TDS and TCS under GST: A Detailed Guide

Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) are essential components of the Goods and Services Tax (GST) framework in India. These provisions were introduced to streamline tax collections and prevent tax evasion. In this blog, we will explore the intricacies of TDS and TCS under GST, shedding light on their significance, applicability, and procedures.

𝐓𝐃𝐒 𝐮𝐧𝐝𝐞𝐫 𝐆𝐒𝐓

𝟏. 𝐖𝐡𝐚𝐭 𝐢𝐬 𝐓𝐃𝐒?

Tax Deducted at Source (TDS) is a mechanism where the person making a payment deducts a certain percentage of the payment as tax and deposits it with the government. TDS provisions under GST are primarily aimed at ensuring tax compliance and tracking high-value transactions.

𝟐. 𝐀𝐩𝐩𝐥𝐢𝐜𝐚𝐛𝐢𝐥𝐢𝐭𝐲:

TDS under GST is applicable to specific entities such as government agencies, local authorities, and certain categories of taxpayers. They are required to deduct TDS when making payments to suppliers or vendors.

𝟑. 𝐑𝐚𝐭𝐞 𝐨𝐟 𝐓𝐃𝐒:

The rate of TDS under GST varies based on the nature of the transaction. It is typically a small percentage of the total payment.

𝟒. 𝐂𝐨𝐦𝐩𝐥𝐢𝐚𝐧𝐜𝐞:

Those who are required to deduct TDS must obtain GST registration as TDS deductor even if he is a separately registered taxpayer and file periodic returns, providing details of TDS deducted and deposited.

Tax Deducted at Source (TDS) is a mechanism where a specified percentage of the total amount payable is deducted by the recipient of goods or services while making payments to the supplier. The deducted amount is then remitted to the government. TDS under GST is governed by Section 51 of the CGST Act, 2017.

𝐀𝐩𝐩𝐥𝐢𝐜𝐚𝐛𝐢𝐥𝐢𝐭𝐲 𝐨𝐟 𝐓𝐃𝐒:

TDS under GST is applicable to the following entities:

- Government agencies or specified persons.

- Local Authorities

- Such category of persons notified by the Government

- Public sector undertaking, etc

𝐊𝐞𝐲 𝐏𝐨𝐢𝐧𝐭𝐬 𝐚𝐛𝐨𝐮𝐭 𝐓𝐃𝐒:

- TDS is deducted at a prescribed rate, which should not exceed 2% (1% each for CGST and SGST/UTGST) of the total value of the supply.

- The deducted TDS amount must be remitted to the government within a specified timeframe.

- The deductor must furnish a TDS certificate to the deductee.

𝐓𝐂𝐒 𝐮𝐧𝐝𝐞𝐫 𝐆𝐒𝐓

𝟏. 𝐖𝐡𝐚𝐭 𝐢𝐬 𝐓𝐂𝐒?

Tax Collected at Source (TCS) is another mechanism where the seller collects tax from the buyer at the time of sale and deposits it with the government. TCS provisions are intended to track high-value transactions and promote tax transparency.

𝟐. 𝐀𝐩𝐩𝐥𝐢𝐜𝐚𝐛𝐢𝐥𝐢𝐭𝐲:

TCS under GST is applicable to e-commerce operators who facilitate the sale of goods or services through their platforms. They are required to collect TCS from the sellers on their platforms.

𝟑. 𝐑𝐚𝐭𝐞 𝐨𝐟 𝐓𝐂𝐒:

The rate of TCS under GST is a small percentage of the total transaction value. It varies based on the type of goods or services sold.

𝟒. 𝐂𝐨𝐦𝐩𝐥𝐢𝐚𝐧𝐜𝐞:

E-commerce operators must register under GST, collect TCS from sellers, and file regular returns with details of TCS collected and deposited.

Tax Collected at Source (TCS) is the flip side of TDS. It places the responsibility of collecting tax on the supplier rather than the recipient. Under TCS, the supplier collects tax from the recipient and deposits it with the government. TCS under GST is governed by Section 52 of the CGST Act, 2017.

𝐀𝐩𝐩𝐥𝐢𝐜𝐚𝐛𝐢𝐥𝐢𝐭𝐲 𝐨𝐟 𝐓𝐂𝐒:

TCS under GST applies to the following entities:

- E-commerce operators who facilitate supplies made by other suppliers.

𝐊𝐞𝐲 𝐏𝐨𝐢𝐧𝐭𝐬 𝐚𝐛𝐨𝐮𝐭 𝐓𝐂𝐒:

- TCS is collected by the e-commerce operator at a specified rate.

