Tax Collected at Source under GST

Last Updated at: March 16, 2020
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Tax Collected at Source under GST

Tax Collected at Source or TCS refers to the tax collected by the e-commerce operators from the buyer on behalf of the supplier of goods or services and remitted to the Government. This tax is collected by the seller from the buyer at the time of sale and as the name suggests, the tax is deducted directly from the source of payment.

The Income Tax Act includes provisions for deduction of taxes from the source under Section 206C. The Operator must collect taxes as per the rate notified by the Government from the ‘net value’ as defined under Section 51(1). As per the recent notification, the operator must collect taxes at not exceeding the rate of 1%. The net value can only be determined by a formula that is specified in Section 52(1) of the Act, which is as follows: 

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

Once the TCS is deducted, it must be paid back to the Government within 10 days within the end of the month of the collection (Section 52(3)). Such collected amount should be paid by debiting the e-cash ledger and electronic liability register will be credited duly. Apart from this, there must be a monthly statement as well as an annual statement electronically. 

Who can collect TCS under GST:

As per Section 52, the e-commerce operator is liable to collect TCS only if the supply or purchase has been made through the operator on behalf of another supplier and the consideration alone is collected by the operator. However, as per section 9(5) of the I-T Act, there are few exceptional cases for collecting TCS such as:

  • Clubs (Unregistered suppliers)
  • Hotel accommodations 
  • Passenger transportation service providers- taxi, motor cab or motorcycle, etc.
  • Housekeeping services- plumbing, carpentry, etc. (Unregistered suppliers)

The liability of the operator arises only when he pays the vendor or supplier after deducting the TCS. 

Classification of tax paid by the operator:

The tax amount paid by the operator to the Government can be classified as:

    1. IGST & CGST is paid to the Central Government
    2. SGST is paid to the respective State Government 

Get Online GST Registration

Importance of Forms GSTR-8 and GSTR-2A:

  • GSTR-8: This form needs to be submitted by the 10th of the next month in which the tax was collected. The form is used to file for TCS returns by the e-commerce operators. It can only be filed once the collected tax has been submitted to the respective Government. GSTR-8 cannot be revised once it has been filed. 
  • GSTR-2A: This form is predominantly used by e-commerce sellers. All details filed by the e-commerce buyers will be available in the GSTR-2A for the usage of the sellers. The tax collected can be viewed in the electronic cash ledgers of the respective sellers. The sellers can match and reconcile their supplies mentioned in the GSTR-2A and claim for credits accordingly. 

(** After matching and reconciling the data in GSTR-8 and GSTR-2A, if there are any discrepancies, it will be informed to the supplier and the operator. If the changes are not made within the stipulated time period, then the Tax amount would be added to the supplier’s liability. The supplier will be made liable for the interest amount as well.)

Registration Provisions:

Every e-commerce operator and supplier need to compulsorily register under the GST with a few exceptions and conditions as mentioned below:

  1. All e-commerce operator, without any threshold limit specification, needs to register under the Goods and Service Tax
  2. Every e-commerce supplier excluding the exceptions mentioned in Section 9(5) of the CGST Act needs to be registered. 
  3. The supplier who is service providers making supplies through e-commerce platforms are exempted from registration if their gross turnover does not exceed Rs. 20 lakhs (assuming there are no inter-state supplies made).
  4. All goods suppliers must compulsorily register without any exemptions. 
  5. The registration of an e-commerce company must be made in every state where it practices the trade. 

TCS Certificate:

After filing the Quarterly TCS return (i.e. Form 27EQ), he has to provide a TCS Certificate to the purchaser of the Goods. The Certificate contains the following details:

  • Name of the seller and buyer
  • TAN of the person filing the quarterly TCS return
  • The gross tax collected by the seller
  • Rate of tax applied
  • The PAN of both the seller and buyer
  • The date of Tax collection 

Every e-commerce supplier and operator must have registered under GST in every state in which they operate before October 1st, 2018 as it was the date after which all TCS provisions were brought into effect. With the introduction of the TCS system, tax evasion can be significantly reduced as taxes are being levied at every instance of the Transactions.

