TCS Refund under GST: A Navigation through its

Impact on E-commerce and Other Businesses

taxscan.in/tcs-refund-under-gst-a-navigation-through-its-impact-on-e-commerce-and-other-
businesses/367835

January 23, 2024

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By Devanand T R - On January 23, 2024 7:37 pm - 3 mins read

Introduction

The Goods and Services Tax (GST) regime in India has undergone various
amendments aiming to streamline taxation and stimulate economic growth. One such
modification that has sparked significant interest among businesses, especially in the
e-commerce sector, is the introduction of the Tax Collection at Source (TCS)
provision. This article navigates through the intricate implications of TCS refund
under GST and its far-reaching impact on e-commerce and various other businesses.

TCS under GST

TCS stands for Tax Collected at Source. It is a mechanism wherein a buyer deducts a
specific percentage of tax at the source of the payment made to a seller and deposits
this collected tax directly with the government on behalf of the seller.

In the context of GST regulations in India, e-commerce operators are mandated to

collect 0.5% under CGST and 0.5% under SGST. For interstate transactions, the e-
commerce operator must collect 1% under IGST of the net value of taxable supplies
facilitated by them through their platforms.

Eligibility for TCS Refund

To be eligible for a TCS refund under GST, a seller must be registered under GST,
have filed necessary returns (GSTR 1 and GSTR 3B), have excess TCS credited to
their Electronic Cash Ledger and not have utilised the TCS amount for any other tax
liability. Over 10 lakh registered taxpayers fall under the eligibility criteria for TCS
refund.

GST TCS Rate

The GST TCS rate varies based on the type of transaction and the seller’s turnover in
the preceding financial year.

For e-commerce, the rate is 1% (0.5% CGST + 0.5% SGST) on the gross
consideration value for suppliers with a turnover exceeding Rs.50 lakh in the previous
financial year.

For other specified supplies, the rate is 5% (2.5% CGST + 2.5% SGST) on the gross
payment value for specific transactions outlined in the GST law.

Key Points and Considerations

Sellers with a turnover below Rs.50 lakh in the previous financial year are
exempt from TCS liability on e-commerce transactions.
The TCS rate for both e-commerce and other transactions is subject to revision
by the government through notifications.
The TCS rate applies to the gross payment value, including the GST payable
on the supply.

Concept of TCS for E-commerce Companies

The concept of TCS for e-commerce companies plays a crucial role in tax collection
under the GST regime in India.

The purpose of TCS for e-commerce companies is multi-faceted

Addressing tax evasion: TCS acts as a preventive measure against tax

evasion, ensuring upfront tax collection from sellers on e-commerce platforms.
Improved tax compliance: E-commerce platforms simplify the tax compliance
process for both sellers and the government by deducting and depositing tax
directly with the government on the seller’s behalf.
Enhanced tax revenue: Upfront collection of tax through TCS ensures a steady
flow of tax revenue for the government, aiding fiscal stability and development
initiatives.
Functioning of TCS for E-commerce Companies

Tax collectors: E-commerce platforms deduct a specified percentage of tax

(currently 1%) from the total sale price, including GST, when a buyer completes
a purchase.
Depositing collected tax: The platform is responsible for depositing the collected
TCS amount with the government on behalf of the seller, typically on a monthly
or quarterly basis.
Impact on sellers: While upfront deduction might seem inconvenient, sellers can
claim the TCS amount as a tax credit when filing their GST returns, ensuring
the overall tax burden remains the same.

Conclusion

The introduction of TCS refund under GST is a positive development for businesses
operating in the dynamic e-commerce sector and beyond. It is a mechanism that
effectively addresses concerns related to cash flow, competitiveness and compliance,
fostering a more business-friendly environment. Though challenges exist, proactive
measures from the government coupled with increased awareness within the
business community can contribute to the seamless implementation of TCS refund
provisions.

The concept of TCS for e-commerce companies emerges as a win-win for both the
government and the platforms. It ensures timely tax collection, simplifies compliance
and promotes a healthy e-commerce ecosystem. As the GST framework continues to
evolve, businesses must stay informed and adapt to changes to navigate the
complex landscape of taxation in India. TCS refund provisions, contribute to a
business-friendly environment, fostering growth and prosperity in the Indian business
landscape.

