Explore the nuances of TDS (Tax Deducted at Source) and TCS (Tax Collected at Source) mechanisms under GST. Understand their eligibility, rates, registration, returns, and consequences of non-compliance.
TDS (Tax Deducted at Source) and TCS (Tax Collected at Source) are two essential components under Goods and Services Tax, primarily aimed at collecting revenue from various sources and ensuring timely payment of taxes. In this article, we will understand the concept of TDS and TCS under GST and their differences.
Section 51 of the CGST Act, 2017 deals with the procedure for ‘Tax Deduction at Source’. TDS is a mechanism in which a specified percentage of tax is deducted by the person making the payment and deposited with the government. TDS under GST is applicable only in specific cases, such as the payment of salary, commission, professional fees, rent etc
Eligibility:
The Government may order the following persons (the deductor) to deduct tax at source:
- a department or establishment of the Central Government or State Government; or
- local authority; or
- Governmental agencies; or
- such persons or category of persons as may be notified by the Government on the recommendations of the Council.
- An authority or a board or any other body which has been set up by Parliament or a State Legislature or by a government, with 51% equity (control) owned by the government.
- A society established by the Central or any State Government or a Local Authority and the society is registered under the Societies Registration Act, 1860.
- Public sector undertakings.
Rate of TDS
TDS is to be deducted at the rate of 2% on payments made to the supplier of taxable goods and/or services, where the total value of such supply, under an individual contract, exceeds Rs.2,50,000.
Non-Applicability of the provision
No deduction of Tax at source shall be made if the location of supplier and place of supply is in a state or union territory, which is different from the State of the registration of the recipient because deductor is not allowed to deduct and deposit TDS of a state/Union territory which is different from his State/Union Territory.
Registration
All service providers, whether supplying intra-state, inter-state or through e-commerce operator are exempt from obtaining GST Registration, provided their aggregate turnover exceeds Rs. 20 lakhs.
A TDS Deductor has to compulsorily register without any threshold limit. The deductor has a privilege of obtaining registration under GST without requiring PAN. He can obtain registration using his Tax Deduction and Collection Account Number (TAN) issued under the Income Tax Act, 1961
TDS Return
The deductor would be liable to make the payment of TDS by the 10th day of the next month in form GSTR-7. If the supplier is unregistered, name of the supplier rather than GSTIN shall be mentioned in the return
TDS Certificate
A TDS certificate is required to be issued by deductor (the person who is deducting tax) in Form GSTR-7A to the deductee (the supplier from whose payment TDS is deducted), within 5 days of crediting the amount to the Government, failing which the deductor would be liable to pay a late fee of Rs. 100/- per day from the expiry of the 5th day till the certificate is issued.
The deductor shall furnish a TDS certificate in FORM GSTR-7A to the deductee mentioning in it the following:
- contract value
- rate of deduction
- Amount deducted
- Amount paid to the appropriate Government
- Any other particulars as may be prescribed
Consequences of non-compliance of TDS Provisions
| S.No. | Particulars | Consequence |
| 1 | TDS not deducted | Interest to be paid along with the TDS amount; else the amount shall be determined and recovered as per the law |
| 2 | TDS certificate not issued or delayed beyond the prescribed period of five days | Late fee of Rs. 100/-per day subject to a maximum of Rs. 5000/- |
| 3 | TDS deducted but not paid to the Government or paid later than 10th of the succeeding month | Interest to be paid along with the TDS amount; else the amount shall be determined and recovered as per the law |
| 4 | Late filing of TDS returns | Late fee of Rs. 100/- for every day during which such failure continues, subject to a maximum amount of five thousand rupees |
Section 52 has been inserted under the CGST law for all e-commerce aggregators to bring TCS under GST. TCS means the tax collected by an e-commerce operator from the consideration received by it on behalf of the supplier of goods, or services who makes supplies through the operator’s online platform.
Eligibility
TCS is due to certain operators who own, operate, and manage e-commerce platforms. TCS applies only when the operators collect payment from customers on behalf of vendors or suppliers. In simpler terms, when e-commerce operators pay the consideration collected to the vendors, they must deduct TCS and pay the net amount.
Here are a few exceptions to the TCS provisions for e-commerce platform services:
- Hotels and nightclubs (unregistered vendors)
- Passenger transport – radio taxi, motor cab, or motorcycle
- Plumbing, carpentry, and other housekeeping services (unregistered suppliers)
Rate of TCS
The Dealers or traders who supply goods and services through e-commerce operators will receive payment after a deduction of TCS @1%.
Registration
The e-commerce operators liable to collect TCS must compulsorily register under GST and there is no threshold limit exemption for it. An e-commerce company must register itself in GST in every state it supplies goods or services to. Also, the sellers supplying goods through the online portal of e-commerce players are also mandatorily required to get registered under GST except those who make supplies notified under Section 9(5) of the CGST Act.
TCS Return
The e-commerce operators are required to deposit the tax by 10th day of the next month in GSTR-8. However, the commissioner may, by notification extend the time limit for furnishing the statement for such class of registered persons as may be specified in the notification.
Annual Return
In addition to the monthly return, every operator who collects the amount is required to furnish an annual statement, electronically containing the details of outward supplies of goods or services or both and the amount collected under the said section during the year in GSTR-9B before 31st December following the end of such financial year.
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