0

Tax Collected at Source under GST

1515

Tax Collected at Source or TCS refers to the tax collected by the e-commerce operators from the buyer on behalf of the supplier of goods or services and remitted to the Government. This tax is collected by the seller from the buyer at the time of sale and as the name suggests, the tax is deducted directly from the source of payment.

The Income Tax Act includes provisions for deduction of taxes from the source under Section 206C. The Operator must collect taxes as per the rate notified by the Government from the ‘net value’ as defined under Section 51(1). As per the recent notification, the operator must collect taxes at not exceeding the rate of 1%. The net value can only be determined by a formula that is specified in Section 52(1) of the Act, which is as follows: 

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

Once the TCS is deducted, it must be paid back to the Government within 10 days within the end of the month of the collection (Section 52(3)). Such collected amount should be paid by debiting the e-cash ledger and electronic liability register will be credited duly. Apart from this, there must be a monthly statement as well as an annual statement electronically. 

Who can collect TCS under GST:

As per Section 52, the e-commerce operator is liable to collect TCS only if the supply or purchase has been made through the operator on behalf of another supplier and the consideration alone is collected by the operator. However, as per section 9(5) of the I-T Act, there are few exceptional cases for collecting TCS such as:

  • Clubs (Unregistered suppliers)
  • Hotel accommodations 
  • Passenger transportation service providers- taxi, motor cab or motorcycle, etc.
  • Housekeeping services- plumbing, carpentry, etc. (Unregistered suppliers)

The liability of the operator arises only when he pays the vendor or supplier after deducting the TCS. 

Classification of tax paid by the operator:

The tax amount paid by the operator to the Government can be classified as:

    1. IGST & CGST is paid to the Central Government
    2. SGST is paid to the respective State Government 

Get Online GST Registration

Importance of Forms GSTR-8 and GSTR-2A:

  • GSTR-8: This form needs to be submitted by the 10th of the next month in which the tax was collected. The form is used to file for TCS returns by the e-commerce operators. It can only be filed once the collected tax has been submitted to the respective Government. GSTR-8 cannot be revised once it has been filed. 
  • GSTR-2A: This form is predominantly used by e-commerce sellers. All details filed by the e-commerce buyers will be available in the GSTR-2A for the usage of the sellers. The tax collected can be viewed in the electronic cash ledgers of the respective sellers. The sellers can match and reconcile their supplies mentioned in the GSTR-2A and claim for credits accordingly. 

(** After matching and reconciling the data in GSTR-8 and GSTR-2A, if there are any discrepancies, it will be informed to the supplier and the operator. If the changes are not made within the stipulated time period, then the Tax amount would be added to the supplier’s liability. The supplier will be made liable for the interest amount as well.)

Registration Provisions:

Every e-commerce operator and supplier need to compulsorily register under the GST with a few exceptions and conditions as mentioned below:

  1. All e-commerce operator, without any threshold limit specification, needs to register under the Goods and Service Tax
  2. Every e-commerce supplier excluding the exceptions mentioned in Section 9(5) of the CGST Act needs to be registered. 
  3. The supplier who is service providers making supplies through e-commerce platforms are exempted from registration if their gross turnover does not exceed Rs. 20 lakhs (assuming there are no inter-state supplies made).
  4. All goods suppliers must compulsorily register without any exemptions. 
  5. The registration of an e-commerce company must be made in every state where it practices the trade. 

TCS Certificate:

After filing the Quarterly TCS return (i.e. Form 27EQ), he has to provide a TCS Certificate to the purchaser of the Goods. The Certificate contains the following details:

  • Name of the seller and buyer
  • TAN of the person filing the quarterly TCS return
  • The gross tax collected by the seller
  • Rate of tax applied
  • The PAN of both the seller and buyer
  • The date of Tax collection 

Every e-commerce supplier and operator must have registered under GST in every state in which they operate before October 1st, 2018 as it was the date after which all TCS provisions were brought into effect. With the introduction of the TCS system, tax evasion can be significantly reduced as taxes are being levied at every instance of the Transactions.

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A lawyer with 14 years' experience, Vikram has worked with several well-known corporate law firms before joining Vakilsearch.