Recently, the Government vide Notification No. 51/2018, dated 13-9-2018 has made effective TCS provisions given under section 52 of Central Goods and Services Act, 2017(hereinafter referred to as CGST Act) from 1-10-2018. As a result, e-commerce operators will have to collect the tax from those suppliers who are selling goods or providing services on/through their sites while making payments to such suppliers. The learned author tries to summarise provisions relating to TCS provided in GST laws applicable for e-commerce operators along with an illustration.
Today the virtual world has impacted every aspect of our life and the commerce sector has not remain unaffected. Over the couple of years, India has changed the way it shops and trades. Right from buying a pen to purchasing a TV, it is a click away with the help of online shopping platforms. The entire world has been witnessing a growth in e-commerce transactions and therefore, it has become necessary for the businesses to understand and adopt e-commerce to grow trade in India.
E-commerce is the buying and selling of goods and services on the internet electronically and making payment electronically or via any other mode. Section 2(44) of CGST Act defines the term ‘e-commerce’ as the supply of goods or services or both, including digital products over digital or electronic network.
There can be two types of e-commerce players in industry:
|E-commerce operators||E-commerce suppliers|
|An entity like Snapdeal, PaytmMall, Jabong, etc that owns, operates or manages digital platform for e-commerce. Section 2 (45) of the CGST Act, defines “Ecommerce operator’ as any person who owns, operates or manages digital or electronic facility or platform for e-commerce||An entity that supplies goods
or services on a digital ecommerce
Sections 9(5) and section 52 of the CGST Act contain provisions relating to ecommerce. Similar provisions regarding e-commerce are also prescribed by State GST laws. Further, in terms of provisions of section 20 of the IGST Act, e-commerce provisions under CGST Act have also been made applicable to Integrated Goods and Service Tax Act, 2017 (hereinafter referred to as IGST Act) and section 5(5) of the IGST Act also prescribes the provisions relating to specified services provided through e-commerce. All these provisions will be discussed in the forthcoming paras of this article.
2. Applicability of TCS provisions to e-commerce operators
(i) Liability to deduct TCS: As per provisions of section 52 of the CGST Act, every e-commerce operator, not being an agent is required to collect tax known as TCS on the net taxable value in case a supplier supplies some goods or services through its portal and the payment for that supply is collected by the e-commerce operator.
There are various models of e-commerce like inventory led model, open market model, managed market places, etc. which are adopted by different players for providing goods or services to customers. E-commerce operators will be required to collect taxes and deposit to the Government only under those models where the goods or services are supplied by other suppliers and e-commerce operator is collecting consideration for suppliers.
(ii) Rate of TCS: An e-commerce operator needs to collect tax @2% (1%CGST+1%SGST) from the supplier on the net taxable value of intra state supply of goods or services supplied through its portal. In case of inter-state supplies of goods or services supplied through e-commerce operator, it is liable to collect tax at a rate of 2% of net taxable supplies vide section 20 of IGST Act.
(iii) Value at which TCS is to be collected: Tax is to be collected on net taxable value of goods or services supplied by other suppliers through e-commerce operator.
Explanation to section 52(1) clarifies that “net value of taxable supplies” shall mean the aggregate value of taxable supplies of goods or services or both made during any month by all registered persons through the e-commerce operator as reduced by the aggregate value of taxable supplies returned to the suppliers during the said month. Further, specified services on which e commerce operator itself is liable to pay GST under section 9(5) is not included in the net taxable value and thus, no tax is to be collected on such amount.
3. Credit claim of TCS by the supplier supplying through e-commerce operator Section 52(7) of the CGST Act, allows the supplier supplying goods or services or both through the e-commerce operator to take credit of the TCS amount collected in electronic cash ledger.
