpose. He should also remit the TCS amount collected to the government on or before 10th of following month.

GSTR 8 will contain the following details. (As per the format released by the Govt. previously – it may be subject to amendments now in next few days)

Implications of TCS On E-Commerce Industry

  1. What is the percentage of TCS to be deducted and how it is to be calculated?

For now, TCS is to be deducted at the rate of 2% on aggregate supplies made by the vendor through an E-Commerce platform. (Percentage will be confirmed by govt. soon)

  • 1% CGST and 1% SGST in case of within the state sales
  • 2% of IGST in case of Interstate sales.

It will be calculated on the aggregate value of supplies net of sales returns in a month.

Ex: Mr.A, has sold goods worth Rs.10,000 through Flipkart platform in a particular month – and Mr.A also charged GST of 18% as 1,800 on the invoice.

Now Flipkart should deduct 2% of Rs. 10,000  i.e. Rs 200 as TCS and remit it to the government before 10th of next month.

  1. In case of Sales returns what should be done?

TCS should be deducted on net sales in a month. Which means out of the total sales conducted in a month – sales returns should be deducted and on the net amount, TCS should be calculated and deducted.

  1. Should ECO obtain state-specific registration for each and every state in which he operates?

As per the initial provisions of GST, yes ECO should obtain state-specific registration in case of operating in multiple states. (However, clarity is expected from the government very soon in this aspect in next few days. Already top ECOs have taken their state-specific registrations but small ECOs are expected to be significantly affected because of this provision).

FAQs from the government on TCS are expected soon, in which we can get a clarity on the rate of TCS and also on state-specific registration requirement.

  1. What is the impact on sellers selling through ECO platforms?

For sellers who are selling through platforms like Flipkart and Amazon, there won’t be any additional compliances. However, TCS deducted by the ECO can be taken as a credit while making the GST payments.

 

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