TCS PROVISIONS ON ELECTRONIC COMMERCE OPERATOR w.e.f. 01.10.2018

[Anuj Bansal]

Section 52 of CGST Act governs the provision of TCS in case of Electronic Commerce Operator(here after referred as‘ECO’). By press release dated 26/6/2017, Government has deferred the applicability of provisions of Section 52 relating to TCS, until further notice. The GST Council in their 22nd meeting held on 6th October, 2017 at New Delhi decided that operationalisation of TCS provisions shall be postponed till 31.03.2018. Thereafter, vide press release Dt.10/03/18, Government during 26^th meeting of GST council held in New Delhi, decided that provisions relation to TCS stand suspended till 30.06.18. Then again vide press release Dt.29.06.18 provisions of Section 52 were suspended till 30.09.18 by the Government.Now finally, vide Notification no. 51/2018- Central Tax, Dt. 13.09.18 provisions of section 52 shall come in force from 01.10.2018, which is going to open a Pandora box like reconciliation, filing of returns, etc.

Before discussing the provisions of this section further, let’s understand the background. In this digital world, it’s not necessary that buyer and seller of goods and services meet physically. They can do the transaction over digital or electronic network also which is called ‘ELECTRONIC COMMERCE’, in layman language. Sometimes such transactions are done through ‘Electronic Commerce Operator’. ECO facilitates such transactions by creating an Electronic market where sellers lists their products along with its features and price. Buyer chooses the suitable product and purchases the same. Seller supplies the good through ECO or sometimes directly. Payment can be done in cash at time of delivery but sometimes same is done in advance before the delivery of product. ECO collects the amount and transfers the same to sellers after deducting some charges for facilitating this transaction. Most of the time, facility is there to return the goods too. To capture the unreported sales by vendors through ECO, Government has introduced provisions of TCS in GST Act. ECO is required to collect TCS of 1% from net taxable value of supplies made through them. For an example,suppose a certain product is sold at ₹ 10000/- through an Operator by a seller. The Operator would collect tax @ 1% of the net value of ₹ 10000/- i.e. ₹ 100/- as TCS. Further, following definitions are relevant before we proceed to analyse section 52 of CGST Act:-

1. According to Section 2(45) of CGST Act, “Electronic commerce operator” means any person who owns, operates or manages digital or electronic facility or platform for electronic commerce.
2. According to Section 2(44) of CGST Act, “Electronic commerce” means the supply of goods or services or both, including digital products over digital or electronic network.

Section 52 of CGST Act and its analysis:

As per above section, ‘Every Electronic commerce operator not being an agent, shall collect an amount calculated at such rate not exceeding 1%, as may be notified by the Government on the recommendations of the Council, of the net value of taxable supplies made through it by other suppliers where the consideration with respect to such supplies is to be collected by the operator.’

VALUE OF TAXABLE SUPPLIES ON WHICH TCS TO BE COLLECTED

As per explanation to section 52(1), net value of taxable supplies means aggregate value of all taxable supplies made through ECO net of all supplies returned by the buyers. Value of taxable supplies shall not include value on which ECO is required to pay tax under Reverse Charge Mechanism, as per Sec(9)(5) of CGST Act. For this purpose, as per notification No. 17/2017 two services on which ECO shall pay tax under reverse charge mechanism are (1) services by way of transportation of passengers by a radio-taxi, motorcab, maxicab and motor Cycle (Example:-Ola and Uber shall pay tax under RCM) and (2) services by way of providing accommodation in hotel, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes, except where such hotel, guest house etc. are liable for registration.

RATE OF TCS, COLLECTION AND PAYMENT OF TAX

Tax shall be collected by ECO @ 1% of net value of taxable supplies made through it, where payment of such supplies has to be collected by ECO.After determining the value of turnover as stated above, tax has to be collected on monthly basis.

Tax collected shall be deposited by the ECO to the Government within 10 days after the end of the month in which such collection is made. Tax collected has to be bifurcated in IGST, CGST,  SGST and Union territory tax as is charged on invoice and deposited accordingly. Meaning, in case of Intra- state transaction TCS will be bifurcated in (0.5% CGST+ 0.5% SGST) and shall be deposited accordingly. While in case of Inter-state transaction, TCS of 1% will be deposited towards IGST as per Sectoral FAQ issued by CBEC. Rate of TCS has also been notified vide notifications Dt. 20.09.18 under CGST & IGST Acts.

FILING OF MONTHLY STATEMENT & ANNUAL RETURN

As per sub-section 52(4), after deposition of tax, the ECO is required to file a monthly statement in form GSTR-8 wherein details of outward supplies made through it along-with all the sales-returns. Such statement has to be filed within 10 days from the end of the month.Amount of tax collected will be reflected in cash ledger and same can be used for payment of tax by the supplier of goods.

In addition to monthly return, as stated above,an annual return(in prescribed format) shall be filed by ECO before last day of December following end of financial year.

RECTIFICATION

If operator finds any omission or incorrect particulars, same can be rectified in the statement of month during which such error is discovered. No correction can be made after the due date for filing GSTR-8 for the month of September of the following year.

MATCHING CONCEPT

Most important aspect is matching of details filed by ECO in GSTR-8 and by supplier in GSTR 1. Both the details should match. In case of discrepancy, both the parties shall be communicated discrepancies. The discrepancies shall be communicated in Form GST-MIS-3 to the supplier and GST MIS-4 to the ECO. As per CGST Rules 79(2) & 79(3) both of them should rectify the same. If rectification is not done in the month of communication of discrepancy, and if value of outward supply declared by operator is more than that of supplier, tax liability to the extent of discrepancy shall be added to output tax liability of supplier in following month in which discrepancy was communicated. Concern supplier is required to pay the tax along with the interest specified.

DEPARTMENT MAY CALL DETAILS

The department may issue a notice to theoperator to furnish details about:

1. Supplies of goods/or services effected during any period, or
2. Stock of goods held by the suppliers in the godowns or warehouse managed by such operators and declared as additional places of business by such suppliers.

The details shall be furnished by the operator in fifteen working days on being asked by the department. In case the details are not furnished the person will be liable to penalty which may extend to ₹ 25,000/- as provided in section 52(14).

COMPULSORY REGISTRATION

As per section 24 of CGST Act certain category of persons have to compulsory get registered under the Act. Both operator and supplier selling goods through ECO have to get compulsory registered under the Act. Hence, threshold limit of 20 lakhs is not applicable to them.

Few further takeaways :-

1. In case goods are purchased from different vendors and then sale in made on own website, under own billing, in such case no TCS is required to be deducted.
2. If a supplier sells its own products through a web site hosted by him. In such case no TCS is required to be deducted and GST at prevailing rate would be applicable.
3. If exempted goods like books are sold through ECO then TCS is not required to be collected since supply itself is not taxable.
4. Where supplier sells goods through ECO, their goods may be stored in shared facility operated by ECO. In such case, same place may be registered by multiple suppliers as additional place of business.