4. Illustration explaining TCS Mechanism
Suppose X Ltd. of Delhi sells mobile phones on FlipKart and a customer from Delhi ordered a mobile phone worth Rs. 20,000. GST rate on mobile phones is 12%. Flipkart deducts its commission @10% on value of goods. Calculate the amount which X Ltd. will receive after all deductions.
|Invoice raised by X Ltd to customer|
|Selling price of Mobile phone||20000|
|Selling price after GST||22400|
|Total amount to be paid by customer||22400|
|Invoice raised by Flipkart to X Ltd.|
|Commission (10% of Rs. 20,000)||2000|
|[email protected]% (Input)||400|
|Total amount to be paid by X Ltd. To Flipkart||2760|
Flipkart will pay X Ltd. a net amount of Rs. 19640 (22400-2760). However, since GST laws allows credit of IGST to be utilised in CGST output liability and claim of TCS paid by e-commerce operator, X Ltd. , therefore, will deduct Rs 760 (360+400) while paying its output liability of 2400(1200+1200) and will thus pay, only 1640 in cash towards its output liability. Therefore, the net value in the hands of X Ltd. will be as follows:
|Total amount to be received from customer||22400|
|Amount deducted by Flipkart||2760|
|Net amount to be received from Flipkart||19640|
|GST Output Liability||2400|
|CGST of Rs 1200|
|SGST of Rs. 1200|
|Input tax credit of IGST paid on commission||360|
|Credit of TCS||400|
|Net GST Output liability to be paid in cash||1640|
|Net amount in the hands of X Ltd.||18000|
5. Non applicability of TCS provisions to e-commerce operator in case of supply of specified services- Section 9(5)/5(5) of CGST Act/IGST Act
Under the GST Laws, e-commerce operators have been made responsible for paying tax under two ways. One is, when the e-commerce operator itself becomes liable to pay tax on specified services under section 9(5) of CGST Act or 5(5) of IGST Act through reverse charge. Another is, when e-commerce operator is liable to collect tax under section 52 of CGST Act or section 20 of IGST Act for the value of taxable supplies made through it by other suppliers of goods or services other than specified services under section 9(5) of CGST Act or 5(5) of IGST Act. Thus, it is clear that specified services as discussed below are taxable in hands of e-commerce operator only.
(i) E-commerce operator treated as taxable person: Under section 9(5) of CGST Act and 5(5) of IGST Act, the Central Government is empowered to specify category of services on which the GST shall be paid by the e-commerce operator, if such services are supplied through it. In such cases, e-commerce operator shall be treated as the supplier liable for paying the GST in relation to the supply of such services and all the provisions would apply to it instead of actual supplier of services.
(ii) Notified services under section 9(5): By virtue of Notification Nos. 17/2017 and 14/2017 dated 28-6-2017 as amended from time to time specifies the following services :
– Transportation of passengers by a radio-taxi, motor cab, maxi cab and motor cycle.
– 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 e-commerce operator is liable for registration under GST laws.
– House-keeping, such as plumbing, carpentering etc, except where the person supplying such service through e-commerce operator is liable for registration under GST laws.
(iii) Person liable to pay GST for above notified service:
– If the e-commerce operator is located in taxable territory- Person liable to pay tax is the e-commerce operator.
– If the e-commerce operator does not have physical presence in the taxable territory-Person liable to pay tax is the person representing the e-commerce operator.
– If the e-commerce operator has neither the physical presence nor any representative in the taxable territory- Person liable to pay tax is the person appointed by the e-commerce operator for the purpose of paying the tax.
6. Procedural compliances to be made by E-commerce operators
(i) Registration: Every e-commerce operator has to compulsorily register itself under section 24(x) of CGST Act. Further, persons who are required to pay GST under section 9(5) has to compulsorily register themselves as per provisions of section 24(iv). The benefit of threshold limit of Rs. 20 lakh (Rs. 10 lakh for special category states except J & K) is not applicable to them.
(ii) Deposit of TCS to the Government: The amount collected as TCS shall be paid to the Government by an e-commerce operator within ten days after the end of the month in which such collection is made. [Section 52(3)].
(iii) Monthly TCS Return by E-commerce operator: According to section 52(4), every e-commerce operator who collects TCS from supplier who supplies goods or services through its portal is required to file a monthly return in Form GSTR-8 within 10 days from the end of the month. The return shall include details of outward supplies of goods or services or both effected through e-commerce operator to registered or unregistered persons, including the supplies of goods or services or both returned through it, and the amount of TCS collected during a month.
(iv) Correction in monthly TCS return: After filing of return, if e-commerce operator discovers any omission or incorrect particulars therein, 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 at 18% given in section 50. However, such rectification of any omission or incorrect particulars shall not 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 return, whichever is earlier. [Section 52(6)].