- The collected TCS must be deposited to the government within the stipulated timeline.

- The e-commerce operator must furnish a TCS certificate to the supplier.

𝐊𝐞𝐲 𝐓𝐚𝐤𝐞𝐚𝐰𝐚𝐲𝐬:

- TDS and TCS are mechanisms introduced under GST to ensure tax compliance and transparency.

- TDS is applicable to specific entities making payments to suppliers, while TCS is applicable to e-commerce operators.

- Both TDS and TCS involve deducting or collecting a small percentage of the transaction value as tax.

- Compliance with TDS and TCS provisions includes obtaining certificates, filing returns, and depositing tax with the government.

𝐆𝐒𝐓𝐑-𝟕 𝐚𝐧𝐝 𝐆𝐒𝐓𝐑-𝟖: 𝐒𝐭𝐫𝐞𝐚𝐦𝐥𝐢𝐧𝐢𝐧𝐠 𝐓𝐃𝐒 𝐚𝐧𝐝 𝐓𝐂𝐒 𝐂𝐨𝐦𝐩𝐥𝐢𝐚𝐧𝐜𝐞

𝐈𝐦𝐩𝐨𝐫𝐭𝐚𝐧𝐜𝐞 𝐨𝐟 𝐓𝐃𝐒 𝐚𝐧𝐝 𝐓𝐂𝐒

TDS and TCS serve several critical purposes under GST:

1. Revenue Collection: These provisions ensure a continuous inflow of tax revenue to the government by preventing tax evasion.

2. Tracking Transactions: TDS and TCS facilitate the tracking of high-value transactions, enhancing transparency in the tax system.

3. Compliance: They encourage compliance among suppliers and e-commerce operators, as non-compliance can lead to penalties and legal consequences.

4. Reduced Tax Evasion: TDS and TCS mechanisms act as deterrents against tax evasion, benefiting both the government and honest taxpayers.

Entities responsible for deducting Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) also have obligations under the GST regime. To facilitate this, the government has introduced two crucial return forms: GSTR-7 and GSTR-8.

𝐆𝐒𝐓𝐑-𝟕: 𝐓𝐃𝐒 𝐑𝐞𝐭𝐮𝐫𝐧 𝐅𝐨𝐫𝐦

GSTR-7 is the GST return form designed for entities that are required to deduct TDS under GST. It is an important compliance document that helps in the reporting and payment of TDS amounts. Here's a closer look at GSTR-7:

𝟏. 𝐖𝐡𝐨 𝐒𝐡𝐨𝐮𝐥𝐝 𝐅𝐢𝐥𝐞 𝐆𝐒𝐓𝐑-𝟕?:

Any person or organization that deducts TDS under GST is obligated to file GSTR-7. It is a GST return form filed by tax deductors, usually government entities and certain individuals, who deduct TDS under GST. It contains details of TDS deducted, TDS liability, and TDS refunds.

𝟐. 𝐅𝐫𝐞𝐪𝐮𝐞𝐧𝐜𝐲: GSTR-7 must be filed on a monthly basis, irrespective of the amount of TDS deducted.

𝟑. 𝐃𝐞𝐭𝐚𝐢𝐥𝐬 𝐢𝐧 𝐆𝐒𝐓𝐑-𝟕 𝐅𝐨𝐫𝐦:

• GSTIN

• Legal name of the deductor

• Details of the tax deducted at source

• Changes to details of TDS for any earlier tax period

• Tax deduction at source and paid

• Interest, late fee payable, and paid

• Refund claimed from electronic cash ledger

• Debit entries in electronic cash ledger for TDS/interest payment

𝟒. 𝐃𝐮𝐞 𝐃𝐚𝐭𝐞: The due date for filing GSTR-7 is typically on or before the 10th of the following month.

𝟓. 𝐏𝐞𝐧𝐚𝐥𝐭𝐲 𝐟𝐨𝐫 𝐍𝐨𝐭 𝐅𝐢𝐥𝐢𝐧𝐠 𝐆𝐒𝐓𝐑-𝟕 (𝐓𝐃𝐒 𝐑𝐞𝐭𝐮𝐫𝐧 𝐅𝐨𝐫𝐦)

Failing to file GSTR-7, the TDS return form, within the stipulated due date can result in penalties and consequences for the deductor. Here are the penalties associated with non-filing or delayed filing of GSTR-7:

𝐚. 𝐋𝐚𝐭𝐞 𝐅𝐞𝐞: If a deductor does not file GSTR-7 by the due date, they may be liable to pay a late fee. Rs. 100 per day under CGST and Rs.100 under SGST shall be levied, and the total will be Rs.200 per day of delay during which the return remains unfiled. The maximum late fee is Rs. 5,000.

