TDS & TCS Basics
- TDS refers to the tax which is deducted when the buyer of goods or services, such as government departments, makes payments under a business contract.
- TCS refers to the tax which is collected by the electronic commerce operator when a seller supplies some goods or services through its website and the payment for that supply is collected by the electronic commerce operator
Who is liable to deduct TDS
- A department or an establishment of the Central Government or State Government; or
- Local authority; or
- Governmental agencies; or
- Such persons or category of persons, notified by the Government.
- Public sector undertakings, or
- A society established by the Central or any State Government or a Local Authority and the society is registered under the Societies Registration Act, 1860, or
- An authority or a board or any other body which has been set up by Parliament or a State Legislature or by a government, with 51% equity (control) owned by the government.
Rate of TDS
- The rate of TDS notified under the GST laws is 2% (1% CGST+1% SGST or 2% IGST) on the payments made to the seller of taxable goods or services
- If the total value of supply under a contract exceeds Rs 2.5 lakhs then the person/entity would be liable to deduct TDS.
The deductor would be liable to make the payment of TDS by the 10th day of the next month in form GSTR-7.
For example, an ‘X’ department of the Central Government deducts TDS @2% from ‘Y’ on 5 March 2021, then it is liable to make payment by 10 April 2021.
TCS UNDER GST
- Section 52 has been inserted under the CGST law for all e-commerce aggregators to bring TCS in GST.
- e-Commerce aggregators are made responsible under the GST law for deducting and depositing tax at the rate of 1% from each transaction.
- Any dealers or traders selling goods or services online would get the payment after deduction of 1% tax (0.5% CGST+ 0.5% SGST or 1% IGST).
- They would need to deposit the tax deducted by the 10th day of the next month in form GSTR-8.
For example, Mr Santosh is a trader who sells his ready-made clothes online on Local Search India. He receives an order for Rs 20,000, inclusive of tax and commission. Amazon charges a commission of Rs 200. Further, there is a return worth Rs 1,000. Amazon would, therefore, need to deduct 1% tax (TCS) on the amount, excluding sales returns (Rs 1,000), but including the money paid as a commission (Rs 200) and GST. Local Search would thus be deducting TCS in GST at Rs 90 (1% of Rs 19,000) on net sales value
