Tirth Shah
Gearing up the Indian Economy
On 1 July 2017, when One of the Leading Accounting Professional body – The Institute of Chartered Accountants of India completed it’s 68 years of successful journey, our Honourable Prime Minister Narendra Modi addressed the professional community at New Delhi discussing about the role bestowed on the Members of the Community for implementing the GST and the further responsibility laid down to mechanise and develop the Indian Commercial market.
Just the previous night, where the Parliament was attended by Honourable President, Speaker, Prime Minister and the other dignitaries including Ratan Tata, Goods and Service Tax was finally rolled out after a decade of efforts laid down for it’s implementation.
Goods and Service Tax ( or say, Good and Simple Tax ) is expected and practically forecasted to boost up the Indian Economy and enhance further the Growth to ONE OF THE FASTEST GROWING ECONOMY IN THE WORLD. Many of the experts deduce the GST Implementation as a Non-Violent Surgical strike by P.M. To reduce in short, GST is finally all green signaled to put an end to the Evasion of taxes and increase the prospects of Foreign Investments on account of Simplified Tax Reforms AMIDST VARIOUS OPPOSITIONS.
Introducing TCS
Coming on to the Subject, it’s firstly important to discuss the difference between Tax Deduction at Source and Tax Collection at Source.
- Tax Deduction at Source refers to the Tax which is deducted when the Recipient of Goods or Services makes some payment under a Contract.
- Tax Collection at Source refers to the Tax collected by an Electronic Commerce Operator when any Supplier supplies any goods through it’s portal.
E-commerce Operator can be related to various E-commerce websites such as Amazon, Flipkart, Snapdeal,etc.
Understanding the Mechanism
Various E-commerce Operators display on their Website/Portal, various products and services that are actually supplied by some other suppliers. Consumers purchase the products from such portals and the Supplier supplies the product to the Consumers.
The price decided/negotiated for the product is collected from the Consumer by THE OPERATORS. It is then passed on the actual supplier after deducting various Commission/Fees.
On such an event, the Government has placed a Responsibility on the Operators to collect the Tax from the Supplier at the RATE OF 1%
The taxable amount shall be considered as the NET VALUE OF THE PRODUCT SUPPLIED BY THE SUPPLIER.
Illustrating It
Suppose, Amazon displays an Electronic Product supplied by X Dealer/Wholesaler/Retailer. The displayed price is Rs.2,000. A customer purchases the product from the website at the price of Rs.2,000. The product is however supplied by X.
Amazon collects the amount from the Customer by AVAILABLE MODE OF PAYMENT.
Here, the net value of the product supplied is Rs.2,000. Therefore, Amazon has the responsibility to collect the Tax @ 1% i.e Rs.20 from the AMOUNT PAYABLE, and the remainder Rs.1980 shall be paid to the X.
Capturing the Statutory Provisions
Definition
Section 2(44) of the CGST Act, 2017 defines
“Electronic Commerce” as the Supply of Goods or Services or both, including digital products over digital or electronic network.
Section 2(45) of the CGST Act, 2017 defines “Electronic Commerce Operator” as any person who owns, operates or manages digital or electronic facility or platform for Electronic commerce.
Registration
Section 24 of the CGST Act describes the persons that are required to be registered under the Act.
According to Section 24(ix) of the CGST Act, every person who supply goods or services or both, other than supplies specified under sub-section (5) of Section 9, through electronic commerce operator who is required to collect tax at source under Section 52. Thus, every supplier supplying goods or services through E-commerce Operator has to register under the Act and obtain GSTIN.
According to Section 24(x) of the CGST Act, every electronic commerce operator needs to register under the Act. Thus, it further mandates every Electronic Commerce operator to register itself under the Act.
The interesting point here remains that the Threshold LIMIT of Rs.20 lacs ( Rs.10 lacs in specified areas ) doesn’t remain applicable to the Supplier or E-commerce Operator. THUS, EVERY SUPPLIER (supplying through E-commerce Operator) AND E-COMMERCE OPERATOR NEEDS TO REGISTER UNDER THE ACT COMPULSORILY IRRESPECTIVE OF THE TURNOVER.
Power to Collect Taxes
According to Section 52(1) of the CGST Act, every Electronic Commerce Operator shall collect an amount not exceeding one percent, as may be notified by the Government on the recommendations of the Council, of the Net value of the Taxable supplies made through it by other suppliers where the consideration with respect to such supplies is to be collected by the operator. Thus, every E-commerce Operator is empowered by Government by Section 52(1) to collect TCS under the Act.
TCS Statement
According to Section 52(3) of the CGST Act, the amount collected under sub-section (1) shall be paid to the Government by the operator within ten days after the end of the month in which such collection is made,in such manner as may be prescribed. Thus, e-commerce operator needs to pay the TCS so collected within ten days of the following month.
Further, according to Section 52(4) of the CGST Act, every such operator needs to file/furnish a monthly statement in FORM GSTR-8 by the 10th of the following month.
According to Section 52(5) of the CGST Act, every Operator is required to furnish an ANNUAL STATEMENT in prescribed form by 31st December following the end of EVERY FINANCIAL YEAR.
Accoring to Section 52(6) of the CGST Act, every Operator can rectify errors in the Statement filed, if any, latest by the return to be filed for the month of September, following the end of every financial year.
The details provided by the Operator in GSTR-8 shall be made available electronically to each of the Suppliers in PART-C of FORM GSTR-2A after the due date of filing FORM GSTR-8
Credit of Tax collected as TCS
According to Section 52(7) of the CGST Act, the tax collected by the Operator shall be credited to the cash ledger of the Supplier who has supplied the goods or services through such Operator. The supplier can claim Credit of the tax collected and reflected in the Return by the Operator in Supplier’s Electronic Cash Ledger.
Matching the Information furnished
The details of the supplies and it’s value furnished in the Returns of the Supplier shall be matched with that of the Information given in the Returns by the Operator under sub-section (4) according to Section 52(8) of the CGST Act.
However, if there is any discrepancy in the value of the Supplies or information furnished in the Returns, the same shall be communicated to both the parties under Section 52(9) of the CGST Act.
If such discrepancy in value/information is not rectified in the valid return of the Supplier/Operator in his statement for the month in which the discrepancy is communicated, then such amount shall be added to the Output Tax liability of the Supplier in his return for the month succeeding the month in which the discrepancy is communicated according to Section 52(10) of the CGST Act.
The supplier shall have to pay the differential amount of Output tax along with interest at the rate specified under Section 50(1) on the amount so added from the date such tax was due till the date of it’s payment as per Section 52(11) of the CGST Act.
Notice to the Operator
According to Section 52(12) of the CGST Act, any authority not below the rank of Deputy Commissioner can issue Notice to the Operator, ordering him to provide details relating to volume of goods/services supplied, stock of goods in the Godown/Warehouse,etc.
Section 52(13) of the CGST Act mandates every Operator to whom a notice has been served under sub-section (12) to furnish the required information within 15 days of the date of serving such Notice.
Section 52(14) of the CGST Act is the PENALTY PROVISION. Accordingly, if an Operator fails to furnish the information required to under the Notice served under sub-section 52, he shall be laible for PENAL ACTION UNDER SECTION 122 and shall also be liable for penalty up to Rs.25,000/-
To Conclude…
TCS provisions has distributed the responsibility to collect taxes between the Government and the Operator. Furthermore, it has provided the Government with continuous flow of Revenue and Cash liquidity. It also ensures less evasion of taxes from the suppliers. Thus, TCS provisions are made stringent enough to reduce the EVASION OF TAXES.
About the Blog
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