Often, words ‘Tax Collection at Source – TCS’ is spoken along with the word ‘TDS’ when we hear discussion about Income Tax laws. Very few might be knowing the meaning and modus operandi of levy of TCS, as TCS is applicable only on few sectors of business under Income Tax Laws and is not very widespread and general compliance for normal business houses.
Let us first understand what TCS is..??
Under Income Tax laws, on the sale of certain items, a tax is collected by seller at prescribed rates from the buyer, called as Tax collected at source or TCS. The seller then transfers the tax collected from the purchaser to the government and issue a TCS certificate, for which the buyer of such goods will get tax credit.
The person collecting TCS is termed as Collector and the person from whom TCS is collected is termed as Collectee.
TCS under GST laws.
Section 52 of CGST Act, 2017 takes care of provisions regarding TCS.
Following are the important points under this provisions:
- TCS is applicable to every electronic commerce operator (‘ECO’) who is not acting as an agent of any supplier.
- TCS is applicable to the supplies of goods or services made by Suppliers through ECO.
- The consideration of such supplies is received by ECO on behalf of the Suppliers.
- ECO shall collect TCS at the prescribed rate from the payment to be passed on the Suppliers. Rate of TCS shall be notified by the Government which in no case shall be more than 1%.
- Notified rate of TCS is 0.50% under CGST & SGST both and 1.0% under IGST. Notification # 52/2018 – Central Tax & Notification # 02/2018 – Integrated Tax both dated 20th September, 2018.
- For the purpose of calculating TCS, net value of taxable supplies made through ECO shall be considered.
- “Net value of taxable supplies” means the aggregate value of taxable supplies of goods or services less aggregate value of taxable supplies returned to the suppliers during that month, i.e. Supplies net off returns.
- “Net value of taxable supplies” shall not include categories of services, supplied by suppliers through ECO, on which the tax shall be paid by the electronic commerce operator as if ECO is liable to pay tax on such supplies.
Payment, Monthly Return & Annual Return:
- ECO shall pay TCS so collected to the Government Treasury within ten days subsequent to the month in which such collection is made i.e. by 10th of subsequent month.
- ECO shall file return stating the details of TCS so collected within ten days subsequent to the month in which such collection is made i.e. by 10th of subsequent month.
- Such monthly return shall be in FORM GSTR – 8.
- ECO shall file an annual statement for every financial year, stating the details of supplies made through it by different suppliers and TCS collected and paid to the Government Treasury, by 31st day of December subsequent to respective financial year.
- ECO shall file such annual statement in FORM GSTR -9B.
- Appropriate officer may issue a notice in FORM GSTR-3A if ECO fails to file the return as mentioned above.
Rectification in returns & reconciliation of difference:
- ECO shall have chance to rectify the mistakes made in earlier return while reporting details of TCS so collected. Mistake can be rectified in subsequent return, but not after the return for the period of September subsequent to the financial year or actual date of filing of Annual Statement whichever is earlier.
- Data filed by ECO shall be matched with the data filed by the suppliers. The discrepancy, arising out of matching of data, shall be communicated to both persons by appropriate officer.
- Where the value of outward supplies furnished by ECO is more than the value of outward supplies furnished by the supplier and which supplier is not able to reconcile and rectify, tax on such unreconciled and unrectified sales shall be added to the turnover of the suppliers.
Credit to Suppliers:
- Credit of TCS collected by ECO shall be available to Suppliers in Electronic Cash Ledger.
- Details filed by ECO in FORM GSTR – 8 shall be available to the suppliers in Part C of FORM GSTR-2A.
- Unlike TDS, there is no provision of issuing Certificate of TCS so collected to Supplier.
- Any person required to collect TCS shall apply for registration in FORM GST REG-07 for the grant of registration.
- A certificate of registration in FORM GST REG-06 shall be issued within a period of three working days from the date of submission of the application.
Notification No. 51/2018 – Central Tax dated 13th September 2018 has made mandatory for ECOs to collect TCS on necessary transactions from 1st October 2018.