The concept of TDS and TCS is familiar under Direct Tax Laws. TDS is a mechanism for advanced collection of tax while TCS is levied and collected on the sale value of certain commodities when referred to the Income Tax Act. However, the concept of TDS & TCS under Indirect Tax Mechanism (GST) is not the same as contained in the Income Tax Act.
In this article we would like to cover the following: –
This concept is brought under Indirect Taxation for the first time since 1st October 2018. GST lawmakers have incorporated the concepts of TDS and TCS under GST law to track the business transaction and generate revenue.
Basic Difference Between TDS & TCS
|TDS is roughly based on the concept of paying as you earn, hence deducted from any income or collection.||TCS is an additional payment, hence collected over and above any amount paid/ payable.|
Concept under GST
|TDS is deducted when the recipient of goods or services make some payment under a contract.||TCS refers to the tax which is collected by ECO when the supplier supplies some goods/ services through its portal & payment for that supply is collected by ECO.|
|It acts as a powerful instrument to prevent tax evasion & expand the tax base as it provides for the creation of an audit trail. It also helps to track and cross-verify business transactions and ensures correct reporting.|
Section 51: Tax Deduction At Source
Persons liable to deduct TDS:
→ A department or establishment of the Central or State Government
→ Local authority
→ Governmental agencies
→ Such persons or category of persons as may be notified, by the Central or a State Government on the
Recommendations of the Council. Such notified persons as per N/N 50/2018-CT dated 13/09/2018 are:
- An authority or a board or anybody set up by an Act of Parliament or a State legislature or established by any Government with 51% or more participation by way of equity or control, to carry out any function
- Society established by the Central Government or State Government or a Local Authority under the Societies Registration Act, 1860
- Public Sector Undertakings (PSU)
Applicability of TDS:
Tax to be deducted from the payment made or credited to the supplier (deductee) of taxable goods or services or both, where the total value of such supply under a contract exceeds Rs. 2,50,000/-.
Hence, there will be no TDS liability if the supply is exempt.
Rate of TDS:
|TDS RATE||CGST||SGST/ UTGST||IGST||Where the value of supply under a contract exceeds Rs. 2,50,000/-|
Non – Applicability of TDS:
→ Ministry of Defence (Notification No. 57/2018-CT dated 23/10/2018).
→ Supply of goods or services or both from a PSU to another PSU, whether or not a distinct person (Notification No. 61/2018-CT dated 5/11/2018).
→ Supply of goods or services or both from one department or establishment of the Central or State Government, Local authority, Governmental agencies and notified category of person to another (Notification No. 73/2018-CT dated 31/12/2018).
→ It is also provided that no deduction shall be made if the location of the supplier (LOS) and the place of supply (POS) is in a State/ Union Territory which is different from the State/ Union Territory of registration of the recipient.
Due Date of Payment of TDS:
→ The amount deducted as tax under this section shall be paid to the Government by the deductor within 10 days after the end of the month in which such deduction is made, in such manner as prescribed.
Failure to give TDS Certificate:
If any deductor fails to furnish the deductee the certificate after deducting TDS, within 5 days of crediting the amount so deducted to the Government, the deductor shall pay by way of a late fee, a sum of Rs. 100/- per day from the day after the expiry of such 5 days period until the failure is rectified, subject to a maximum amount of Rs. 5,000/-.
Form and manner of submission of Return by a person required to deduct TDS:
Rule 66 of CGST Rule 2017 and Notification No 31/2019 – Central Tax dated 28th June 2020 provide that –
→ Every registered person required to deduct TDS under Section 51 shall furnish a return in Form GSTR-7 electronically through the common portal either directly or from the Facilitation Centre notified by the Commissioner.
→ This amount will be reflected directly in the cash ledger on the common portal.
→ The certificate shall be made available electronically to the deductee on the common portal in Form GSTR-7A on the basis of the return furnished.
Default in TDS payment to Government:
→ Interest to be paid in accordance with the provisions of Section 50(1) i.e. 18% p.a.
→ The determination of the amount in default under this section shall be made in the manner specified in Section 73 or Section 74.
Erroneous deduction of TDS:
→ The refund to the deductor or the deductee arising on account of excess or erroneous deduction shall be dealt with in accordance with provisions of Section 54
→ No refund to the deductor shall be granted if the amount deducted has been credited to the electronic cash ledger of the deductee.
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Section 52: Collection Of Tax At Source
Applicability of TCS:
→ Every Electronic Commerce Operator (ECO), not being an agent, shall collect TCS on the net value of taxable supplies made through it by other suppliers where the consideration with respect to such supplies is to be collected by the ECO.
