The Goods and Services Tax (GST) system has reformed the way indirect taxes are collected in India, including for e-commerce transactions. One significant feature of this system is the introduction of Tax Collected at Source (TCS) under GST, which applies to e-commerce operators. TCS under GST aims to streamline tax collection, enhance compliance, and ensure transparency in the growing e-commerce sector. In this article, we will delve into what TCS under GST is, who is liable for it, how it works, and the implications for e-commerce operators.
What is TCS Under GST?
TCS (Tax Collected at Source) under GST is a mechanism where the e-commerce operator collects tax on behalf of the supplier (the seller of goods or services) at the time of the transaction. This tax is then deposited with the government. TCS ensures that the government collects tax from e-commerce transactions, which are often harder to track compared to traditional retail sales.
The introduction of TCS under GST came into effect on October 1, 2018, as part of efforts to address challenges in indirect tax collection in the digital economy. The TCS provision primarily targets e-commerce operators who facilitate the sale of goods or services between suppliers and buyers through their platform.
Who is Liable to Collect TCS?
The e-commerce operator is responsible for collecting TCS. An e-commerce operator is any individual or business that owns, operates, or manages an electronic platform for buying and selling goods or services. Examples include well-known platforms such as Amazon, Flipkart, and Snapdeal.
E-commerce operators are required to collect tax on the total sale price of the goods or services sold through their platform. This applies regardless of whether the goods are sold by the operator itself or by third-party sellers using the platform. The operator’s responsibility is to collect and remit the tax to the government on behalf of the seller.
Who is Exempt from TCS Under GST?
While e-commerce operators are responsible for collecting TCS, not all sales made through e-commerce platforms are subject to TCS. Certain exemptions exist:
Exports and Exporters: If goods are sold to an exporter, they are generally exempt from TCS since exports are zero-rated under GST.
Suppliers under Composition Scheme: Suppliers who have opted for the GST Composition Scheme are also exempt from TCS. Under the Composition Scheme, small businesses pay a fixed rate of tax and are not required to collect TCS.
Certain Categories of Goods and Services: The GST Act has outlined certain goods and services that are not subject to TCS. These may include essential items like food items that are exempt under GST.
How is TCS Under GST Calculated?
The TCS rate under GST is 1% of the net taxable supply of goods or services sold through the e-commerce platform. The operator is required to collect this tax from the buyer at the time of the transaction.
For example, if an e-commerce platform facilitates the sale of a product worth ₹50,000, the operator will collect TCS at the rate of 1%, which amounts to ₹500. The operator will then remit this ₹500 to the government.
1% TCS on taxable supplies: This means the GST on goods and services sold through the platform, excluding the sales that are exempt or fall under the Composition Scheme.
E-commerce operators must ensure TCS is deducted and deposited: The amount collected is deducted from the supplier’s payment, and the operator is responsible for remitting this to the government.
When and How to Deposit TCS?
E-commerce operators must deposit the TCS they have collected to the government. The deposit must be made monthly within 10 days from the end of the month in which the tax was collected.
For instance, if TCS was collected in the month of January, the e-commerce operator must deposit the tax by 10th February. The payment is made using GST PMT-06 on the GST portal.
Filing of Returns for TCS Under GST
E-commerce operators must file GSTR-8 every month. This return includes the details of the TCS collected during the month, which is used to reconcile with the supplier’s tax returns.
Additionally, suppliers can claim the TCS as input tax credit (ITC) in their GST returns. This means that if a seller is registered under GST and has paid TCS on the sales made through an e-commerce platform, they can claim that amount as credit to offset their tax liability.
Role of TCS in Enhancing Tax Compliance
TCS under GST plays a critical role in improving tax compliance in the e-commerce sector. Some of the key benefits include:
Better Tax Collection: TCS ensures that tax is collected at the point of transaction, improving the efficiency of tax collection and reducing the risk of tax evasion.
Increased Transparency: With the e-commerce operator acting as a tax collector, there is a higher level of transparency in the transactions, making it easier for authorities to track the movement of goods and services.
Streamlined Process: TCS simplifies the process of tax collection by centralizing it with the e-commerce operator, rather than having to depend on multiple suppliers.
Boost to E-Commerce Ecosystem: By ensuring that suppliers and e-commerce operators comply with tax laws, TCS contributes to the growth of a compliant, accountable, and trustworthy e-commerce ecosystem in India.
Conclusion
TCS under GST represents a significant shift in how tax is collected in the e-commerce sector. E-commerce operators must understand their role as tax collectors and ensure that they comply with the TCS provisions. This includes calculating the tax correctly, collecting it from customers, remitting it to the government, and filing returns in a timely manner. At the same time, suppliers can benefit from claiming TCS as input tax credit. Overall, TCS ensures better tax compliance, transparency, and a more organized e-commerce industry.
For e-commerce operators, staying updated with the latest regulations and ensuring proper TCS management is key to avoiding penalties and fostering a smooth tax compliance system under GST.
