TAX COLLECTED AT SOURCE UNDER GST
- After introduction of the
GST Act it was found that many suppliers were flouting law by not paying
their share of taxes. This consequently led to failure of the GST Act
implementation. Often criticized GST Act was getting targeted again
because of the non-compliance of the law. It was seen that some suppliers
were not filing returns even though they have not opted for composition
scheme or were not below threshold limit. By not filing their return these
suppliers were escaping their liability of GST as well as Income Tax.
- To curb the menace of flouting law, the Govt. on the recommendation of the GST Council introduced the concept of the Tax Collected at source (TCS). It is important to observe here that the concept of TCS is only applicable on the E-commerce operators but does not include agents in its operation. Starting 1st October 2018, every e-commerce operator has to collect TCS barring a few exceptions.
- 2 of the GST Act electronic
commerce operator is defined under GST laws in the following terms:-
“Electronic Commerce” Means The Supply Of Goods Or Services Or Both, Including
Digital Products Over Digital Or Electronic Network;
“Electronic Commerce Operator” Means Any Person Who Owns, Operates Or Manages
Digital Or Electronic Facility Or Platform For Electronic Commerce;
- It can be seen that the
definition of the electronic commerce operator is restricted to only
persons who owns, operates and manages digital or electronic facility or
platform for electronic commerce. This definition includes both category
of operator i.e. one who operates, manages and sell its own product e.g.
Samsung, Apple etc. and also the one who is only managing and operating
the website and selling products of different supplier. There is no
distinction between the operator who is selling his own product and an
operator who is selling products of others as per GST Law for the purpose
WORKING OF E-COMMERCE PLATFORM:
- The E-commerce platform
provide for a platform for small sellers to sell their product to people
at large. This has enlarged the reach of the sellers to even to remotest
part of the India. In E-commerce business there is portal on which various
products from various suppliers is listed. Any buyer interested in buying
any product from the E-commerce portal will go through the website and
will place an order as per his will. The product selected is actually
manufactured by the third party or by the company itself. Payment is
collected by the E-commerce service provider and the same is remitted to
the third party who is the actual manufacturer of the product. So, here
the E-Commerce portal facilitating as a listing portal only.
WHY TCS IS INTRODUCED ONLY FOR E-COMMERCE PLATFORM:
- The E-commerce business has
taken by a boom in the recent decade all over the world. The magnitude of
commerce and facilities available through this E-commerce website is
unimaginable. There are thousands and thousands of small suppliers working
behind such E-commerce giants. The colossal like Flipkart, Amazon, Myntra
etc. has provided a platform to thousand small and medium suppliers to
reach out to every part of India.
- The step taken by the Govt.
is in the furtherance of their untiring job of making the companies in
compliance with the GST law. It is easier to keep a track on a big
supplier then on thousand suppliers. These e-commerce operators are trade
colossal who are easily traceable and it is easy to impose responsibility
on them then to thousand small traders. So, the Govt. made an arrangement
in the name of TCS whereby the responsibility is casted upon the
E-commerce operator to deduct tax. By this methodology the Govt. will be
in a better position to keep a check on the defaulting sellers who were
flouting the law by not filing the return.
- The sole reason that can be
apparently seen from the TCS concept is to bring bigger base under the tax
regime. If E-commerce operator is deducting 1% TCS of every transaction
then the Govt. will have the data and information that the certain
supplier has made a transaction and now that certain supplier cannot
escape its own responsibility of tax payment.
- 24 of the Goods and Service
Tax Act provides for compulsorily registration. This section starts with a
non-obstante clause and states that “notwithstanding anything contained in
sub-section (1) of section 22, the following categories of persons shall
be required to be registered under this Act”. Sec 24 sub-section (x)
states that every electronic commerce operator meaning thereby that every
commerce operator has to compulsorily get registered under the Act
irrespective of their turnover.
- Application for Registration
for TCS collector is to be filed in REG-07. Registration certificate to be
issued in REG-06. If a proper officer is satisfied that a person is no
longer liable to deduct tax, he may cancel registration in REG-08.
POWER TO COLLECT TAX:
- Sec 52 of the GST Act
provides for the collection of tax at source by the Electronic commerce
operator. The amount or rate of Tax Collected at source shall not be more
than 1% of the net value of taxable supply.
RATE OF TCS UNDER GST:
- Under the GST regime, every
electronic commerce operator, not being an agent, shall collect an amount
calculated @ 0.5% of the net value of intra-State taxable supplies made
through it by other suppliers where the consideration with respect to such
supplies is to be collected by the said operator.
– Sec.20 Of The IGST Act Provides That In Case
Of Tax Collection At Source, The Operator Shall Collect Tax At Such Rate Not
Exceeding 2% As May Be Notified On The Recommendations Of The Council Of The
Net Value Of Taxable Supplies. But At Present This Rate Has Been Notified @ 1%.
– Suppose A Product Is Sold At Rs.1000/-
Through An ECO By A Supplier. The Operator Would Collect Tax @1% Of The Net
Value Of Rs.1000/- I.E. Rs.10/- (Inter State Supply).
DEPOSIT OF TCS:
- The specified date for
depositing or remitting to TCS collected to the Govt. exchequer is within
10 days from the closing of the month in which tax collected at source is
deducted. This monthly return is to be filed along with details containing
sales transaction on which TCS is collected in Form GSTR-8.
- Every E-commerce operator
shall file GSTR 9B, an annual return. This annual return needs to be filed
by 31st of December following the end of every financial
year whereby the E-commerce operator is required to provide reconciliation
between financial accounting results and GST Returns.
- On the other hand, the
vendors/ suppliers must file 3 monthly returns. It is only when these
returns are duly filed that the suppliers can claim credit of the tax
- The TCS concept is not
applicable to Indian Companies only but also to any foreign companies
which are working in India. The rationale behind the idea is pristinely
clear. The concept of the tax collected at source is more of an
administrative move than to a legal move. It is easier for the Govt. admin
to keep a track of a mammoth then keeping track of small industries and
sellers. Putting liability on the mammoth is easier and in this process
Govt. will curb the menace of escaping of tax liability by various
- On the other hand the
compliance of the E-commerce operator will rise significantly. TCS will
put another grunt on the already overloaded operator to comply with
another set of the compliance checklist. The compliance cost will be added
whereby the company needs to have a IT structure which can deduct tax @1%
on every transaction.