TDS, TCS provisions under GST to come into effect from October 1

New Delhi, Sep 14: The government on Thursday sought to check evasion of Goods and Services Tax (GST) by introducing provisions that will make mandatory for e-commerce companies to collect tax at source to help track the sellers on platforms such as Amazon and Flipkart. Similarly, public sector companies will have to deduct GST at the specified rate when they make payments, which will again help keep tabs on those providing services or goods to them.
Although the final TCS (tax collection at source) rate is still to be notified, the rate under the law is capped at 1 per cent under Central GST, 1 per cent under state GST and 2 per cent under IGST.
“This should not have much of an impact on consumers, but will have an impact on suppliers selling through ecommerce platforms and ecommerce operators themselves. E-commerce companies for TCS and various PSUs for TDS would need to quickly gear up their ERP systems to comply with these provisions from October 1. With audit report as well being notified, the industry would now really need to buckle up, especially given the short time frame,” said Abhishek Jain, tax partner at consulting firm EY.
Both the provisions had been kept in abeyance for over a year as the government wanted the new tax regime to settle down. The move comes after the Centre and states implemented the e-way bills, which have helped track consignments better. The steps are meant to plug leakages and help the government meet its monthly collection target of Rs 1 lakh crore.
Consultants said industry fears that TCS might have a negative impact on their business but demands of doing away with it has not found favour in the government. “It is not yet clear whether e-commerce companies will have to obtain registration in each state from where vendors are supplying or a single centralized registration would suffice. TDS provision under GST is on similar lines we had under various state VAT laws.
TDS provision applies only to select taxpayers and also only on intra-state supplies of contract value exceeding Rs 2.5 lakh. It requires separate registration and return filing by persons responsible for deducting TDS,” said Pratik Jain, indirect tax practice leader at PricewaterhouseCoopers.