TDS/TCS Deductions Now Mandatory For E-Commerce Companies From 1st October


October 4, 2019

TDS and TCS provisions under GST


Importance of TDS and TCS under GST

These are the four questions that can explain the basic application of TDS as stated under GST law:

Q1. Who can deduct TDS under GST?

The people who are responsible for deducting tax are:

1) Central or State Government departments, or
2) regional authority, or
3) governmental agencies, or
4) The person who will be notified by the Central or State Government on the guidance of the Council.

Q2. What is the rate of TDS to be reduced under GST?

Under GST, the maximum rate of TDS is 2%, to be declared by CBIC.

Q3. Is there any limit for deducting TDS under?

The person/entity can apt to deduct TDS, if the total value of supply under a contract increases Rs 2.5 lakhs.

Q4. What is the time limit for payment of TDS?

The time limit for payments of TDS by the deductor would be by the 10th day of the next month.

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Influence of TDS on Government Civil Contractor

Throughout the country, more than 10,000 civil contractors are given by the Indian government every year. More than Rs 100 crore are used for constructing/repairing the national highways. These divisions are adapted by big construction companies and then fragmented to smaller firms and again fragmented to another small firm. Due to the TDS responsibility, this loop will face problems due to GST.

To ensure the tax compliance by all the divisions and subdivisions, the government will need to reduce TDS from the divisions. In the present time, tax compliance is not fulfilled by many small civil/ labor divisions. Under GST it will be necessary for them to register and fulfill the tax compliance.

TCS Compliance for the e-commerce sector

Finally, the government is set to implement the much-awaited TCS and TDS provisions for the E-commerce companies and directed them to start collecting up to 1 per cent TCS in the while doing any payment to suppliers under the GST.

Under GST law, a clause has been added for all the e-commerce aggregators in which they will be made responsible for deducting tax at the rate of 1% from each transaction. Only after this deduction, any dealers/services online/traders selling goods will get the payment. A lot of compliance and administration cost will be increased for online aggregators like Amazon, Flipkart, Snapdeal, etc. TDS must be deposited by the 10th day of next month.

For claiming the TDS by E-Commerce operators, all the traders, services online/dealers selling goods will have to get registered under GST even if their annual income is less than 20 Lakhs.

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All the concerned entities are commanded to collect TDS at 1 per cent on the payments given to the suppliers of either Goods or services on their platform. The Tax deducted at source (TDS) and Tax collected at source (TCS) provisions under GST to come into action from 1st of October as said by the Government.

According to the CGST act, the concerned entities are said to collect TDS at 1 per cent in on all the payment is done to the suppliers of Goods and services in case there are excesses of Rs 2.5 lakhs. While the States will also Levy 1 per cent TDS under the CGST act.

Coming to the E-commerce companies, they are now liable to collect up to 1 per cent TCS on every payment done to suppliers under Goods and Services Tax (GST). And the states can also charge up to 1 per cent TCS under SGST act.

In this regard, the E-commerce companies for TCS and the other relevant entities i.e PSU’s and the Government companies for TDS deductions are said to get their ERP’s updated soon so to don’t miss any deduction specified under the provisions by 1st October.

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It is said that the deductions of TCS and TDS will help the tax department to get more and more data structuring in the Economic system and will get to know more in-depth details of GST tax transactions.

TDS and TCS under GST

TDS rule will help to achieve transparency in the operations of government contracts and tax compliance. To incorporate the TCS rule added under GST, E-commerce websites like Amazon, Snapdeal, Flipkart, etc should make definite changes in their online payment process and administration/ finance department.


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