After deferring the provisions related to TCS since the implementation of GST, Government has, vide Notification No. 50/2018 – Central Tax dated September 13, 2018 and Notification No. 51/2018 – Central Tax dated September 13, 2018, appointed 1st October, 2018 as the date from which the TCS provisions shall be made applicable. Hence it is worthwhile to understand the same for better compliance. In the present article we shall cover frequently asked questions with respect to the TCS provisions.
It stands for the tax collection at source. It is a concept borrowed from the Income Tax. Basically the payer (viz. collector) is required to collect some amount as tax while making the payment to the supplier. Such amount shall be collected separately over and above the invoice value. Hence let us say INR 1180 is the invoice value (Basic amount is INR 1000 plus tax is INR 180). Then the payer shall collect 1% (i.e. INR 10) and make the payment of such tax to the Government. Net amount of INR 1170 (i.e. 1180-10) shall be paid to the concerned supplier.
On the other hand, supplier can claim credit of the tax so collected while discharging his liabilities. It acts as a powerful instrument to prevent tax evasion and expands the tax net, as it provides for the creation of an audit trail.
As per Sec. 52(1) of the CGST Act, 2017 every electronic commerce operator, not being an agent, shall collect an amount calculated at such rate not exceeding one per cent, as may be notified by the Government.
Electronic commerce operator is defined u/s 2(45) of the CGST Act, 2017 as under:
“electronic commerce operator means any person who owns, operates or manages digital or electronic facility or platform for electronic commerce”
Hence the persons who either owns or operates or manages digital or electronic facility or platform for electronic commerce shall be considered as electronic commerce operators. Further “electronic commerce” is defined u/s 2(44) of the CGST Act, 2017 as under:
“electronic commerce means the supply of goods or services or both, including digital products over digital or electronic network”
Combined reading of the above definitions will entail that only companies who are in the business of providing such platform for electronic commerce shall be regarded as electronic commerce operators. Hence companies like Amazon, Flipkart, etc. which displays / lists on their portal products as well as services which are actually supplied by some other person to the consumer are electronic commerce operator. On placing the order for a particular product/ services the actual supplier supplies the selected product/services to the consumer. The price/consideration for the product/services is collected by the Operator from the consumer and passed on to the actual supplier after deducting his commission by the Operator. Such Operator is only required to collect the tax at source.
As per Section 52(1) of the CGST Act, 2017, TCS is to be collected by an electronic commerce operator on 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 such operator.
Hence TCS is to be collected if:
a. taxable supplies are made through the Operator by other suppliers AND
b. consideration with respect to such supplies is collected by the Operator.
Thus TCS is required to be collected on all taxable supplies made through an electronic commerce operator where the consideration is received by such operator.
There is thus no threshold exemption from TCS once the above cited conditions are fulfilled. However, the supplies made by the electronic commerce operator on its own account are not subject to TCS requirements since the above stated conditions are not fulfilled.
As per Sec. 52(1) of the CGST Act, TCS is required to be collected on the “net value of taxable supplies”. Further “net value of taxable supplies” is defined by an Explanation to Sec. 52(1) as under:
“net value of taxable supplies shall mean the aggregate value of taxable supplies of goods or services or both, other than services notified under sub-section (5) of section 9, made during any month by all registered persons through the operator reduced by the aggregate value of taxable supplies returned to the suppliers during the said month.”
Same can also be explained through the following equation:
Net Value of Taxable Supplies = [(Aggregate Value of Taxable Supplies of Goods + Services) – (Section 9(5) Services)]} – (Aggregate Value of Returned Taxable Supplies + Goods)]
Let us take an example to understand. Gross taxable value of supplies made by a particular supplier in a month is let us say INR 10 lakhs. During the said month, the aggregate value of supplies returned (original supply might have been done during the same month or even before) is INR 1 lakhs. Then, as per the above definition, “net value of taxable supplies” shall be INR 9 lakhs on which TCS is to be collected for that particular month.
It may be noted that the “value of taxable supplies” shall not include the GST since Sec. 15(2)(a) of the CGST Act, 2017 clearly excludes the same.
