The two crucial aspects of GST are TDS and TCS that impacts how you do compliances and business operations. Lets understand the difference between TDS and TCS under GST.
Understanding TDS under GST
In TDS, the payer deducts GST. You have to pay tax deducted at source (TDS) to the government when payments are made to suppliers for goods or services.
When does TDS apply?
TDS applies when the total value of a contract is more than ₹2.5 lakh.
Who must deduct TDS(Tax Deducted at Source)?
Government departments, local authorities, and public sector undertakings must deduct TDS.
What is the TDS Rate?
TDS is deducted at 1% under the CGST Act and 1% under the SGST Act, totaling 2%.
How to file GST Returns for TDS?
You can do GST Return Filing for TDS in Form GSTR-7.
When to file GST Return Form 7?
The deductor must pay the TDS by the 10th day of the following month using Form GSTR-7.
For example, if a department of the Central Government deducts TDS at 2% from a supplier on March 5, 2024, they need to pay it by April 10, 2024.
Understanding TCS under GST
TCS is collected when e-commerce operators collect a percentage of tax from the amount they receive for goods or services sold through their platforms.
When does TCS apply?
If you sell your products or services on E-Commerce platforms, you pay TCS(Tax Collected at Source) to E-Commerce platforms. TCS applies to e-commerce operators as per Section 52 of the CGST Act.
Who must collect TCS?
E-commerce platforms must collect TCS on the net value of taxable supplies sold through their platform.
What is TCS Rate?
The E-Commerce operators collect TCS at 1%.
How to file GST Returns for TCS?
E-commerce operators need to get GST Registration and they can file GST Returns for TCS using Form GSTR-8.
When to File GST Return Form 8?
E-Commerce Operators need to file GST Return Form 8 on the 10th day of the following month. For example, For transactions conducted in the month of July, the GST Return Form 8 must be filed by August 10th.
Distinction between TDS & TCS
| Who Deducts/Collects | TDS Deducted by government departments, agencies, or notified entities. | TCS Collected by e-commerce operators on transactions made through their platform. |
| Applicable Section | Section 51 of the CGST Act. | Section 52 of the CGST Act. |
| Rate of Tax | 2% (1% CGST + 1% SGST/UTGST or 2% IGST) | 1% (0.5% CGST + 0.5% SGST/UTGST or 1% IGST) |
| Applicability | Applicable on contracts exceeding ₹2.5 lakh. | Applicable on all sales through e-commerce platforms. |
| Purpose | Ensures tax is collected at the source of payment to prevent evasion. | Ensures tax compliance and transparency in e-commerce transactions. |
| Returns Form | GSTR-7 | GSTR-8 |
| Due Date for Filing | 10th day of the following month. | 10th day of the following month. |
| Credit Utilisation | Deducted TDS amount is credited to the supplier’s electronic cash ledger. | Collected TCS amount is credited to the supplier’s electronic cash ledger. |
| Example | Government pays ₹1,00,000 to a supplier and deducts ₹2,000 as TDS. | Amazon sells goods worth ₹1,00,000 and collects ₹1,000 as TCS from the supplier. |
| Impact on Cash Flow | Affects supplier’s cash flow by deducting a portion of their payment. | Affects supplier’s cash flow by collecting a portion of their sales revenue. |
| Compliance | Responsibility of government departments/agencies to deduct and remit TDS. | Responsibility of e-commerce operators to collect and remit TCS. |
| Registration | Entities must obtain a TDS registration under GST. | E-commerce operators must register for TCS under GST. |
| Exemption Limits | Applicable only for contracts above ₹2.5 lakh. | No minimum threshold; applies to all sales through e-commerce platforms. |
Moreover, If you want any other guidance relating to TCS or TDS under GST, please feel free to talk to our business advisors at 8881-069-069.
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