Applicability of TDS & TCS on GST

   Goods and Service Tax is the trending topic in today’s business world, as it is newly introduced, many companies are facing difficulty in applicability, yet another notification is to be introduced which will be applicable 1st day of October 2018 as many are yet to figure out all the provisions of GST this addition made to the act would definitely impact on business transactions.

           The Central Government vide Notification No. 50/2018 - Central Tax dated September 13, 2018 and Notification No. 51/2018 - Central Tax dated September 13, 2018, has appointed the 1st day of October 2018, as the date on which the provisions of Section 51 of the CGST Act, 2017 (i.e. Tax deduction at source) and Section 52 (i.e. Tax collection at source) shall come into force. According to this section following persons are required to deduct TDS

  1. A department or establishment of the Central Government or State      Government or

  2. Local authority or

  3. Governmental agencies or

  4. Such persons or category of persons as may be notified by the            Government on the recommendations of the Council.

Under Section 51(1):  TDS is to be deducted when Suppliers of taxable goods or services or both to the deductor(s), where the total value of such supply, under a contract, exceeds INR 2,50,000 to be deducted @1% [i.e. 2% for CGST+SGST/UTGST or IGST] from the payment made or credited to the deductee and the purpose of calculationthe value of supply shall be taken as the amount excluding CGST, CGST/UTGST, IGST and cess indicated in the invoice.

Under Section 51(2): The amount of TDS shall be paid to the Government by the deductor within 10 days after the end of the month in which such deduction is made.

However, the deductee under section 51(5) canclaim credit, in his electronic cash ledger, of the tax deducted and reflected in the return of the deductor furnished under Section 39(3).

For the cases where is excess deduction Under Section 51(8)Refund to deductee arising on account of excess or erroneous deduction shall be dealt in accordance with Section 54.

Tax collected at source 

 Under section 52(1): Every electronic commerce operator ('operator'), not being an agent, shall collect TCS at prescribed rate when taxable supplies are made through it by other suppliers and the consideration with respect to such supplies is to be collected by the operator,

       For example;There are many e-commerce operators, like Amazon, Flipkart, Jabong, etc. operating in India. These operators display on their portal products as well as services which are actually supplied by some other person to the consumer. The goods or services belonging to other suppliers are displayed on the portals of the operators and consumers buy such goods/services through these portals. On placing the order for a particular product/service, the actual supplier supplies the selected product/ service to the consumer. The price/consideration for the product/service is collected by the operator from the consumer and passed on to the actual supplier after the deduction of commission by the operator. The Government has placed the responsibility on the operator to collect TDS from the supplier. This shall be done by the operator by paying the supplier, the price of the product/ services, less the amount of TDS.

    The rate of interest remains the same as that of TDS being rate not exceeding 1% of the net value of taxable supplies of the goods/services supplied through the portal of the operator.

'Net value of taxable supplies' shall mean the aggregate value of taxable supplies of goods or services or both, other than services notified under sub-section (5) of section 9, made during any month by all registered persons through the operator reduced by the aggregate value of taxable supplies returned to the suppliers during the said month.

Every e-commerce operator is required to compulsorily register in GST irrespective of threshold limits.This clause is amended vide the CGST Amendment Act, 2018 to restrict applicability of compulsory registration to only those cases of e-commerce operator who is required to collect TCS under Section 52 [yet to be notified].

·         Section 24(ix) of the CGST Act, 2017 makes it mandatory for every person who supplies goods/services through an operator to get registered under GST.

     ITC to Suppliers: Under section 52(7); The tax collected by the operator shall be credited to the cash ledger of the supplier who has supplied the goods/services through the operator. The supplier can claim credit of the tax collected and reflected in the return by the Operator in his [supplier’s] electronic cash ledger.