Understanding TDS and TCS under GST: A Comprehensive Guide

Understanding TDS and TCS under GST A Comprehensive Guide

Overview on TDS and TCS under GST

In India, the Goods and Services Tax (GST) has taken the place of number of other indirect taxes. The GST’s imposition of Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) is one of its main components. We will give a thorough review of TDS and TCS under GST in this article.

What does TDS under GST mean?

TDS is the term used to describe the tax that is subtracted from payments made under a business agreement by buyers of products or services, such as government entities. The GST regulations require that TDS be applied at a rate of 2% (1% CGST + 1% SGST or 2% IGST) to payments made to sellers of taxable goods or services.

1% of the total amount paid to the supplier is the TDS rate under the GST law. The buyer deposits the TDS they have deducted with the government after which the supplier can claim a tax credit for it when they file their income tax return.

Payments made for products, services, or both are subject to TDS under the GST law. The tax deducted at source (TDS) is applied to the taxable value of the supply, not the tax amount shown on the invoice. If the entire supply value is Rs. 100 and the GST rate is 18%, for instance, the taxable value will be Rs. 84. The TDS in this scenario will be 1% of Rs. 84, or Rs. 0.84.

Only after payment is made to the supplier is TDS under GST relevant. If the payment is paid in advance, the TDS will only apply when the actual payment is made Those that deducted TDS must file the details of such tax deduction in form GSTR-7. Due date for submission of such GSTR-7 is 10th of every next month in a particular tax period..

Who is required to deduct TDS under GST?

TDS is mandated under the GST and is imposed on a number of government agencies as well as companies. The organizations that must make TDS deductions under GST include the following:

  • A local authority, a department, or an organisation of the federal or state governments
  • Governmental or statutory organisations
  • Such persons or category of persons notified by the government.

What is TCS under GST?

TCS is a method for getting the seller to pay tax right away. TCS is applicable to e-commerce operators who run a platform for the purchase and sale of goods and services under GST. With TCS, the government will be sure to get a portion of the transactional tax as soon as the money is collected rather than having to wait until the seller submits their taxes.

Only if the seller is registered for GST and the supply is conducted through an e-commerce platform is the TCS relevant. TCS under GST is calculated at 1% of the net value of taxable supplies made through the online marketplace.

Only when the payment is received by the e-commerce operator on behalf of the seller is TCS under GST applicable. The seller can claim a tax credit for the TCS paid when filing their returns because it is deposited with the government after the e-commerce operator receives it.

On the net value of taxable supplies made through the e-commerce platform, TCS under GST is applicable. The net value is computed as the total cost of supplies purchased via the online shopping platform less the cost of products that customers have returned or revoked by the vendor. The net value of taxable supply, for instance, will be Rs 90,000 if the entire value of supplies made through the e-commerce platform is Rs 1,000,000 and the value of goods returned by customers is Rs 10,000. The TCS in this instance will be Rs. 900, or 1% of Rs. 90,000.

Who is responsible for GST TCS collection?

TCS is applicable to e-commerce operators who run a platform for the purchase and sale of goods and services under GST. The organisations listed below are obligated by GST to collect TCS:

  • Anyone who owns, runs, or oversees an online platform for e-commerce
  • Anybody who has a GST e-commerce operator registration
  • Any individual whom the government has designated as an e-commerce operator.

TDS and TCS returns under GST

Every person who is required by the GST to withhold TDS must submit a TDS return in Form GSTR-7. Within ten days of the end of the month in which the TDS was deducted, the return must be filed.

Similar to this, every online merchant who is required to collect TCS under GST must submit a TCS return in Form GSTR-8. After the end of the month in which the TCS was collected, the return must be filed within 10 days.

Penalties for breaking the rules

Penalties and legal action may result from failure to comply with GST’s TDS and TCS regulations. The buyer will be responsible for paying the TDS along with interest and penalties if it is not deducted from the purchase price or submitted with the government. Similar to this, the e-commerce operator will be responsible for paying the TCS as well as interest and penalties if it is not collected or deposited with the government.


In conclusion, understanding the concepts of TDS (Tax Deducted at Source) and TCS (Tax Collected at Source) under GST is crucial for businesses to comply with tax regulations. These provisions have been introduced to ensure the smooth flow of tax revenues and reduce tax evasion.

TDS involves deducting a certain percentage of tax at the time of making payments to suppliers or service providers. It places the responsibility on the deductor to deduct tax and deposit it with the government. TDS provisions help in ensuring that the government receives tax revenue at the earliest stage of the transaction.

On the other hand, TCS requires certain e-commerce operators to collect tax at a specified rate from the consideration received for supplies made by third-party sellers on their platform. This provision aims to capture tax at the source and reduce tax leakages in the e-commerce sector.

Both TDS and TCS have their own compliance requirements, including obtaining registration, filing returns, maintaining records, and issuing certificates. Non-compliance can lead to penalties and legal consequences.

It is essential for businesses to stay updated with the latest regulations and comply with TDS and TCS provisions to avoid any penalties or complications. Consulting with tax professionals or seeking guidance from the relevant authorities can provide further clarity and help ensure proper compliance.

By adhering to the TDS and TCS provisions, businesses contribute to the overall tax system’s integrity and support the government’s efforts in creating a transparent and accountable tax environment.

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