TCS Provisions under GST Explained: E-commerce Operator Obligations

Introduction

Under the Goods and Services Tax (GST) law, e-commerce operators (ECOs) are required to collect a small percentage of tax, known as Tax Collected at Source (TCS), on the supply of goods or services made through their platforms by other suppliers. This TCS is then deposited with the government and credited to the supplier’s electronic cash ledger. This article explains the key aspects of TCS under GST in simple language.

1. What is TCS under GST?

Since October 1, 2018, GST law mandates ECOs to collect TCS on taxable supplies made through their platforms, with some exceptions (e.g., when the ECO acts as an agent or for specific services). Below are the main aspects of TCS:

(a) Applicability of TCS

• Who collects TCS? Every ECO, unless acting as an agent, must collect TCS.
• On what? TCS is collected on the net value of taxable supplies where the ECO collects payment from customers.
• Rate of TCS: As of July 10, 2024, the TCS rate is 0.25% under CGST and SGST/UTGST each (0.5% for interstate supplies under IGST). Earlier, it was 0.5% under CGST/SGST and 1% under IGST.
• Exceptions: TCS is not collected if:
  • The ECO sells its own products on its website.
  • The ECO acts as an agent.
  • Services are covered under Section 9(5) of the CGST Act (e.g., restaurant services via ECOs since January 1, 2022).
  • The supplier collects payment directly.
  • Supplies are exempt, non-taxable (e.g., petrol, diesel), or under reverse charge.
  • Goods are imported through the ECO.

(b) Depositing TCS

• When to collect? TCS is collected when the supply is made, regardless of when payment is received.
• When to deposit? The ECO must deposit TCS to the government within 10 days after the end of the month in which it was collected, using the electronic cash ledger on the GSTN portal.
• Late deposit: Interest is charged for delayed deposits.

(c) Filing TCS Returns

• ECOs must file a monthly statement in Form GSTR-8 by the 10th of the next month, detailing supplies, returns, and TCS collected.
• An annual statement in Form GSTR-9B is required by December 31 of the next financial year, though this form is not yet notified.
• If details in GSTR-8 don’t match the supplier’s GSTR-1, discrepancies are communicated. Unresolved discrepancies are added to the supplier’s tax liability with interest.

(d) Claiming TCS Credit

• Suppliers can claim TCS credited by the ECO in their electronic cash ledger via the GSTN portal.
• They can accept or reject the TCS amount, and the accepted amount is credited for use in tax payments.
• Excess TCS can be refunded, similar to other excess balances in the electronic cash ledger.

(e) Registration for TCS Collectors

• ECOs must obtain a separate GST registration as a TCS collector for each state/UT, even if already registered under GST.
• Foreign ECOs supplying to customers in India must register in each state/UT or appoint an agent if they have no physical presence.

(f) Other Key Provisions

• Multiple ECOs: In cases like the Open Network for Digital Commerce (ONDC), the ECO paying the supplier (usually the seller-side ECO) collects TCS.
• Tea Board Example: The Tea Board, an ECO, collects TCS on tea sales (on the net value of tea) and auctioneer services (on commissions).
• Negative Net Value: If returns exceed supplies in a month, the negative value is ignored for TCS calculation and does not affect future periods.
• Penalties: Failing to collect or deposit TCS, or collecting less than required, results in penalties.
• GST Authority Powers: Authorities can issue notices to ECOs for details on supplies or stock, with a 15-day response period. Non-compliance may lead to a penalty of up to ₹25,000.

2. Key Scenarios Where TCS Does Not Apply

3. Conclusion

TCS under GST ensures tax compliance for supplies made through e-commerce platforms. ECOs play a key role in collecting and depositing TCS, filing returns, and enabling suppliers to claim credits. Understanding exemptions, rates, and compliance requirements helps ECOs and suppliers navigate the system effectively.