It may also be noted that the value of services notified u/s 9(5) are to be excluded. As per Notification No. 17/2017-Central Tax (Rate) dated 28.06.2017 following supplies have been notified u/s 9(5):
a. services by way of transportation of passengers by a radio-taxi, motorcab, maxicab and motor cycle
b. services by way of providing accommodation in hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes, except where the person supplying such service through electronic commerce operatoris liable for registration under sub-section (1) of section 22 of the said Central Goods and Services Tax Act
c. services by way of house-keeping, such as plumbing, carpentering etc., except where the person supplying such service through electronic commerce operatoris liable for registration under sub-section (1) of section 22 of the said Central Goods and Services Tax Act
In all the above three cases, since the electronic commerce operator has been made liable to pay the tax as if he is the supplier u/s 9(5), there is no requirement to collect TCS.
There is no exception to collection of TCS if all the stipulated conditions (mentioned supra) are fulfilled. Hence there is no threshold exemption.
As per Sec. 24(ix) of the CGST Act, 2017 persons who supply goods or services or both, other than supplies specified under sub-section (5) of section 9, through an electronic commerce operator, who is required to collect tax at source under section 52, shall obtain compulsory registration.
Thus if the supplier is making inter-state supply of goods, through an electronic commerce operator, such person needs to obtain compulsory registration and hence the question of collecting TCS from unregistered person shall not arise.
It may be noted that the Government vide Notification No. 65/2017-C.T., dated 15-11-2017 has granted threshold exemption to persons making inter-state supply of taxable services through an electronic commerce operator if the aggregate turnover, to be computed on all India basis, does not exceed INR 20 lakhs (INR 10 lakhs for special category States). However no such exemption has been granted to persons making inter-state supply of goods.
Hence if a supplier only makes intra-state supplies of services and enjoys the threshold exemption, the question will remain as to whether TCS needs to be collected from such supplier ?
Plain reading of Sec. 52(1) provides that TCS shall be collected from all the suppliers. However Explanation to the said provision provides that the “net value of taxable supplies” shall mean the aggregate value of taxable supplies of goods or services or both, other than services notified under sub-section (5) of section 9, made during any month by all registered persons through the operator. Hence only supplies by registered persons are covered.
Thus in case of an unregistered person, the “net value of taxable supplies” shall be NIL and hence TCS is not to be collected.
Vide Notification No. 52/2018 – Central Tax, rate of TCS shall be 0.5% for Central Tax. Hence 0.5% shall also be for State Tax. For IGST, rate of TCS shall be 1% as notified by Notification No. 02/2018 – Integrated Tax.
As per Sec. 24(x) of the CGST Act, 2017 every electronic commerce operator must be compulsorily registered. Hence there are no threshold limits for registration as collector. This clause has been amended vide the CGST Amendment Act, 2018 to restrict applicability of compulsory registration to only those cases of e-commerce operator who is required to collect TCS under Section 52. The operation of said amendment is yet to be notified.
As on date, there is also no provision for centralized registration for intra-state supplies made in the respective States. Hence the electronic commerce operator will be required to register in every State where the concerned suppliers are based to comply with the TCS provisions.
Form GST REG-07 needs to be filed for obtaining the registration as collector. Applicants who don’t have PAN can register on the basis of TAN. The proper officer may grant registration after due verification and issue a certificate of registration in FORM GST REG-06 within a period of three working days from the date of submission of the application.
Sec. 52(1) of the CGST Act, 2017 only provides that the amount of tax shall be collected at such rate (1%) of the net value of taxable supplies. Hence the point of collection (i.e. accrual or payment) has not been clearly prescribed.
Explanation to the said provision however provides that “net value of taxable supplies” shall mean the aggregate value of taxable supplies made during the month by the concerned registered supplier. Hence it appears that the TCS shall be collected at the point at which it can be said that the supplies have been made. Hence the time of supply as determined u/s 12 & 13 of the CGST Act, 2017 (usually an invoice) shall be the point of collection.
Let us take an illustration to understand. Suppose a customer places an order on Amazon platform on 31.10.2018 and makes the payment. Goods are however dispatched on 02.11.2018 and hence invoice is also prepared on such date. In such scenario, Amazon is required to collect TCS only in the month of November (i.e. the month in which supply is made) and not October when payment is received.
