Top 10 FAQs on Tax Collection at Source under GST

Mudit Handa, 03/12/2018

Indeed, GST registration is the integral aspect for every business form. The first year of this newly introduced indirect tax regime has witnessed the tremendous rise in monthly GST Collections, besides massive GST refunds disbursed to millions of taxpayers. Undoubtedly, there are numerous benefits of GST registration for enhancement of ease of doing business. However, there are still some doubts among the taxpayers regarding various aspects of GST.

One of them is the concept of Tax Collection at Source (TCS) under GST, which is applicable to all the e-commerce operators having GST registration.

We all know that this is the first year of GST. Moreover, the concept of TCS under GST has been recently brought into effect from 1st of October 2018. Thus, procedural faults and technical glitches might hinder smooth compliance.

However, these errors can be easily ruled out, by knowing the ground rules of the TCS mechanism under GST. Given below are the most frequently asked questions on TCS under GST that will help you clarify all your doubts regarding this concept.

 

#1. Who is an e-commerce operator?

Under Section 2(45) of the CGST Act 2017, e-commerce operator refers to a person who owns, operates or manages a digital or electronic facility or portal for e-commerce business.

 

#2. What is meant by Tax Collection at Source?

As per the provisions of Section 52 of the CGST Act 2017, an e-commerce operator, and not an agent, who has GST registration is supposed to collect an amount of GST @ 1% of the net value of taxable supplies where the consideration with regard to the said supplies is to be collected by the e-commerce operator. The amount so collected is known as Tax Collection at Source (TCS).

 

#3. How much is the rate of TCS under GST?

The rate of TCS under GST is given as below-

  • The Rate of TCS is fixed @ 0.5% as CGST and IGST as per the CGST Act, 2017 and the respective SGST/UTGST Act 2017.

  • TCS rate is fixed @ 1% u/s 20 the IGST Act, 2017, read with Section 52(1) of the CGST Act 2017.

 

#4. How will TCS apply on the e-commerce operators located outside India?

Though foreign e-commerce operators do not have a place of business in India, if their supplier and customers are in India, provisions of TCS under GST shall apply on them. Such foreign e-commerce operators shall collect TCS on such supplies.

 

#5. Where shall foreign e-commerce operators obtain a GST registration?

Foreign e-commerce operators who are supposed to collect tax at source would be required to obtain the GST registration in each State / Union Territory.

  • Very importantly, each State/UT has an administrative jurisdiction.

  • All e-commerce operators (ECOs) having the business (but not a place of business) in that State/UT shall get GST registration in the respective administrative jurisdiction.

  • The proper officer for GST registration of ECOs has also been notified in all States/UT.

  • In case, the foreign e-commerce operator does not have a place of business in the respective State / UT, he may choose to appoint an agent on his behalf.

 

#6. Do the e-Commerce operators need to have separate GST registration for TCS?

All E-Commerce operators need to get separate GST registration for TCS irrespective of the fact that the e-Commerce operator is already having a GST registration as a supplier or has a GSTIN. GST Registration for TCS is done through FORM GST REG-07.

 

#7. How will actual suppliers be able to claim a credit of TCS?

The amount of TCS deposited by the ECOs with the Government will be finally reflected in the electronic cash ledger of the actual supplier (i.e. the person on whose account TCS collection is made) based on the GST return filing procedure by the operator in the FORM GSTR-8.

 

#8. How will TCS be credited in cash ledger?

  • TCS collected by the e-commerce operator is to be deposited by him under the respective tax head (i.e. CGST / SGST / UTGST / IGST).

  • Based on the GST return filing (i.e. GSTR-8) filed by the ECO, the tax would be credited to the electronic cash ledger of the actual supplier.

 

#9. Whether the refund of such TCS credit lying in the ledger would be allowed?

If the supplier does not utilize the amount of TCS credit lying in the cash ledger, he may claim the refund of the excess balance as per the section 54(1) of the CGST Act, 2017.

 

#10. Whether TCS payment through Input Tax Credit of an operator is allowed?

No, payment of TCS is not permitted through Input Tax Credit of e-Commerce operator.

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Top 10 FAQs on Tax Collection at Source under GST
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