Rate of TCS:
→ Rate not exceeding 1%, as may be notified by the Government on the recommendations of the Council, on the net value of taxable supplies. As per N/N 52/2018 – CT dated 20/09/2018, the rate of TCS as notified by the CBIC on the recommendation of the council is 0.5% under the CGST Act.
Calculation of Net Value of Taxable Supplies:
Net Value of Taxable Supplies = Aggregate Value of Taxable Supplies of goods or services or both [other than services notified under Section 9(5)] made during any month by all registered persons through the ECO (-) aggregate value of taxable supplies returned to the suppliers during the said month.
Payment & Recovery of TCS:
→ The power to collect the amount specified here shall be without prejudice to any other mode of recovery from the ECO.
→ The amount collected as TCS shall be paid to the Government by the ECO within 10 days after the end of the month in which such collection is made, in such manner as prescribed.
Every ECO who collects the amount specified here shall furnish a statement, electronically, containing:
→ The details of outward supplies of goods or services or both effected through it
→ Including the supplies of goods or services or both returned through it and
→ The amounts collected as TCS during a month
→ In such form and manner as may be prescribed (GSTR-8) within 10 days after the end of such month.
Form and Manner of submission of statement of supplies through an e-commerce operator:
Rule 67 of CGST Rules 2017 and Notification No 31/2019 – Central Tax dated 28th June 2020 provides –
→ Every ECO required to collect TCS under Section 52 shall furnish a statement in Form GSTR-8 electronically through the common portal either directly or from the Facilitation Centre notified by the Commissioner.
→ The details furnished by the operator shall be made available electronically to each of the suppliers on the common portal after filing of Form GSTR-8 for claiming the amount of tax collected in his electronic cash ledger after validation.
Every ECO who collects the amount of TCS shall furnish an annual statement electronically:
→ Containing the details of outward supplies of goods or services or both effected through it
→ Including the supplies of goods or services or both returned through it and
→ The amounts collected under TCS during the financial year
→ In such form and manner as may be prescribed (Form GSTR-9B), before the 31st day of December following the end of such financial year.
Omission or Incorrect Statement in Monthly Statement:
If any ECO after furnishing a monthly statement discovers any omission/ incorrect particulars therein, other than as a result of scrutiny, audit, inspection or enforcement activity by the tax authorities:
→ He shall rectify such omission/ incorrect particulars in the statement to be furnished for the month during which such omission/ incorrect particulars are noticed, subject to payment of interest specified in Section 50(1).
|Errors / Omissions in Monthly Statement|
|Manner||Make rectifications in the Statement itself:|
→ Rectify in a statement furnished for the month in which errors/ omissions come to notice
→ Interest @ 18% p.a. also payable
|Time Limitation||Rectification allowed maximum by 10th October (after the end of Financial Year). However, if a relevant annual statement has been filed prior to such date, then rectification is permissible only up to date of furnishing of such annual statement.|
The claim of Credit in E-Cash Ledger of Supplier:
The supplier who has supplied the goods or services or both through the ECO shall claim credit in his electronic credit ledger of the amount collected and reflected in the monthly statement of the ECO furnished.
CBIC FAQ’s And Clarifications
Q. Manner of furnishing the details of State/ Union Territory in an application for registration by TDS deductor or TCS collector state where he doesn’t have a physical presence.
Rule 12(1A) of the CGST Rules – Notification No. 74/2018 CT dated 31.12.2018 & Notification No. 33/2019 CT dated 18.07.2019
→ When a person is applying for registration to deduct or collect tax in accordance with the provisions of Section 51 (TDS) or Section 52 (TCS) in a State or Union Territory where he doesn’t have a physical presence, he shall mention the name of said State or Union Territory in part A of prescribed application form for registration. Further, the name of the State or Union Territory in which his principal place of business is located is to be mentioned in part B of the application form. State or Union Territory mentioned in part A and part B of the application form may be different.
Q. Clarification on the collection of tax at source by Tea Board of India. Whether they should collect TCS under Section 52 of the CGST Act from the sellers of tea (i.e. the tea producers) or from the auctioneers of tea who carry out the auction on behalf of such sellers and buyers or from both.
Circular No. 74/48/2018 dated 5/11/2018
→ It is clarified that TCS at the notified rate in terms of Section 52 of the CGST Act shall be collected by Tea Board respectively from the –
- Sellers (i.e. tea producers) on the net value of supply of goods i.e. tea and
- Auctioneers on the net value of the supply of services (i.e. brokerage).
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