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Gift Vouchers and Cards are Actionable Claims, GST Applicable

on the Date of Redemption u/s 12(4)(b) of CGST Act: Madras
HC [Read Order]
In Kalyan Jewellers Case, Madras High Court held that GST is applicable on Gift
Vouchers and Cards as they fall under ‘Actionable Claims’

By Manu Sharma - On January 23, 2024 7:37 pm - 5 mins read

A Single Bench of the Madras High Court has recently held that gift vouchers and gift
cards are actionable claims and Goods and Services Tax ( GST ) is applicable on the
date of redemption under Section 12(4)(b) of the Central Goods and Services Tax (
CGST ) Act.

A Writ Petition was filed under Article 226 of Constitution of India, for issuance of a
Writ of Certiorari calling for the records of the impugned order so far as the finding
that the time of supply of the gift voucher/PPI issued by the petitioner to its customers
is at the point of issuance of voucher/PPI and quash the same, by Kalyan Jewellers
India Ltd.

As a part of the sales promotion, the petitioner formulated a Scheme by issuing

different types of Pre-Paid Instruments ( hereinafter referred to as PPI’s and/or/Gift
Vouchers ). These PPI’s are known as “Gift Vouchers/Gift Cards” in the market (
hereinafter referred to as PPI’s and/or/Gift Vouchers ). These “Gift Vouchers” are sold
both in its retail outlets as well as through online portals by engaging the services of
third party service providers.
The following ruling was delivered in the Advance Ruling Application of the Jewellers,
“The Own closed PPIs issued by the Applicant are ‘vouchers’ as defined under
CGST/TNGST Act 2017 and are a supply of goods under CGST/TNGST Act 2017.

The time of supply of such gift vouchers / gift cards by the applicant to the customers
shall be the date of issue of vouchers if the vouchers are specific to any particular
goods specified against the voucher. If the gift vouchers / gift cards are redeemable
against any goods bought, the time of supply is the date of redemption of voucher.”

Aggrieved by the aforesaid order, the petitioner filed an appeal at the Appellate
Authority for Advance Rulings ( AAAR ), “The time of supply of the gift vouchers/gift
cards by the applicant to the customers shall be the date of issue of such vouchers
and the applicable rate of tax is that applicable to that of the goods.”

Notably, The expression “Gold Voucher” was substituted with the expression “Gift
Voucher” in the Impugned Order.

The specific case of the petitioner is that these Gift Vouchers/Gift Cards are
“actionable claims” and therefore not liable to tax as they fall within the purview of the
execution in Section 7(2) of the respective GST Enactments read with Schedule III to
the respective GST Enactments.

It was submitted that as per Section 7(2) of the respective GST Enactments, these “
Gift Vouchers” are “actionable claims” within the meaning of Section 3 of the Transfer
of Property Act, 1882 and since it is specified in the Schedule III, it is to be treated
neither as a “supply of goods” nor as a “supply of services” and therefore the
petitioner was not liable to tax at the time of its issuance to its customers.

Alternatively, it was the case of the petitioner that the petitioner can be taxed only at
the time of actual sale of the merchandise i.e., at the time of redemption of the Gift
Vouchers by a customer.

On the other hand, the counsel for the respondent submitted that PPI’s issued by the
petitioner was nothing but a Pre-Paid Card Instrument /Voucher and was liable to tax
under the machinery prescribed under Section 12(4)(a) of the respective GST
Enactments.

It was also submitted that tax liability is on the goods to be delivered on a future date.
However, tax was payable at the time of issuance of the “Gift Vouchers” as there was
identification of the merchandise in the “Gift Vouchers” issued by the petitioner.

The Bench observed that, “There are distinct elements in the definition of “actionable
claim” in Section 3 of the Transfer of Property Act. As the nomenclature suggest, an
“actionable claim” is a “debt” or a “beneficial interest” in a movable property not in
possession of the claimant, which the Court recognize as an affording ground for
granting relief to a claimant. An “actionable claim” is assignable in terms of Section
130 of the Transfer of Property Act, 1882.”

It was also noted that, ““Gift Voucher/Card” thus acknowledges debt. Thus, “Gift
Voucher/Card” is nothing but a “debt instrument”. It can be redeemed on a future date
on its presentation towards ‘sale consideration’ for purchase of the merchandise from
any one of the petitioner’s retail outlets.”

“The value of the “Gift Voucher/Card” is meant to be set-off towards payment for the
sale of the merchandise traded by the petitioner. A customer or his or her donee
is/are entitled to redeem the value in the “Gift Voucher/Card” towards sale
consideration of purchase to be made by them from the petitioner’s outlet under the
terms of the scheme under which it is issued. If the petitioner commits a breach or
fails to allow such redemption, such customer would have right to enforce”, the bench
further noted.

