Concept and Applicability of TDS and TCS provisions w.e.f. October 1, 2018

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After getting deferred till September 30, 2018, 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.

For easy digests, we are summarizing hereunder the gist of provisions pertaining to TDS and TCS in GST:

Tax Deduction at Source (TDS) under Section 51 of the CGST Act, 2017 read with Rule 66 of the CGST Rules, 2017
Particulars Applicable Section/ Sub-section/ Notification Provisions
Who is required to deduct TDS (deductor)? Section 51(1) r.w. Notification No. 50/2018 – Central Tax dated September 13, 2018

Following persons are required to deduct TDS:

(a)   a department or establishment of the Central Government or State Government; or

(b)   local authority; or

(c)   Governmental agencies; or

(d)   such persons or category of persons as may be notified by the Government on the recommendations of the Council

Persons notified under Section 51(1)(d):

(a)   an authority or a board or any other body, –

(i) set up by an Act of Parliament or a State Legislature; or

(ii) established by any Government,

with fifty-one per cent. or more participation by way of equity or control, to carry out any function;

(b)   Society established by the Central Government or the State Government or a Local Authority under the Societies Registration Act, 1860 (21 of 1860);

(c)   public sector undertakings

When & from whom TDS is required to be deducted (deductee)? Section 51(1) 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/-
Rate of TDS Section 51(1) TDS is to be deducted at the rate of 1% [i.e. 2% for CGST+SGST/UTGST or IGST] from the payment made or credited to the deductee
Value of supply Explanation to Section 51(1)

For the purpose of TDS specified above, the value of supply shall be taken as the amount excluding CGST, CGST/UTGST, IGST and cess indicated in the invoice

Compulsory registration for TDS deductor Section 24(vi)

TDS deductors, whether or not separately registered, are required to compulsorily register in GST irrespective of threshold limits.

Form for TDS deductor registration Rule 12(1)

Form GST REG-07 – Registration started from September 18, 2017(The Goods and Services Tax (GST) Council, at its 21st meeting in Hyderabad)

TDS applicants who do not have a PAN, can register on basis of TAN

Payment of TDS by deductor 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.


TDS Certificate to deductee Section 51(2) and Section 51(3) r.w. Rule 66(3)

The deductor shall furnish to the deductee a certificate in Form GSTR-7A (made electronically available), within 5 days of crediting the amount so deducted to Government, mentioning therein:

  • contract value,
  • rate of deduction,
  • amount deducted,
  • amount paid to the Governments
  • such other particulars in such manner as may be prescribed
ITC to deductee Section 51(5) The deductee shall claim credit, in his electronic cash ledger, of the tax deducted and reflected in the return of the deductor furnished under Section 39(3).
GST Return by the TDS deductor Rule 66(1)

GSTR-7 (The due date of filing GSTR-7 is due on 10th of the following month)

Interest / Late fee for non-compliance
Non-payment of TDS within time Section 51(6)

Interest as per Section 50(1) [at 18% per annum] is payable in addition to the amount of tax deducted.

Failure to furnish TDS Certificate Section 51(4) Late fee of INR 1,000/- per day from the day after the expiry of five days period until the failure is rectified, subject to a maximum amount of INR 5,000/-

[i.e. INR 2,000/- per day subject to maximum of INR 10,000/- for CGST + SGST/UTGST]

Recovery & Refund
Determination of amount in default Section 51(7) In accordance with Section 73 (determination of tax in non-fraud cases) or Section 74 (determination of tax in fraud cases) of the CGST Act, 2017
Refund of excess deduction Section 51(8)

Refund to deductee arising on account of excess or erroneous deduction shall be dealt in accordance with Section 54.

No refund shall be granted if the amount deducted has been credited to electronic cash ledger of deductee.

Collection of tax at Source (TCS) under Section 52 of the CGST Act, 2017 read with Rule 67 of the CGST Rules, 2017
Particulars Applicable Section/ Sub-section/ Notification Provisions
Who is required to collect TCS? 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.

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.

Rate of TCS Section 52(1) TCS is to be deducted at the rate not exceeding 1% of the net value of taxable supplies of the goods/services supplied through the portal of the operator
Meaning of ‘electronic commerce operator’ Section 2(45) “Electronic commerce operator” means any person who owns, operates or manages digital or electronic facility or platform for electronic commerce
Meaning of ‘electronic commerce’ Section 2(44) “Electronic commerce” means the supply of goods or services or both, including digital products over digital or electronic network
Meaning of ‘Net value of taxable supplies’ Explanation to Section 52(1) “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
Compulsory registration for TCS collector Section 24(x) 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].

Compulsory registration for suppliers through operators Section 24(ix) 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.
Form for TCS collector registration Rule 12(1) Form GST REG-07 – Registration started from September 18, 2017 (The Goods and Services Tax (GST) Council, at its 21st meeting in Hyderabad)
Payment of TCS by operator Section 52(3) The amount of TCS shall be paid to the Government by the operator within 10 days after the end of the month in which such collection is made.
TCS statement Section 52(4), 52(5) & 52(6) r.w. Rule 67(1) & 80(2) The operator is required to furnish a monthly statement in Form GSTR-8 by the 10th of the following month.

The operator is also required to file an Annual statement in Form GSTR-9B by the 31st of December following the end of every financial year.

The operator can rectify errors in the statements filed, if any, latest by the return to be filed for the month of September, following the end of every financial year or the actual date of furnishing relevant annual statement, whichever is earlier.

ITC to supplier 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.
Matching of details of supplies Section 52(8) to 52(11) The details of the supplies, including the value of supplies, submitted by every operator in the statements will be matched with the details of supplies submitted by all such suppliers in their returns.

If there is any discrepancy in the value of supplies, the same would be communicated to both of them.

If such discrepancy in value is not rectified within the given time, then such amount would be added to the output tax liability of such suppler.

The supplier will have to pay the differential amount of output tax along with interest.

Notice to the operator Section 52(12) to 52(14)

An officer not below the rank of Deputy Commissioner can issue Notice to an operator, asking him to furnish details relating to volume of the goods/services supplied, stock of goods lying in warehouses/godowns etc.

The operator is required to furnish such details within 15 working days.

In case an operator fails to furnish the information, besides being liable for penal action under Section 122, it shall also be liable for penalty up to Rs. 25,000/-

Hope the information will assist you in your Professional endeavours. In case of any query/ information, please do not hesitate to write back to us.

Disclaimer: The contents of this document are solely for informational purpose. It does not constitute professional advice or recommendation of firm. Neither the authors nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this document nor for any actions taken in reliance thereon.

Readers are advised to consult the professional for understanding applicability of this newsletter in the respective scenarios. While due care has been taken in preparing this document, the existence of mistakes and omissions herein is not ruled out. No part of this document should be distributed or copied (except for personal, non-commercial use) without our written permission.

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