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With growing sellers on eCommerce platforms like Flipkart, Amazon, etc. and with the exponential rise in Indian eCommerce industry, involved with numerous transactions, it had become impede for GST team to track each and every seller thereby making it difficult to keep a track on tax payments. In order to overcome this issue, TCS (Tax Collected at source) has been introduced by the government via section 194-0 in the Act and is applicable w.e.f 1st of October, 2018.
What is the rule?
As per section 52 of GST act, 2017, all the eCommerce operators (like Flipkart/Amazon/Zomato, etc.) should collect TCS from e-commerce suppliers selling their product or services on their platforms.
Rate of TCS: An e-commerce operator needs to collect tax @1% (0.5% CGST+0.5% SGST or 1% IGST as applicable) from the supplier on supply of goods or services supplied through its portal.
Value on which TCS to be collected: Tax is to be collected on net taxable value of goods or services supplied by other suppliers through e-commerce operator.
Explanation to section 52(1) clarifies that “net value of taxable supplies” shall mean the aggregate value of taxable supplies of goods or services or both made during any month by all registered persons through the e-commerce operator as reduced by the aggregate value of taxable supplies returned to the suppliers during the said month. Further, specified services on which e commerce operator itself is liable to pay GST under section 9(5) is not included in the net taxable value and thus, no tax is to be collected on such amount.
Example:
Seller puts up a product of Rs. 1000/- on Amazon platform.
Buyer buys the product @Rs. 1000/- plus 18% GST (assuming 18% tax slab) = Rs. 1180/- which will be collected by Amazon.
Amazon while making payment to the vendor, have to deduct 1% TCS on base value (1% of Rs.1000 = Rs. 10/-) apart from other standard deductions like commissions, etc.
Hence Amazon will pay Rs. 1170/- to the seller.
E-commerce supplier can claim refund of TCS paid to e-commerce operator
Section 52(7) of the CGST Act, allows the supplier supplying goods or services or both through the e-commerce operator to take credit of the TCS amount collected in electronic cash ledger.
Registration requirements under TCS provisions of GST
All the vendors and eCommerce operators are required to register themselves with GST, except those supplies notified under section 9(5) of CGST Act.
Section 9 (5) covers the following supplies – Transporting passengers by a radio-taxi and motorcycle OR providing accommodation in hotels, guest houses, for residential or lodging purposes (unregistered suppliers) OR services of house-keeping, such as plumber, carpenter etc. ( unregistered suppliers). In all three cases, the e-commerce operator shall pay GST, meet the compliances. Therefore, suppliers don’t have to register if they provide these services listed in 9 (5), provided they do not cross the Rs 20 Lakhs threshold for registration.
All the eCommerce operators are required to fill in a statement providing transaction detail of vendors while making their payment.
Suppliers of goods supplying through an e-commerce platform are not exempt from registration.
An e-commerce company must register itself in GST in every state it supplies goods or services to.
Also, note that suppliers of services making a supply through an e-commerce platform are exempt from registration if their aggregate turnover is less than Rs 20 Lakhs (assuming they do not make inter-state supplies).
A person supplying goods/services from their own eCommerce portals, however, will not be considered under this act.
As a result, the tax department will have more power over the eCommerce platform transactions and will also make sure about the products sold by the suppliers have been updated correctly.
Due date for depositing TCS by e-com platform?
On 10th of every next month, the TCS has to be submitted to the appropriate GST account by the eCommerce operator, through filing GSTR-8 reporting each sale transaction through their platform.
GSTR-8 once filed cannot be revised.
All the details filed in GSTR-8 is reflected in GSTR-2A of the supplier. The suppliers can claim the credit accordingly after matching and reconciling their supplies with the details in GSTR 2A.
Any discrepancy found while matching and reconciling the supply data and GSTR 2A will be communicated to the operator and the supplier. If the discrepancy is not rectified within the given time period, then the tax amount will be added to the liability of the supplier. The supplier will have to pay the difference along with the interest if any.
How GST department will catch hold of defaulting suppliers
This exercise allows the government to track non-reporting of sales transactions by E-commerce sellers. E.g. If a supplier has a TCS credit of INR 10,000 in the month of April, his total revenue from E-commerce sales should be INR 10,00,000 (INR 7500/1*100). Any short reporting would raise a red flag in GSTN systems. The differences in sales revenue arising due to sales returns is another issue to be tackled. The same is reconciled for proper reporting in GSTR-1.
Penalty on eCommerce companies for non-compliance
They will have to pay a penalty amount of Rs. 25,000 on failing to submit the number by given date.