Tax Collected at Source (TCS) under GST is a mechanism designed to ensure tax compliance in the e-commerce sector. Under Section 52 of the CGST Act, 2017, every e-commerce operator is required to collect TCS on the net value of taxable supplies made through its platform. This provision, effective from 1st October 2018, has significant implications for both e-commerce operators and sellers.
This article explains the rate, applicability, and credit mechanism of TCS under GST.
What is TCS Under GST?
TCS under GST is a tax collected by the e-commerce operator from the seller at the time of settlement. The operator deposits this tax with the government and reports it in its monthly return, GSTR-8. The seller can then claim this TCS as a credit in its own GST return.
The purpose of TCS is to track online sales and ensure that sellers who operate through e-commerce platforms are registered and filing their GST returns.
Rate of TCS Under GST
The TCS rate under GST is 1% of the net taxable supplies. This is bifurcated as:
- 0.5% CGST + 0.5% SGST for intra-state sales.
- 1% IGST for inter-state sales.
The rate was initially notified at 1% (0.5% CGST + 0.5% SGST) but was temporarily reduced to 0.5% in certain periods. The current rate is 1% on the net taxable value of supplies.
Net Taxable Value: What It Includes
"Net taxable supplies" means the aggregate value of taxable supplies made through the e-commerce operator, excluding:
- Supplies of services notified under Section 9(5) (such as restaurant services and passenger transport services).
- Returns and cancellations.
The TCS is calculated on the net value after adjusting for returns and cancellations reported by the seller.
Applicability: Who Must Collect TCS?
TCS under GST is applicable to:
- Every e-commerce operator who owns, operates, or manages a digital platform for electronic commerce.
- The operator must be registered under GST.
- The operator must collect TCS on the net value of taxable supplies made through its platform by other suppliers.
An "e-commerce operator" is defined under Section 2(45) of the CGST Act as any person who owns, operates, or manages a digital or electronic facility or platform for electronic commerce.
TCS Compliance for E-Commerce Operators
E-commerce operators must:
- Obtain GST registration.
- Collect TCS at the applicable rate.
- Deposit the TCS with the government by the 10th of the following month.
- File GSTR-8 by the 10th of the following month.
- Maintain proper records of TCS collected from each seller.
TCS Credit for Sellers
Sellers can claim the TCS deducted by the e-commerce operator as a credit in their electronic cash ledger . The TCS credit is reflected in the seller's GSTR-2A under the TCS credit section.
To claim the credit, the seller must:
- Verify the TCS amount reflected in GSTR-2A.
- Accept the TCS credit in the "TDS and TCS Credit Received" section on the GST portal.
- Report the TCS credit in GSTR-3B and adjust it against the output tax liability.
Common Issues with TCS Reconciliation
- Mismatch between marketplace reports and GSTR-8: Returns, cancellations, and timing differences can cause mismatches.
- Failure to claim TCS credit: Sellers often fail to accept the TCS credit on the GST portal, resulting in a cash outflow.
- Incorrect reporting in GSTR-1: If sales are not reported correctly, the TCS credit may not match.
- Late filing of GSTR-8 by the operator: This delays the credit availability for sellers.
Practical Tips for Sellers
- Download the marketplace TCS report and settlement report every month.
- Compare the TCS amount with the electronic cash ledger and GSTR-2A.
- Accept the TCS credit on the GST portal promptly.
- Reconcile sales reported in GSTR-1 with marketplace data.
- Raise a ticket with the marketplace if there is a mismatch.
Conclusion
TCS under GST is a critical compliance mechanism for the e-commerce sector. E-commerce operators must collect and deposit TCS, file GSTR-8, and report transactions accurately. Sellers must reconcile TCS credits and claim them in their GST returns. Failure to comply can lead to penalties and blocked credits.
At Anuj Desai & Associates, we provide specialised services in TCS reconciliation, GSTR-8 filing, and GST compliance for e-commerce operators and sellers. Our team can help you navigate the complexities of TCS under GST and ensure seamless compliance.
For a confidential consultation, contact us at office@anujdesaiassociates.com or call 9619456656. Visit our website at https://anujdesaiassociates.com or connect with our founder on LinkedIn at linkedin.com/in/ca-anuj-desai-122547230.