It was further observed that, “At the same time, it has to be clarified that if the “Gift
Voucher/Card” are issued for a specified and identified goods, or for a merchandise
of a particular value, tax is payable on such identified goods at the time of issuance
of the “Gift voucher/ Card”, as there is supply of an identified good in view of Section
12(4)(a) of the respective GST Enactments.”

Thus, if the “Gift Voucher/Card” is issued for an identified goods/merchandise, tax is

payable notwithstanding the fact that only a part of the sale consideration is/was
received by the petitioner in advance at the time of issuance of the “Gift
Voucher/Card”.

On the other hand, if the “Gift Voucher/ Card” was issued for any unspecified goods
to be purchased on a future date from a whole range of products/goods/merchandise
offered for sale by the petitioner, tax is payable on such “goods” or “merchandise”
only at the time of sale i.e. at the time of redemption of “Gift Voucher/Card” in view of
Section 12(4)(b) of the respective GST Enactments.

The bench went on to draw-up an illustration – For instance, a person may buy a
voucher or a coupon as a “gift” of a specified goods of a specific value for being
gifted to a donee. The donee, is merely required to collect the merchandise from the
store by presenting the “Gift Voucher/Card” and then complete the sale by taking
delivery of the goods. It will be a situation covered by Section 12(4)(a) of the
respective GST Enactments.

Similarly if the goods are identified at the time of the issuance of the “Gift
Voucher/Card”, GST is payable although full payment is not made and payments are
made in installments and delivery is taken later. Here, the generation of invoice and
delivery of the identified goods or merchandise or article is merely postponed to a
future date i.e. on the date of production/presentation of “Gift Card/ Gift Voucher”.

Therefore, unless there a clear identity of the “goods” or “service” and its value is
ascertained on the date of issuance of the “gift voucher”, question of taxing a future
supply of an unspecified goods or service which is to take place on a future date is
not contemplated under the Scheme of the respective GST Enactments. This is the
true purport of Section 12(4) of the respective GST Enactments.

It was thus held that, “If the “Gift Vouchers/Cards” is for a specified item of jewellery
of specified value, tax is payable at the time of its issuance, as there is supply( i.e
transfer ) within in the meaning of Section 7(1-A) of the respective GST Enactments
read with Sl.No.1(c) to the II Schedule to the respective GST Enactments. Therefore,
tax is payable in view of Section 12(4)(a) of the respective GST Enactments at the
time of issuance of such “Gift Vouchers/Cards”.”

The Bench also held, “ On the other hand, if there is no supply ie. no transfer within in
the meaning of Section 7(1-A) of the respective GST Enactments read with Sl.No.1(
c) to the II Schedule to the respective GST Enactments, time of supply will get
postponed to the actual time of redemption of the “voucher” to a future date of sale of
merchandise or such goods when such Gift Voucher/Card is presented by the
customer at the Counter of the petitioner. The petitioner will be liable to tax on the
date of redemption under Section 12(4)(b) of the respective GST Enactments.”

To Read the full text of the Order CLICK HERE

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GST Update: GSTN issues Advisory on Bank Account Details
Submission for Registered Taxpayers

By Navasree A.M - On January 23, 2024 7:03 pm - 2 mins read

In an official advisory (No. 623) issued on 23rd January 2024, the Goods and
Services Tax Network ( GSTN ) has emphasised the crucial requirement for
registered taxpayers to furnish their bank account details under Rule 10A of the
Central Goods and Services Tax Rules ( CGST ), 2017.

Under the provisions of the CGST Act, 2017, and the corresponding rules, all
registered taxpayers are mandated to submit details of their bank accounts within 30
days from the date of registration or before the due filing date of GSTR-1/IFF,
whichever occurs earlier.

To ensure compliance and prevent any disruptions in business activities, taxpayers

who have not yet provided their bank account details are strongly advised to do so
promptly, especially if the 30-day period is nearing expiration. Failure to comply
may result in the suspension of GSTIN and subsequent debarment from filing
GSTR-1/IFF.

To facilitate this process, a new functionality with specific features is currently under
development and will be deployed in the near future.

KEY FEATURES

1. Failure to furnish the bank account in the stipulated time: It would result
into following:
 2. Taxpayer Registration would get suspended after 30 days and intimation in
FORM REG-31 Will be issued to the Taxpayer.
3. Get the Taxpayer debarred from filing any further GSTR-I/IF

2. Revocation of suspension: If the taxpayer updates their bank account details

in response to the intimation in FORM REG-31, the suspension Will be
automatically revoked.

Cancellation of Registration: If the bank account details are not updated even after
30 days of issuance of FORM REG-31, the registration after suspension may also be
taken up for cancellation process by the Officer.

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