CONCEPT OF TAX COLLECTION AT SOURCE (TCS) IN GST

[Dr. Sanjiv Agarwal]

Chapter X of the CGST Act, 2017 contains provisions in relation Tax Collection at Source (TCS) including e-commerce in section 52. These provisions will be effective from a notified date. However, ‘e-commerce’ and ‘e-commerce operator’ are defined in section 2(44) and 2(45) of the CGST Act, 2017 respectively.

TCS is collected as a tax by the e-commerce operator on behalf of supplier and is only a method of collection of tax through the operator (just like TDS) and the power to collect TCS is without prejudice to any other mode of recovery from the operator.

According to section 52 of the GST Act, every E-commerce operator is required to collect an amount not exceeding 1% of the net value of taxable supplies, made through it by the other suppliers where the consideration of such supplies is to be collected by electronic commerce operator. The tax so collected is called tax collection at source (TCS). The tax so deducted is known as tax collected at source (TCS), similar to tax deducted at source (TDS).

For the purpose, net value of taxable supplies would mean the aggregate value of supply of taxable goods and services other than services which has been notified by Government on which electronics commerce operator has been made liable for payment of tax in terms of section 9(5) of the GST Act minus the aggregate value of goods and services returned to the supplier of such goods and/or services.

However, taxable supplies which are returned by the buyers on the electronic platform will be allowed as a deduction from net value and no TCS will be collected on such amount.

TCS by Electronic Commerce Operator (ECO)

As per section 52(1), ECO is required to collect TCS only when such ECO collects the consideration. If consideration is not collected, TCS provisions will not apply.

It is important to note that services notified under the provisions of section 9(5) of the GST Act, 2017 are required to be excluded for the purpose of TCS. Section 9(5) provides that in respect of notified services, the total tax in respect of those services is required to be paid by e-commerce operator.

E-commerce operators will have to collect and deposit tax collected at source (TCS) in addition to what GST is payable in the states in respect of supply of their own goods and services. This tax will have to be collected on payment to vendors which will be subject to reconciliation at a later stage.

In terms of section 52(1), collection of tax at source is mandatory irrespective of any other provisions in GST Act or in any contract, arrangement or memorandum of understanding. This provision casts an obligation on the operator to collect an amount at the given rate out of the proceeds payable to the actual supplier of goods or services making supplies through it.

In terms of section 52(7) of the CGST Act, 2017, TCS collected from the supplier and deposited with the Government shall be deemed to be the payment of tax on behalf of the supplier and supplier shall claim credit in his electronic cash ledger, as per entries reflected in the statement/return filed by the e-commerce operator.            

An e-commerce operator is required to collect (by way of deduction) tax from the payment to be made to the suppliers of goods and services, who had supplied such goods and services using e-commerce operator’s platform. Such amount is required to be collected on earlier of the following two events-

(a)   time of credit of amount to the accounts of actual supplier of goods and/or services

(b)  time of payment of amount to such suppliers Such tax has to be collected from the amount payable or paid to the supplier, representing consideration towards the supply of goods and/or services made through it.

As per section 52(3) of the CGST Act, 2017, TCS is required to be deposited by the e-commerce operator by 10th day of the following month in which the amount of TCS was so collected i.e., within ten days after the end of the month in which collection is made. Such TCS amount shall be paid to the credit of appropriate Government by the e-commerce operator.

As per section 52(4) of the CGST Act, 2017 an Operator is required to furnish a monthly statement in Form GSTR-8 by the 10th of the following month through an e-commerce operator containing the details of the containing the details of outward supplies of goods or services or both effected through it, including the supplies of goods or services or both returned through it, and the amount collected under sub-section (1) of section 52 of the CGST Act, 2017 during a month within ten days after the end of such month.

The details furnished by the operator under sub-rule (1) 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.

Under section 52(5), the e-commerce operator besides collecting and depositing tax by 10th of following month, has also the obligation 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.

According to section 52 of the CGST Act, 2017, the operator is responsible to collect/deduct the specified percentage of amount out of the proceeds payable to the actual suppliers, pay such amount to the government and file a statement containing respective details. The time available to the operator to deposit the collected amount onbehalf of suppliers and to file the respective Statement containing the details of such collection is 10 days after the end of the month to which such collection relates. The operator is responsible to provide the information sought by the Government relating to the details of the supplies made by the actual suppliers using the portal of operator.

According to section 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 to be collected by the ECO. In this case, there are two transactions - where you purchase the goods from the vendors, and where you sell it through your website. For the first transaction, GST is leviable, and will need to be paid to your vendor, on which credit is available for you. The second transaction is a supply on your own account and not by other suppliers and there is no requirement to collect tax at source. The transaction will attract GST at the prevailing rates.

Any amount collected and paid to the credit of the appropriate Government by e-commerce operator shall be deemed to be a payment of tax on behalf of the concerned supplier and the supplier can claim credit in his electronic cash ledger.

In terms of section 52(12) of the CGST Act, 2017, Any authority not below the rank of Deputy Commissioner may serve a notice, either before or during the course of any proceedings under this Act, requiring the operator to furnish such details relating to-

(a)   supplies of goods and/or services effected through such operator during any period, or

(b)  stock of goods held by the suppliers making supplies through such operator in the godowns or warehouses, by whatever name called, managed by such operators and declared as additional places of business by such suppliers - as may be specified in the notice.

The operator on receipt of notice as aforesaid shall be under an obligation to furnish the required information within fifteen working days from the date of service of notice. In case an Operator fails to furnish the information, besides being liable for penal action under section 122 of the CGST Act, 2017, it shall also be liable for penalty up to ₹ 25,000/-

According to section 52 (7 & 8) of the CGST Act, 2017, the suppliers of goods and services on whose behalf the payment of TCS is collected and deposited by e-commerce operator will be eligible to claim credit of such amount in their electronic cash ledger. The details of supplies, deductions and deposit furnished by e-commerce operator should be matched with the periodical returns furnished by such supplier. On its matching with the details declared by the supplier, the electronic cash ledger of such supplier will be credited with an amount deposited by e-commerce operator on their behalf.

In terms of sub-sections 9 and 10 of section 52 of the CGST Act, 2017, 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 alongwith interest.

Discussions to this article

[JAMES PG]

Whether TCS to be collected for sale of scrap includes GST also?. As per Sec 15 (2) of CGST Act, value of supply shall include any taxes, dues, cesses, fees and charges levied under any law other that CGST/ IGST/ SGST/ UTGST/ Compensation Cess Act, if charged separately by the supplier, it is to be included in the taxable value .CBDT Circular No 23/17 dated 19.07.17 clarifies that TDS to be computed on the value after excluding GST. Whether inclusion of GST for TCS is clashing with TDS provisions?