11. When TCS is required to be paid ?
As per Sec. 52(3), TCS collected during a particular month is required to be paid within ten days after the end of the said month.
As per Rule 46 of the CGST Rules, 2017 there is no requirement to indicate TCS on the invoice issued by the concerned supplier.
As per Sec. 52(4) read with Rule 67(1), every electronic commerce operator shall furnish a return 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 in the FORM GSTR-8 electronically through the common portal. Details furnished in FORM GSTR-8 shall be made available electronically to each of the suppliers in Part C of FORM GSTR-2A.
Return in FORM GSTR-8 needs to be filed within ten days after the end of each month.
As per Sec. 52(6) of the CGST Act, 2017 if any operator after furnishing a return discovers any omission or incorrect particulars therein, other than as a result of scrutiny, audit, inspection or enforcement activity by the tax authorities, he shall rectify such omission or incorrect particulars in the statement to be furnished for the month during which such omission or incorrect particulars are noticed, subject to payment of interest, as specified in sub-section (1) of section 50 (i.e. 18%).
However no such rectification of any omission or incorrect particulars shall be allowed after the due date for furnishing of statement for the month of September following the end of the financial year or the actual date of furnishing of the relevant annual statement, whichever is earlier.
As on date there is no concept of TCS certificate.
As per Sec. 52(7) of the CGST Act, 2017 the supplier who has supplied the goods or services or both through the operator shall claim credit, in his electronic cash ledger, of the amount collected and reflected in the statement of the operator furnished under sub-section (4) (i.e. GSTR-8), in such manner as may be prescribed.
Hence the amount collected and reflected in GSTR-8 shall be credited in the electronic cash ledger of the concerned supplier.
Yes. As per Sec. 52(5) of the CGST Act, 2017 every operator who collects the tax shall furnish an annual statement, electronically, 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 the said sub-section during the financial year, in such form and manner as may be prescribed, before 31st December following the end of such financial year. Said annual return needs to be filed in FORM – 9B.
Yes. As per Sec. 52(8) of the CGST Act, 2017 the details of supplies furnished by every operator under sub-section (4) (i.e. GSTR – 8) shall be matched with the corresponding details of outward supplies furnished by the concerned registered supplier (i.e. GSTR – 1) in such manner and within such time as may be prescribed.
Further the mismatched amount (i.e. discrepancy) shall be communicated and such amount (along with the interest) shall be added to the output tax liability of the concerned supplier if such discrepancy is not rectified in the statement of the month in which the same is communicated.
As on date, no such mechanism for matching has been made operational.
As per Sec. 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 or services or both 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 operator and declared as additional places of business by such suppliers,
as may be specified in the notice.
Every operator on whom a notice has been served shall furnish the required information within fifteen working days of the date of service of such notice. Failure to furnish such details may invite penalty which may extend to twenty-five thousand rupees in addition to any action u/s 122.
|1||TCS not collected||
As per Sec. 122(1)(vi) of the CGST Act, 2017 failure to collect the tax as per Sec. 52(1) can invite penalty of INR 10,000/- or the amount not collected or short collected, whichever is higher.
TCS collected but not paid to the Government
In our opinion Sec. 76 of the CGST Act, 2017 can be invoked by the officer to recover such TCS along with interest. Penalty u/s 122(1)(vi) may also be imposed subject to principles of natural justice.
|3||Late filing of TCS returns||
Provisions of Sec. 47 of the CGST Act, 2017 imposing late fees shall not apply to the TCS return since the same is to be filed u/s 52(4) of the said Act (which is not covered u/s 47). However general penalty up to INR 25,000/- can be imposed u/s 125.
It must however be noted that unless the return is filed, the concerned supplier shall not get the credit in his electronic cash ledger.
As per Sec. 52(6) of the CGST Act, 2017 any errors or omissions in the return filed can be corrected subject to certain time limit. However there is no specific provision to seek refund of the tax collected in excess. Hence the concerned supplier can claim the credit of such excess tax in his cash ledger and utilize the same.