TDS-TCS Provision Under GST Effective From 1st October 2018

On 1st October 2018, the Ministry of Finance appointed the day for the provision relating to the Tax Deducted at Source (TDS) under Section 51 of the Central Goods and Services Tax Act (CGST Act) and Tax Collected at Source (TCS) under Section 52 of the CGST A will come into effect. E-commerce companies will now be obligatory to collect up to 1 percent TCS while executing any payment to suppliers under the GST. States too can levy up to 1 percent TCS under State GST law.

Section 51 of the CGST Act assigned certain specified entities to deduct TDS (at the rate of 1% of the value of supply) while making intra-state supply of goods or services exceeding INR 2.5 Lakhs. Similar anticipation exist under the State GST legislation and hence, the growing deduction that will be made is 2% of the value of the supply and it will be expensive to make online shopping.

The rate of TCS is levied at 1% under CSGT, 1% under SGST and 2% under IGST. An operator must pay the amount of TCS to government within 10 days after the end of the month in which such collection is made. The worker is prescribed to gear a monthly statement in Form GSTR-8 by the 10th of the following month. Also, they are required to file an Yearly statement in Form GSTR-9B by the 31st of December following the end of every financial year.

Effective 1 October 2018, the following entities would be required to deduct TDS:

A department or establishment of the Central Government or State Government; or, Local authority; or, Governmental agencies ; or, An authority or a board or any other body, i.e. set up by an Act of Parliament or a State Legislature Recognized by any Government, with fifty-one per cent or more participation by way of equity or control, to carry out any function.

The Logic behind having the TDS provisions is to help in monitoring the transactions with the Government which may involve ample consideration and further to ensure GST accordance. The announcement of the TCS provisions has a broader impact on e-commerce operators having gross revenue of less than INR 20 lakhs, as they will have to now mandatory pursue registration under the CGST Act and discharge the TCS obligations from 1 October 2018. The TCS provisions may be open to challenge in the writ courts on the ground of differential treatment, as other entities that fall below the threshold are not required to get themselves registered.


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