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Understanding E-invoicing's Influence on TCS for E-commerce Platforms under GST

This article explains the phased implementation of e-invoicing in India and its specific implications for Tax Collected at Source (TCS) for e-commerce operators under GST. It details the integration process for e-commerce platforms with both sandbox and production Invoice Registration Portals (IRPs), outlining the necessary steps for API registration and IRN generation. The content also highlights crucial e-invoicing considerations for suppliers and e-tailers, clarifying their responsibilities and access rights regarding generated IRNs.

📖 2 min read read🏷️ E-invoicing

India has adopted e-invoicing in stages. Initially, it became mandatory for taxpayers with an annual turnover exceeding Rs. 500 crore starting October 1, 2020. Currently, this system applies to businesses generating more than Rs. 10 crore in turnover. As of August 1, 2023, the mandate expanded to include businesses whose turnover surpassed Rs. 5 crore in any financial year since 2017-18.

Recent E-invoicing Developments

May 10, 2023: The Central Board of Indirect Taxes and Customs (CBIC) announced the sixth phase of e-invoicing, extending its reach to businesses with an annual turnover over Rs. 5 crore (from financial year 2017-18 onwards), effective August 1, 2023.May 6, 2023: The GST department postponed the seven-day deadline for reporting older e-invoices to IRP portals by three months. A new effective date for this rule has not yet been specified.April 13, 2023: According to GST Network advisories issued on April 12 and 13, 2023, businesses with an annual turnover of Rs. 100 crore or more were required to submit tax invoices and credit-debit notes to the IRP within seven days of the invoice date, starting May 1, 2023.

Key Aspects of TCS under GST for E-commerce Operators

Under GST, Tax Collected at Source (TCS) refers to the tax withheld by e-commerce operators from the net value of taxable goods or services supplied through their platforms. This applies when the e-commerce operator facilitates the transaction and collects payment from the buyer on behalf of the supplier.

As per Section 52 of the Central Goods and Services Tax (CGST) Act, all e-commerce operators, unless acting purely as agents, are mandated to collect TCS. This applies to all payments they collect on behalf of sellers of goods or services. The TCS rate is 1% of the net taxable value of the supply, which is then remitted by the e-commerce operator on behalf of the supplier.

Integrating ERP Systems with the Sandbox for E-commerce Operators

E-commerce operators (ECOs) can use the e-invoicing system to submit invoices to the Invoice Registration Portal (IRP) for transactions they facilitate on behalf of their suppliers. To integrate their Enterprise Resource Planning (ERP) systems with the IRP's sandbox environment, ECOs should follow these steps:

  • Register on the sandbox portal by selecting 'e-commerce operator' in the registration module and choosing 'TCS' as the GSTIN type. Authenticate with the OTP sent to the registered mobile number.
  • Generate necessary API credentials, including Client ID, Client secret, Username, and Password.
  • Access the sandbox tool and prepare the data payload for Invoice Reference Number (IRN) generation, then proceed to test it within this environment.
  • The payload must include the GSTINs of the seller, buyer, and the e-commerce operator, alongside other pertinent transaction information.
  • When utilizing functionalities like cancelling an IRN/E-Way Bill (EWB), generating an EWB from an IRN, or obtaining a new IRN, the Supplier GSTIN must be provided in addition to other mandatory parameters.

Production System Integration Steps

For e-commerce operators to integrate their ERP systems with the IRP's production environment, the following process should be observed:

  • Log into the IRP and navigate to the 'API registration' section.
  • Submit an application for IP whitelisting, accompanied by a summary of test results. A maximum of four static Indian IP addresses are permitted.
  • The network team will review the application and, upon approval, whitelist the specified IP addresses.
  • Subsequently, API credentials such as a client ID, client secret, username, and password can be created.
  • Users can also generate usernames and passwords for other GSTINs linked under the same Permanent Account Number (PAN) by selecting the initial GSTIN.
  • With these credentials, operators can construct the IRN generation payload and generate Invoice Reference Numbers.
  • As previously noted, the payload must incorporate the seller's GSTIN, the buyer's GSTIN, and the e-commerce operator's GSTIN, in addition to other required data elements.

Key Considerations for Suppliers and E-tailers Regarding E-invoicing

Suppliers and e-tailers utilizing e-commerce platforms should be aware of these e-invoicing requirements:

  • GST-registered e-commerce operators have the authority to generate and cancel Invoice Reference Numbers (IRNs) and e-way bills on behalf of their suppliers of goods.
  • Suppliers selling products through an e-commerce platform must have an annual turnover exceeding Rs. 10 crore (or Rs. 5 crore, effective August 1, 2023). In these scenarios, either the supplier or the e-commerce operator can generate IRNs.
  • When an e-commerce operator sells goods under its own brand, it functions as the supplier. Consequently, if the operator's turnover surpasses Rs. 10 crore (or Rs. 5 crore, effective August 1, 2023), e-invoices are mandatory for these transactions.
  • If an e-commerce operator issues invoices to suppliers for platform usage fees, and the operator's turnover exceeds Rs. 10 crore (or Rs. 5 crore, effective August 1, 2023), then IRNs must also be generated for these service invoices.

Access Scope for IRNs Generated by E-commerce Operators and Suppliers

The table below outlines the access rights for Invoice Reference Numbers (IRNs), depending on whether they were generated or cancelled by an e-commerce operator or a supplier:

IRN Action ByE-commerce Operator AccessSupplier Access
E-commerce operatorYesYes
SupplierNoYes

Further Reading

Frequently Asked Questions

What is GST and how does it benefit the Indian economy?
GST (Goods and Services Tax) is an indirect tax in India that replaced multiple cascading taxes levied by central and state governments. It aims to simplify the tax structure, promote a common national market, and boost economic growth by reducing the overall tax burden and making goods and services cheaper.
Who is required to register for GST in India?
Businesses involved in the supply of goods or services are generally required to register for GST if their aggregate turnover exceeds a specified threshold limit (currently Rs. 20 lakh or Rs. 40 lakh for goods, and Rs. 10 lakh or Rs. 20 lakh for special category states, with some exceptions for e-commerce operators and interstate suppliers).
What are the different types of GST in India (CGST, SGST, IGST, UTGST)?
There are four main types of GST: CGST (Central GST) levied by the Central Government on intra-state supplies, SGST (State GST) levied by State Governments on intra-state supplies, IGST (Integrated GST) levied by the Central Government on inter-state supplies and imports, and UTGST (Union Territory GST) levied by Union Territories on intra-union territory supplies.
How does Input Tax Credit (ITC) work under the GST regime?
Input Tax Credit (ITC) allows taxpayers to claim credit for the GST paid on purchases of goods and services used for business purposes. This credit can then be utilized to offset the GST liability on their outward supplies, thereby avoiding the cascading effect of taxes.
What is the process for filing GST returns?
GST returns are periodic statements that taxpayers are required to file with the tax authorities, detailing their sales, purchases, input tax credit, and tax liability. The process typically involves logging into the GST portal, providing the necessary transaction details, and submitting the return electronically, usually on a monthly or quarterly basis depending on turnover.

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