Understanding TCS Under GST

The introduction of Goods and Services Tax (GST) significantly transformed India’s indirect tax system by bringing uniformity and transparency. One of the key compliance mechanisms introduced specifically for the digital economy is TCS under GST. With the rapid growth of online marketplaces and digital platforms, the government needed a way to track transactions carried out through e-commerce operators. This led to the introduction of tax collected at source under GST, ensuring better reporting and tax compliance.

Under the GST law, e-commerce operators (ECOs) are required to collect a small portion of tax on supplies made through their platforms by third-party sellers. This article explains what TCS is under GST, its applicability, legal provisions, procedures, and how suppliers can claim TCS credit in GST, all in simple and practical terms.

What Is TCS Under GST?

TCS stands for Tax Collected at Source. Under GST, it refers to the tax that an e-commerce operator collects from suppliers when they make taxable supplies through the operator’s digital platform, and the payment is collected by the operator.

The concept of TCS in GST became applicable from 1 October 2018. From this date, eligible e-commerce operators are legally required to collect tax on behalf of the government and deposit it within prescribed timelines.

In simple words, when a seller sells goods or services through an online marketplace and the marketplace collects payment from the customer, the marketplace must deduct TCS before paying the seller.

Why was TCS introduced in GST?

The primary objective of TCS provisions under GST is to bring transparency to online transactions and create an audit trail of sales happening through e-commerce platforms. Since payments are routed through operators, the government placed the responsibility of tax collection on them rather than on individual sellers.

This mechanism helps:

• Track actual sales made by suppliers
• Reduce tax evasion
• Improve compliance in the e-commerce ecosystem

Digital compliance platforms like TMWala assist both operators and sellers by simplifying GST reporting, reconciliation, and tracking TCS credits efficiently.

| Also, know about GST Registration in India

TCS For E-Commerce Operator Under GST

TCS for an e-commerce operator under GST applies when the following conditions are met:

• The supply is taxable under GST
• The supply is made through an e-commerce platform
• The operator collects payment from the customer on behalf of the supplier

Popular examples of e-commerce operators include Amazon, Flipkart, Meesho, and similar platforms. These operators act as intermediaries, displaying goods or services supplied by third-party sellers.

Once the customer places an order, the supplier delivers the goods or services, but the payment flows through the operator. At this stage, the operator deducts TCS and remits the balance to the supplier.

TCS Applicability Under GST

TCS applicability under GST is governed by specific conditions under the law. Both the e-commerce operator and the supplier must compulsorily register under GST, regardless of turnover. The usual GST threshold limits of ₹20 lakh (₹10 lakh for special category states) do not apply.

Mandatory registration is required under:

• Section 24(x) of the CGST Act for e-commerce operators
• Section 24(ix) of the CGST Act for suppliers selling through e-commerce platforms

This ensures that every transaction routed through an e-commerce operator is traceable.

For more information, visit: TCS MECHANISM.pdf

Section 52 of the GST Act: Legal Framework For TCS

Section 52 of the GST Act provides the statutory basis for TCS. It authorizes e-commerce operators to collect tax on net taxable supplies made through their platforms where the consideration is collected by them.

The section also prescribes:

• Rate of TCS
• Time of deposit
• Filing of returns
• Matching of data with suppliers’ returns

Compliance with Section 52 is mandatory, and failure can attract penalties and interest.

TCS Rate Under GST

The TCS rate under GST is fixed at 1% of the net value of taxable supplies. This is split as:

• 0.5% CGST
• 0.5% SGST(or 1% IGST in case of inter-state supplies)

For example, if goods worth ₹1,000 are sold through an e-commerce platform, the operator will deduct ₹10 as TCS and pay ₹990 (after commission and other charges) to the supplier.

Difference Between TDS and TCS Under GST

Understanding the Difference between TDS and TCS under GST is important for compliance clarity.

• TDS is deducted by the recipient of goods or services when making payment to a supplier under a contract
• TCS is collected by the e-commerce operator when a supplier sells goods or services through its platform

While both aim to ensure tax compliance, TDS applies mainly to government departments and notified entities, whereas TCS applies specifically to e-commerce transactions.

TCS Returns and Compliance Requirements

E-commerce operators must deposit the tax collected by the 10th of the following month. They are also required to file a monthly return in Form GSTR-8.

Additionally:

• An annual statement must be filed by 31st December following the end of the financial year
• Errors can be rectified up to September of the following financial year

The details filed in GSTR-8 are automatically reflected in the supplier’s GSTR-2A, ensuring transparency and data matching.

Solutions like TMWala help automate GSTR-8 filing, reduce manual errors, and ensure timely compliance for both operators and sellers.

TCS Credit In GST For Suppliers

TCS credit in GST is one of the most important benefits for suppliers. The tax collected by the operator is credited to the supplier’s electronic cash ledger once the operator files GSTR-8.

The supplier can use this credit to:

• Pay the output GST liability
• Offset tax dues

This ensures that TCS is not an additional tax burden but a mechanism for advance tax collection.

Matching Of TCS Details

The GST system automatically matches:

• Details filed by the operator in GSTR-8
• Details reported by the supplier in their GST returns

Any mismatch in values is communicated to both parties. If not rectified within the prescribed time, the difference is added to the supplier’s output tax liability along with interest.

Powers Of GST Authorities

GST officers (not below the rank of Deputy Commissioner) can issue notices to e-commerce operators seeking information about:

• Volume of supplies
• Stock in warehouses
• Supplier details

Operators must respond within 15 working days. Failure can result in penalties of up to ₹25,000, along with additional penal action under GST law.

Conclusion

TCS under GST plays a crucial role in regulating the e-commerce sector by ensuring transparency, accountability, and tax compliance. From understanding TCS applicability under GST to claiming TCS credit in GST, both operators and suppliers must be aware of their responsibilities under Section 52 of GST Act.

With increasing digital transactions, compliance is no longer optionalit is essential. Using smart GST compliance platforms like TMWala can significantly ease the burden by streamlining filings, reconciliations, and credit tracking.

When implemented correctly, tax collected at source under GST benefits not just the government but also businesses by creating a structured, trustworthy digital commerce ecosystem.

FAQs

1. What is TCS under GST?
   TCS under GST is tax collected by an e-commerce operator on taxable supplies made through its platform.
2. Who is required to collect TCS in GST?
   E-commerce operators who collect payment on behalf of third–party sellers must collect TCS.
3. From when is TCS in GST applicable?
   TCS in GST is applicable from 1 October 2018.
4. What is the TCS rate under GST?
   The TCS rate under GST is 1% of the net taxable value.
5. Which law governs TCS provisions under GST?
   TCS provisions under GST are governed by Section 52 of GST Act.
6. Is GST registration mandatory for TCS applicability under GST?
   Yes, both e-commerce operators and sellers must compulsorily register under GST.
7. How is TCS credit in GST claimed by suppliers?
   TCS credit in GST is reflected in the supplier’s electronic cash ledger after GSTR-8 filing.
8. What return is filed for TCS under GST?
   E-commerce operators must file Form GSTR-8 monthly.
9. What is the difference between TDS and TCS under GST?
   TDS is deducted by the buyer, while TCS is collected by e-commerce operators.
10. What happens if TCS details do not match?
    The mismatch is added to the supplier’s tax liability along with applicable interest.