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GST

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

we are going to examine the impact of the TCS mechanism under GST specifically Tax Collected at Source (TCS) on e-commerce industry

The E-Commerce industry has a unique place in the GST regime. GST Act incorporates Tax collected at source (TCS) provisions, however, it did not actively notify the provisions.

Now E-Commerce – TCS provisions have been notified by the Government on September 13th, 2018. From October 1st of 2018, it will start leaving the tax on e-commerce

Summary of the New Updates:

  • A separate registration should be obtained by the E-commerce operators (ECO) for 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 the 10th of the subsequent month.
  • E-Commerce operators should also furnish a monthly return with the details of Tax on e-commerce collected on or before the 10th of Next month. (GSTR 8)

Tax on E-Commerce Collected at Source New Provisions :

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

Inventory Model – In this model, the owner of the e-commerce portal acts as a trader. The owner maintains an inventory of stock and sells his / her own stock through the portal. TCS does not apply to this model of e-commerce

Aggregator Model – In this model, the owner of the e-commerce portal does not sell anything directly but allows other vendors to sell their goods by registering on the portal and taking a commission from the sales made. TCS is applicable to this model.

Tax Collected At Source Provisions Applicable To E-Commerce Operator

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

Implications of TCS on the E-commerce Industry

What is the TCS percentage deducted and how is it calculated?

  • On the E-commerce platform, from aggregate supplies, 2% TCS is deducted.
  • 1% CGST and 1% SGST in case of within-the-state sales
  • 2% of IGST in case of interstate sales.

The calculation considers the monthly sales returns of the aggregate value of supplies.

Ex: Mr.A, has sold goods worth Rs.10,000 through the Flipkart platform in a particular month – and Mr.A also charged a 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 the 10th of next month.

The calculation of Sales Return

On the net sales in a month, the organization deducts TCS. This means from the monthly sales – deduct the sales returns. On the net amount, it calculates the TCS to deduct.

Should ECO obtain state-specific registration for each and every state in which it operates?

As per the initial provisions of GST, yes ECO should obtain state-specific registration in case of operating in multiple states.

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, the c whatever TDS the ECO deducts.

Conclusion

E-commerce is still in its nascent stage across the world. Innovations in business models are taking place on a frequent scale, requiring governments to reassess the taxation structure for these business activities. Keeping abreast with these changes while managing your business at the same time can be a harrowing ordeal. So it is always advisable to engage a professional tax expert who is trained to understand the tax framework and is up-to-date with all the changes in taxation. If you have any other queries or require any assistance with regard to any legal or regulatory matter, get in touch with us and we will ensure that your concerns are addressed by our team of experts.

FAQ on E-Commerce TCS:

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.

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.

Does An E-Commerce Operator Require TCS Registration?

Yes, E-Commerce operators should obtain a separate registration under GST for TCS purpose. He should also file a separate return (GSTR 8) for TCS purposes. 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)


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