𝐛. 𝐈𝐧𝐭𝐞𝐫𝐞𝐬𝐭: In addition to the late fee, interest may be applicable on the TDS amount not paid within the due date. The interest rate is usually set at 18% per annum, calculated from the day after the due date.

𝐜. 𝐁𝐥𝐨𝐜𝐤𝐢𝐧𝐠 𝐨𝐟 𝐄-𝐖𝐚𝐲 𝐁𝐢𝐥𝐥: Non-compliance with GSTR-7 filing can result in the blocking of the deductor's e-way bill generation facility. This can disrupt the movement of goods and impact business operations.

𝐆𝐒𝐓𝐑-𝟖: 𝐓𝐂𝐒 𝐑𝐞𝐭𝐮𝐫𝐧 𝐅𝐨𝐫𝐦

GSTR-8 is the counterpart to GSTR-7, designed for individuals or entities that collect TCS under GST. It is a GST return form filed by e-commerce operators who collect TCS on supplies made through their platforms. It includes information about supplies, TCS collected, and liability. Here's what you need to know about GSTR-8:

𝟏. 𝐖𝐡𝐨 𝐒𝐡𝐨𝐮𝐥𝐝 𝐅𝐢𝐥𝐞 𝐆𝐒𝐓𝐑-𝟖?: Any person or organization that collects TCS under GST, such as e-commerce operators, must file GSTR-8. Any e-commerce operator registered under GST, which manages a digital platform for e-commerce (like Amazon), must file GSTR-8. They are required to obtain GST registration and register for TCS as well.

𝟐. 𝐅𝐫𝐞𝐪𝐮𝐞𝐧𝐜𝐲: GSTR-8 must be filed on a monthly basis, regardless of the quantum of TCS collected.

3. 𝐃𝐞𝐭𝐚𝐢𝐥𝐬 𝐢𝐧 𝐆𝐒𝐓𝐑-𝟖 𝐅𝐨𝐫𝐦:

• 1. GSTIN of the E-commerce Operator.

• 2. Legal name of the registered person.

• 3. Details of supplies made through e-commerce operator.

• 4. Amendments to details of supplies in respect of any earlier statement

• 5. Details of interest

• 6. Tax payable and paid

• 7. Interest payable and paid

• 8. Refund claimed from electronic cash ledger

• 9. Debit entries in cash ledger for TCS/interest payment

𝟒. 𝐃𝐮𝐞 𝐃𝐚𝐭𝐞: The due date for filing GSTR-8 is usually on or before the 10th of the subsequent month.

𝟓. 𝐏𝐞𝐧𝐚𝐥𝐭𝐲 𝐟𝐨𝐫 𝐍𝐨𝐭 𝐅𝐢𝐥𝐢𝐧𝐠 𝐆𝐒𝐓𝐑-𝟖 (𝐓𝐂𝐒 𝐑𝐞𝐭𝐮𝐫𝐧 𝐅𝐨𝐫𝐦)

𝐚. 𝐋𝐚𝐭𝐞 𝐅𝐞𝐞: If an e-commerce operator fails to file GSTR-8 within the prescribed due date, they may be liable to pay a late fee. Rs. 100 per day under CGST and Rs.100 under SGST shall be levied, and the total will be Rs.200 per day of delay during which the return remains unfiled. The maximum late fee is Rs. 5,000.

𝐛. 𝐈𝐧𝐭𝐞𝐫𝐞𝐬𝐭: In addition to the late fee, interest may be applicable on the TCS amount not paid within the due date. The interest rate is typically set at 18% per annum, calculated from the day after the due date.

𝐜. 𝐁𝐥𝐨𝐜𝐤𝐢𝐧𝐠 𝐨𝐟 𝐄-𝐖𝐚𝐲 𝐁𝐢𝐥𝐥: Similar to GSTR-7, non-compliance with GSTR-8 filing can lead to the blocking of the e-commerce operator's e-way bill generation facility.

𝐂𝐨𝐧𝐜𝐥𝐮𝐬𝐢𝐨𝐧

TDS and TCS provisions under GST play a crucial role in ensuring tax compliance and revenue collection. It's essential for businesses and e-commerce operators to understand these provisions, adhere to the prescribed rates, and meet the compliance requirements to avoid penalties and legal consequences.