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What is TCS tax under GST & how to calculate TCS tax? | TCS Rates Chart

TCS tax

“It takes more brains and effort to file the taxes than it does to make the actual revenue” said a harried accountant working under a sincere tax compliant owner. Thankfully, since the advent of GST in India, tech firms and the Government are making filing taxes like Tax collected at source, Tax deducted at sources as easy as ABC.

“Tax collected at source (TCS)” whom we assume is a newcomer, has been  in India for the past six decades. It has been widened to the sale of  goods above a specific limit from Oct 1st 2020. Caution sellers! TCS tax  filling can become a nightmare for you and your accountant if you chose  the rough manual filing path. But do not worry because you are in the  right place and at the right time. So keep calm and scroll down to  become TCS compliant in the easiest way possible.  

What is TCS (Tax collected at source) on sale of goods?

tcs tax flow

The Tax collected at source (TCS) has to be paid by the seller of goods which needs to be collected from the buyer at the time of sale. Cumulative TCS tax amount for the month should be paid to the Government on or before the 7th day of next month. The buyer of the goods can take a credit of the tax paid, in the same financial year. If in case the seller collects extra TCS amount, it can be claimed by the buyer.

What goods are covered under TCS and at what rate?

Like you saw above, TCS tax was launched 6 decades back. However, from OCT 1st 2020, it has to be collected on the sale of goods (electronics, auto parts, hardware, apparel, F&V etc…) to a purchaser exceeding Rs 50 Lakhs at the rate of 0.1%  as per section 206C(H1).
Surprise! TCS tax will not be collected for the transactions under the section 206C(H1) which involve TDS (Tax deducted at source).

tcs tax rates

How can retailers calculate TCS tax for sale on goods in a few clicks?    

Assume, Ram enterprise has made a turn over of more than Rs 10 crores in the financial year 2020-2021, then they are supposed to collect TCS tax on sale of goods for financial year 2021-2022.

Will Ram enterprise collect TCS from every customer? No!

They will collect the TCS amount from a customer, say Laxman stores, only if Ram enterprise made sales above 50 lakhs to Laxman stores in the entire financial year 2020-2021. Now that we have understood the tax slab, let us get to work. Ram enterprise has made a sales bill of Rs 71,250 to Laxman stores and the total sales for the financial year 2021-2022 to Laxman stores has already crossed 50 lakhs. In this case, the TCS will calculated at the rate of 0.01% (till march 31 2021, the TCS rate was 0.075%).

Ram enterprise will collect Rs 71.25 and pay it to the government. Laxman stores will make a credit entry of Rs 71.25 for the TCS paid.

TCS tax under GST for online sellers

Retailers who sell on e-commerce platforms like Amazon, Flipkart can stay carefree about TCS tax as these e-commerce guys will take care of it for you, although TCS will be deducted from your revenue.  Let’s see how Kiran Electronics handles TCS under GST.

Kiran Electronics is a GST registered retailer who sells Samsung mobile phones on Flipkart. Now, he receives an order for Rs 50,000 inclusive of tax and commission. Assume, Flipkart charges Kiran a commission of Rs 400 for the sale. A deduction of 1% tax (TCS) on the amount will be made, including the money paid as commission Rs 400 and GST Rs 5357.14 (as GST rate on mobile phone is 12%). Thus, Flipkart would be deducting tax of Rs 500 which is 1% of the total sales invoice value.

TCS tax sounds easy, can it be managed easily too?   

Whether you are a retailer or a supplier, you will have to pass a journal entry for recording TCS on sale of goods in your books. Let us consider you make 100s of sales bill in a month for which TCS needs to be collected.

1) Will you calculate TCS amount for each and every bill using a calculator?
2) Will you even know whether TCS should be calculated for Laxman enterprise or not?
3) Will you pass 100’s of Journal entries for TCS collection? Even if you miss one, you will end up becoming a non TCS compliant business.

If you have scrolled down this far, I would like you to read the title once again.

Yes, this time you got to keep calm and let the tech take care. The TCS process can be automated to an extent where all you got to do is only make  TCS payment . Tech has the ability to calculate Tax collected at source for the respective party, pass a journal entry and showcase the cumulative TCS amount to be paid at the end of one month. It is time for you to step out of accounting processes and get yourselves busy making business decisions.

If you own a POS/ an ERP/ an accounting software, then either dive deep into your software to check out the feature.

Need help? Don’t worry, try downloading a trial of our solution and replicate the above given scenario using this help article on our community page and learn how GOFRUGAL eased the TCS process.

For more information on TCS tax rules and regulations, check out the links below.

Document shared by Govt. of India on TCS

Steps to file TCS by Income tax Department of India