Tax Collected At Source (TCS) Provisions Under GST

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TCS Provisions Under GST

Every electronic commerce operator in India is required to collected tax (GST) on the net value of taxable supplies made by third-party suppliers (sellers) registered on its platform; where the payment for such supplies is collected by the said e-commerce operator.

The provisions of Tax collected at source (TCS) under GST are better explained with an example.

The responsibility to collect Goods and Services Tax (GST) at source lies with e-commerce operator.

Let us take the example of Amazon/Flipkart. Both Amazon and Flipkart operate an e-commerce platform. Third party sellers can register and sell their products on the platform.

The payment for such goods and services sold, are collected by Flipkart/Amazon and then remitted back to the sellers.

It is now the responsibility of the e-commerce operator (Amazon/Flipkart in this case) to collect tax on the value of such taxable supplies made by the third-party suppliers before remitting the proceeds to the supplier.

Rate at which tax is to be collected

Tax is to be collected at the following rates on the ‘net’ value of taxable supplies made by the third-party supplier through e-commerce portal:

For Intra-State supplies (supplies within the same state): 0.5% of the net value of intra-state taxable supplies.

For Inter-State Supplies: 1% of the net value of inter-state taxable supplies.

Tax is to be collected only on taxable supplies:

Tax shall be collected by the e-commerce operator only on the value of taxable supplies. Taxable supplies are supplies of goods or services on which GST is applicable.

Tax is therefore not required to be collected on exempt/zero-rated supplies.

What is meant by ‘net’ value of taxable supplies:

“Net value of taxable supplies” means the aggregate value of taxable sale of goods and services made during any month by all registered persons through the operator reduced by the aggregate value of taxable sales returned to the suppliers by the customers during the said month.

Note that the value of taxable supplies is the total value (excluding GST) which is billed to the customers. E-commerce platforms deduct a commission on this value. However, we should not deduct this commission while arriving at the taxable value for the purpose of determining the amount of tax to be collected at source.

Lets take an example:

AG, a seller sells goods on the e-commerce platform “COX”.

Total value of goods sold = Rs 100. GST on Above @ 12% = Rs. 12

Total Amount Billed (Inclusive of GST) to the customer: Rs. 112.

Cox platform charges a commission @ 5% on value of goods sold. Total commission charged = Rs. 5

Thus value for the purpose of collecting tax at source = Rs. 100 (This value is the gross value billed including the commission to be charged by the e-commerce operator but, does not include GST)

Tax collected to be paid to the Government within ten days:

The amount collected shall be paid to the Government by the e-commerce operator within ten days after the end of the month in which such collection of tax at source is made.

The Supplier can claim credit of amount collected: 

The supplier who has supplied the goods/services through the ecommerce operator can claim credit of such tax collected in his electronic cash ledger. For this he is required to be registered under the GST laws. This credit can be set off against his output GST liability.

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