TCS under GST

TCS stands for tax collected at source. Under the Indirect Tax Law, The provision of TCS under GST are specified in section 52 of the CGST Act, 2017. Under the Income-tax, government levies TCS on those products or services for which they want to reduce the consumption like tobacco, scarp, etc. However, under GST, the concept of TCS is totally different. 

TCS under GST

Objective:-

Under the Gst Law, Concept of TDS has been introduced with the objective to levy TCS under GST law is to capture the transaction.

Current Situation:

Our Economy is changing significantly in every field like Travelling can be done through Ola or Ubar, Booking hotel through trivago, Buying or selling products or services through online shopping.

There are many online websites like Amazon or Flipkart which gives a platform to any person to buy or sell their products online. The reason, why I’m talking about these online sites because TCS is charged on the transaction connected with these sales.

Practical Example:

Let’s understand it with an example:

Mr. A is a trader of stationery items from Hyderabad and wants to expand its business but he is of a shortage of capital. So he registers himself in the amazon, having a place of business in Delhi, as seller and put his products on the site. One buyer from Delhi places the order from amazon for the supply of stationary of Rs. 10,000, and then such goods are dispatched directly from Mr. A Office. The buyer sent the payment to amazon and amazon transfer the consideration to Mr. A after deducting its commission.

So, how many transactions you see in the above example, although for  common man language, it’s just the one transaction in which Mr. A send the goods through amazon and receives the payment from amazon after deducting a commission

However, in the eyes of law, there are 3 transactions:

Transaction 1:

Supplier: Mr. A and Recipient: Amazon

Supply: It’s a supply of goods because of its an activity for consideration in the course of business.

Place of supply: As we already know, if the location of the supplier and the destination of supply is in the same state, it would be called an intrastate supply and if it’s not in the same state then it’s an interstate supply. 

In the given example, the goods are being transferred from Mr. A location to the buyer location on the instruction of amazon and as per section 10(1)(b) of the IGST Act, 2017, if the goods were transferred from supplier location to the recipient location on the instruction of 3rd person then the destination of the supply shall be treated of the 3rd person i.e. amazon location.

In simple words, the location of supplier: Hyderabad i.e. location of Mr. A and 

Location of destination place: Delhi i.e., Location of Amazon 

Hence it’s an interstate supply and IGST shall be charged.

Taxable person: As per section 22 of the CGST Act, 2017, For the registration under the GST Act, the limit of 20/10 Lakhs shall be applicable. However, section 24 of the CGST act, 2017 specify some of the persons who are compulsorily required to get registration under the act and it includes the persons who are required to charge TCS under section 52.

Computation: Rs. 10,000 * 18% = 1,800

Transaction 2:

Supplier: Amazon and

Recipient: Buyer

The other part of this transaction is the same as transaction 1.

Now, I’ll explain transaction 3 in which TCS provision is applicable.

Transaction 3:

Supplier: Amazon and

Recipient: Mr. A

Amazon transferred the consideration amount after charging its commission to Mr. A for the supply of goods. In other words, Mr. A is giving commission amount to Amazon for supply of goods from its website. 

Supply: It’s a supply of service given by Amazon against consideration of commission to Mr. A.

Place of supply: As per section 12(2) of the IGST Act, 2017, it is a residuary provision in which destination of supply shall be the location of the recipient.

In this case, the location of supplier: Delhi i.e., Location of Amazon and 

Location of destination place: Hyderabad i.e. location of Mr. A

Hence it’s an interstate supply and IGST shall be charged.

Registration under GST FOR TCS LIABILITY:  As we already discussed above, those persons, who are required to charge TCS under section 52, compulsorily get the registration under section 24 of the CGST Act, 2017. Hence, in this case, amazon is compulsorily required to get registered under section 24 of the CGST Act, 2017.  

Computation: Before we compute the TCS amount, first let me tell you certain points related to TCS as mentioned in section 52 of CGST Act, 2017.

The Rate of TCS is 0.5% of CGST and 0.5% of SGST Act in case of intrastate supply and 1% of IGST in case of interstate supply.

TCS on Taxable Value (AMOUNT)

TCS shall be charged on the consideration amount( SALE VALUE) of goods t and not on the value of commission.

Now, say the commission amount is of Rs. 2,000, hence the total amount is required to be paid by Mr. A is as follows:

Particulars Amount  Remarks
Commission Amount       2,000   
IGST@ 18%         360  2000 * 18%
        2,360   
TCS @ 1%         100  10000 * 1%
        2,460   

Note: 

The most important point to note is that TCS shall be charged on the Net value of Taxable Value of Goods on which Mr.A supplied to the buyer on the instruction of Amazone and note on the value of Commission amount.

Practically, when amazon received the payment from the buyer, then it transfers such consideration after deduction of above-specified amount.

Net Value of Taxable Value of Goods:-

It means the aggregate value of taxable supplies(not Exempted or Non-taxable supply) of goods or services, other than services notified under Section 9(5), made during any month by all registered taxable persons through the operator reduced by the aggregate value of taxable supplies returned to the suppliers during the said month.

Time to deposit:

The TCS shall be deposited to the government within 10 days from the end of the month in which the TCS has been charged.

Return to be filed:

Monthly Return: The Amazon is required to be file a return in Form GSTR-8 within 10 days from the end of the month in which it has charged the TCS. In such return, it is required to mention the details of outward supply of goods or services affected by it including the amount returned and the amount of commission charged by the amazon.

Amendment Of GST TCS Return Concept has been Removed:

If after the filing of the return, amazon notice any error or omission then it has not the option to change/amend the option to rectify such incorrect particulars but in the subsequent returns can be revised in the upcoming months or quarter up to the earlier of the following:-

Due date of filing of September month return of Next year

Or 

Date of furnishing the relevant Annual Return in form 9B

Annual Return: 

Amazon shall also be required to file the annual return in form GSTR-9B within 31st December following the end of the relevant such year.

E-Cash Ledger: 

In our example, Amazon has deposited 2 amounts on commission which is GST and TCS. The GST amount shall be reflected in the E credit ledger of Mr. A and the TCS amount shall reflect in the E-cash Ledger of Mr. A account.

Interest for Non-compliance

If the person has not complied with the provisions of section 52 of the CGST act, then he shall be liable for the penalty which may extend to Rs. 50,000/-.

TCS under GST

Conclusion

I have tried to explain the whole concept of TCS with a simple example. Now it is very important to understand that not only amazon but all the E-commerce operator who is required to charge TCS are also compulsorily required to get registered under section 24 of the CGST Act, 2017. 

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