TCS on E-Commerce Operators

Author: Kumar Mc

The Government has notified the effective date of implementation of TCS provisions in GST returns w.e.f. 1.10.2018 (unless extended). This requires E-commerce operators like Amazon, Flipkart, etc. to collect TCS on the Transaction made by the suppliers through their portals w.e.f. the same date. If any under reporting is found, the same would be penalized by adding to the account of the supplier. The learned authors looks at the related provisions to bring attention to them so as to avoid penal actions.

As many transactions nowadays are happening through e-commerce mode, their day to day use in life is increasing. But with the implementation of GST, selling and purchase through GST is not as easy as it was earlier. There are many boundaries and restriction while transacting through E-Commerce. We will discuss here the provisions of TCS on E-commerce Operators.

E-commerce is the buying and selling of goods and services on the internet electronically and making payment electronically or via any other mode. Section 2(44) of CGST Act defines the term ‘e-commerce’ as the supply of goods or services or both, all the traders/dealers selling goods/services online would need to get registered under GST even if their turnover is less than 20 Lakh for claiming the tax deducted by E-commerce operators.

Firstly it is important to understand the difference between E-commerce Operators and E-Commerce Suppliers:

1. E-Commerce Operator

An entity like Amazon, Paytm-Mall, and Flipkart etc. that owns operates or manages digital platform for e-commerce. Section 2(45) of the CGST Act, defines "E-commerce operator" as any person who owns, operates or manages digital or electronic facility or platform for e-commerce.

2. E-Commerce suppliers

An entity that supplies goods or services on a digital ecommerce platform, means any entity which is supplying goods or services through E-Commerce operator and will be termed as E-Commerce Suppliers.

3. Liability to collect TCS

As per provision of section 52 of the CGST Act, every e-commerce operator, not being an agent is required to collect tax known as TCS on the net taxable value in case a supplier supplies some goods or services through its portal and the payment for that supply is collected by the e-commerce operator.

Tax is to be collected on net taxable value of goods or services supplied by other suppliers through e-commerce operator.

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 suppliers" shall mean the aggregate value of taxable suppliers 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 ecommerce 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.

4. Rates of TCS

An e-commerce operator needs to collect tax @2% (1% CGST + 1% SGST) from the supplier on the net taxable value of intra state supply of goods or services supplied through its portal.

Any dealer/traders selling goods/services online would get the payment after deduction of 2% tax. They would need to deposit the tax deducted by the 10th day of the next month.

Mr. X is a trader who sells his ready-made clothes online on Flipkart. He received an order for Rs.10,000 inclusive of tax and commission. Flipkart charges a commission of Rs.200. Flipkart would, therefore, need to deduct 2% tax (TCS) on the amount, including the money paid as commission (Rs. 200) and GST (Rs.1800 when GST @ 18%) Flipkart would thus be deducting tax for Rs.200 (2% of Rs.10000)

5. Notice to the E-Commerce Operators

A Deputy Commissioner or a person above the rank of Deputy Commissioner can issue a notice to the E-Commerce Operator asking him to furnish details regarding the volume of Goods/Services supplied, rate and value, goods still lying in godown etc.

On receiving such notice the operator is required to furnish such details within 15 working days. In case the operator fails to furnish such information within 15 days, he would be liable for penal action and penalty upto Rs.25000.

Further other relevant points can be noted out which are as follows:

  • The seller is required to follow the process of filing other GSTR Returns as applicable from time to time
  • The seller is required to disclose the sale made through GSTR-1 Return. The GST no. of the E-commerce portal is required to be disclosed in GSTR-1.
  • The E-commerce portal would be specifically required to raise an invoice to the seller for the commission being charged by them for selling the product on the E-Commerce portal.

6. Conclusion

Subject to above there are many other rules which are required to be followed by E-Commerce Operators. The government has notified the effective date of implementation of TCS Provisions in GST Returns with effect from 1.10.2018 (unless otherwise extended). Thus E-Commerce Operators like Snapdeal, E-bay etc. have to collect TCS on the transactions made by the suppliers through such portals w.e.f. 1.10.2018.

Further E-Commerce operators are required to timely deposit the TCS and also required to furnish monthly and annual return of TCS. Further sale entered in GSTR-1 will be compared with the report of supplies by E-Commerce operators furnished in GSTR-8. If any under reporting is found, the same will be penalized by adding to the account of the supplier.

Thus TCS provisions need to be carefully looked at as any discrepancies found may lead to penalizing actions.

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