(v) Annual TCS return by e-commerce operator: An annual statement in form GSTR-9B is to be filed by e-commerce operator on or before 31st December following the end of the year. [Section 52(5)].
7. Matching of supplies with the corresponding details furnished by suppliers supplying through e-commerce operator
(i) Liability to register under GST: Suppliers who supply goods or services or both, other than specified services u/s 9(5), through an e-commerce operator, collecting TCS are compulsorily required to register themselves as per provisions of section 24(ix). However, they are eligible to take benefit of threshold limit of Rs. 20 lakh (Rs. 10 lakh for special category states except J & K) vide Notification No. 65/2017 – Central Tax dt 15/11/2017.
(ii) Matching of supplies: Under section 37 of CGST Act, every supplier who is supplying goods or services or both other than notified services under section 9(5) is required to furnish a monthly return in GSTR-1 wherein the details of supply of goods or services through an e-commerce operator in TABLE -4C and TABLE-10 shall also be furnished. Sub section (8) of section 52 says that these details shall be matched with the corresponding details of State of place of supply and net taxable value furnished by e-commerce operator in monthly return (GSTR-8).
(iii) Communication of mismatch in details to an e-commerce operator and supplier: As per section 52(9), where the details of outward supplies furnished by the e-commerce operator do not match with the corresponding details furnished by the supplier in GSTR-1, the discrepancy shall be communicated to both persons in forms GST MIS-3 and GST MIS-4 to supplier and e-commerce operator respectively. Such discrepancy must be communicated on the portal on or before the last date of the month in which matching has been carried out.
(iv) Rectification of discrepancies: Both parties i.e. supplier and e-commerce operator may make suitable corrections in their monthly returns of the month in which discrepancy is made available.
(v) Addition of discrepancy amount to the liability of supplier: The amount in respect of any discrepancy which is not rectified either by the supplier in his valid return or the e-commerce operator in his return for the month in which discrepancy is communicated, shall be added to the output tax liability of the said supplier. An addition would be made in monthly return of supplier succeeding the month in which the discrepancy is communicated. This addition will be made in case where the value of outward supplies furnished by the e-commerce operator is more than the value of outward supplies furnished by the supplier.
Such addition to an output tax liability and interest payable thereon shall be made available to supplier electronically on common portal in Form GST MIS-3. [Section 52(10)].
(vi) Interest on addition of discrepancy amount: Section 52(11) states that the supplier in whose output tax liability any amount has been added as above, is liable to pay the tax payable in respect of such supply along with interest, at the rate of 18% specified under section 50 on the amount so added from the date such tax was due till the date of its payment.
8. Notice to e-commerce operator regarding details of suppliers supplying through its portal
Sub section (12) of section 52 empowers an authority not below the rank of Deputy Commissioner to serve a notice requiring an e-commerce operator to furnish such details relating to—
(a) supplies of goods or services or both effected through such an e-commerce operator during any period; or
(b) stock of goods held by the suppliers making supplies through such e-commerce operator in the godowns or warehouses, by whatever name called, managed by such an e-commerce operator and declared as additional places of business by such suppliers, as may be specified in the notice.
Within fifteen working days of the date of service of such notice, such an e-commerce operator is required to furnish the required information. Non- providing of requisite information may result in fine up to Rs 25,000 without prejudice to any action that may be taken under section 122.[Sub sections (13) and (14) of CGST Act].
With the notification of effective date of implementation of TCS provisions in GST from 1st October, 2018, e-commerce operators like Snapdeal, Amazon, etc will have to compulsorily collect TCS on the transactions made by suppliers through such portals on or after 1st October, 2018. As a result, e-commerce operators and all the suppliers selling through e-commerce operators will also be mandatorily required to get register under GST irrespective of turnovers in order to pass on and claim TCS credit respectively.
E-commerce operators are required to timely deposit the TCS and also furnish a monthly and annual return of TCS. Further, outward supplies reported by suppliers supplying through e-commerce in GSTR-1 will be compared with report of supplies by an e-commerce operator furnished in GSTR-8 and any under reporting will be penalized by adding it to the account of supplier. Thus, all these provisions will lead to more compliances regarding registration, returns, reconciliation and TCS returns by e-commerce operators as well as suppliers supplying through e-commerce operator.
1 Tax collection at source
(The author can be reached at [email protected])