Section 52 of the CGST Act makes provision for collection of tax at source. The Section is being brought in force with effect from 01.10.2018 vide Notification No. 51/2008-CGST dated 13.10.2018.
Section 52 of the CGST Act provides that every electronic commerce operator, not being an agent, shall collect an amount calculated at such rate not exceeding one per cent., as may be notified by the Government on the recommendations of the Council, of the net value of taxable supplies made through it by other suppliers where the consideration with respect to such supplies is to be collected by the operator. The amount collected shall be paid to the Government by the operator within ten days after the end of the month in which such collection is made.
Section 2(44) of the CGST Act defines that Electronic Commerce Operator means any person who owns, operates or manages the digital or electronic facility or platform for electronic commerce. Electronic Commerce means the supply of goods or services or both, including digital products over the digital or electronic network.
The expression “net value of taxable supplies” shall mean the aggregate value of taxable supplies of goods or services or both, 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.
The supplier who has supplied the goods or services or both through the operator shall claim credit, in his electronic cash ledger, of the amount collected and reflected in the statement of the operator furnished. The details of supplies furnished by every operator shall be matched with the corresponding details of outward supplies furnished by the concerned supplier registered under this Act in such manner and within such time as may be prescribed.
Tax Collection at Source (TCS) has similarities with TDS, as well as a few distinctive features. TDS refers to the tax which is deducted when the recipient of goods or services makes some payments under a contract etc., while TCS refers to the tax which is collected by the electronic commerce operator when a supplier supplies some goods or services through its portal and the payment for that supply is collected by the electronic commerce operator.
There are many e-Commerce operators, like Amazon, Flipkart, Ola, Urbanclap 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 the ‘tax’ at a rate of 1% from the supplier. This shall be done by the Operator by paying the supplier, the price of the product/services, less the tax, calculated at the rate of 1%. The said amount will be calculated on the net value of the goods/services supplied through the portal of the Operator. Suppose a certain product is sold at Rs. 1000/- through an Operator by a seller. The Operator would deduct tax @ 1% of the net value of Rs. 1000/- i.e. Rs. 10/-.
The e-Commerce Operator as well as the supplier supplying goods or services through an Operator need to compulsorily register under GST. The threshold limit of Rs. 20 lakhs (Rs. 10 lakhs for special category states) is not applicable to them. Section 24(x) of the CGST Act, 2017 makes it mandatory for every e-Commerce Operator to get registered under GST. Similarly, section 24(ix) of the CGST Act, 2017 makes it mandatory for every person who supplies goods/services through an Operator to get itself registered under GST.
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.
The section imposes a duty on electronic commerce operators to collect a tax, from the consideration required to be paid to the persons making supplies of goods or services or both through it. The deduction shall be done on monthly basis on net value of taxable supplies. Rate of deduction shall not exceed one percent, as notified by the Government.