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TDS and TCS Provisions – Recently, The Ministry of Finance, vide Notification No. 50/2018 and 51/2018-Central Tax dated 13 September 2018, stated that on upcoming 1st October provisions regarding the Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) under Section 51 and Section 52 respectively of the CGST Act will come into force.
As per section 51 of the CGST Act, it is mandatory to deduct TDS at the rate of 1% of the value of supply for certain specified entities which are closely concerned with the government at the time of making payment to the supplier in case of intra-state supply of goods or services value exceeding Rs. 2.5 Lakhs.
Above mentioned provision is the same under SGST, therefore, the cumulative deduction will be 2% of the value of the supply.
As per Section 52 of the CGST Act, consideration received by an e-commerce operator in relation to supply of goods or services is required to be deposited with the Government an amount equivalent to 1% of the net aggregate value of the supply.
SGST contains the same provision as mentioned above, under which the total deduction will be equivalent to 2% of the net aggregate value of the supply.
TDS provisions assist the government in monitoring the transactions involving substantial consideration and which helps in ensuring GST compliance therein. There will be a wider impact of TCS provisions on e-commerce operators whose turnover is less than Rs.20 lakhs operating on a collect model. Now they will have to compulsorily discharge the TCS obligations and seek registration under the CGST Act with effect from 1st October 2018. As the other entities which do not fall under the threshold are not required to apply for GST registration thus provisions regarding TCS can be challenged on the ground of differential treatment in the writ courts.