GST E-invoicing: TCS, Freight, and Discount Management

In the grand scheme of things, GST has been very effectively working its way out, but if we just talk about small complex things that may have inherent characteristics of doubt, then transactions of handling Freight, TCS, and Discounts in E-invoicing can still be a concern for many. Particularly now that the e-invoicing turnover limit for small businesses has been reduced. According to GST Notification 17/2022, companies with an AATO of Rs. 10 Cr. must generate IRN. For businesses with an aggregate annual turnover of Rs. 5 crores or more, the current limit is likely to be reduced further in the near future.

What exactly is TCS under GST?

The tax collected by an e-commerce operator (ECO) from the proceeds of sale on behalf of the seller of goods or services who makes supplies via the ECO is referred to as TCS under GST. TCS is calculated as a percentage of net taxable supplies. Section 52 of the CGST Act deals with the provision of TCS under GST.

Connection of E-invoicing & TCS

There is no separate provision for TCS under section 206C(1H) of the current e-invoicing mandate. TCS included in the invoice value should be included in ‘other charges’ when generating the Invoice Reference Number, so that the invoice value is reported inclusive of TCS. As a result, in GSTR-1, this amount is automatically included in the invoice value.

This new TCS provision applies to receipts rather than sales. As a result, the seller of goods is required to collect TCS on advances received and later adjusted against the invoice. As a result, it is preferable to collect TCS upon receipt rather than when the invoice is issued.

What is the TCS on Sales under the Finance Act 2020?

TCS on automobiles, scrap sales, and services, among other things, is a well-known concept. The provision has been expanded by the Finance Act of 2020 to include the sale of goods as well. Many taxpayers are now reporting this TCS amount on their invoices and including it in the invoice value.

TCS on Sales of Goods provisions apply when the prerequisites are met:

1) Seller sells goods other than export goods, such as alcoholic beverages, tendu leaves, timber, scrap, motor vehicles, foreign remittances, and so on.
2) Total sales/gross receipts/turnover from the seller’s business should have exceeded INR 10 Crores in the immediately preceding Financial Year;
3) The value/aggregate value of sale consideration for goods received from the buyer is greater than INR 50 Lakhs.

Who is responsible for collecting TCS under GST?

Certain operators who run the e-commerce platforms are responsible for TCS. TCS applies only when operators collect payments from customers on behalf of vendors or suppliers. In those other words, when e-commerce operators pay vendor consideration, they must deduct TCS and pay the net value.

Exceptions to the TCS provisions for e-commerce platform services:

• Hotels and nightclubs (Suppliers who are not registered)
• Passenger transport – radio taxi, motor cab, or motorcycle
• Plumbing, carpentry, and other housekeeping services are available (unregistered suppliers)

In what circumstances does TCS not apply?

• Goods are either exported or imported into India.
• On such goods, the buyer is required to deduct tax at source (TDS).
• Buyer is a foreign government’s central government, state government, embassy, high commission, legation, or trade representation;
• According to Section 10(20) of the Act, the buyer is a local authority.
• The goods are already covered by TCS’s existing provisions (e.g. alcoholic liquor, scrap, motor vehicles, etc.)

What is Freight Under GST?

When a Goods Transport Agency (GTA) is required to pay tax on a specific freight service at a specific rate, this is referred to as GST on freight.

In layman’s terms, freight charges are a fee paid for the carriage or transportation of goods. The current article would look at the GST rates that apply to freight charges, the exemption list, and the determination of the GST liability on freight charges.

Connection of E-invoicing & Freight

Because GST is levied on the total value of supplies. The rate of GST on freight is the same as the rate charged on the supply of goods or consignments. As a result, carrying a copy of the e-invoice is not required when transporting the goods. It is, however, required in the process of creating the e-invoice. Electronic submission of Form 10F by a select group of taxpayers has been partially relaxed in accordance with DGIT (Systems) Notification No. 3 of 2022.

How do I calculate GST on insurance and freight charges?

If the other charges, such as packaging, freight, insurance, and so on, are taxable, the regular GST rates will apply to them. It is best to report these as separate line items so that the values are taxed. Later on, a revised schema for these values will be developed for greater clarity and ease of reporting.

If you charge freight tax and it falls under composite supply, you must use the principal place HSN and the freight rate. There will be no specific freight HSN because you are charging the product’s tax rate and freight/insurance is on that specific product.

What are discounts under GST?

Suppliers typically offer discounts to increase sales or to encourage buyers to pay on time. Section 15(3) defines discount treatment as the value of supply excluding any discount given:
Before or at the time of supply, if such discount has been duly recorded in the invoice issued in respect of such supply; and

Only after the supply was already made, if
(i) such discount is established in terms of an agreement entered into at or before the time of such supply and is specifically linked to relevant invoices; and
(ii) the recipient of the supply has reversed the Input Tax Credit attributable to the discount on the basis of the document issued by the supplier.

We can categorize GST on discounts based on the time of discounts as follows:
(1) Discounts given before or at the time of sale
(2) Post-sale Discounts.

Because we are discussing GST on discount, the treatment of GST is dependent on the type of discount.

How should discounts be managed in electronic invoicing?

Discount management is critical for businesses that are eligible for e-invoicing. Purchasers pay invoices at agreed-upon discounted rates.

The invoice level discount field was added as an optional field in E-invoicing Schema version 1.1. As a result, both the invoice and item-level discount fields are already available in the official e-invoicing schema.

If the seller provides a discount for any product level that affects the taxable value of that product, these discounts must be reported at the item level. And if a discount deal, such as a rebate or any kind of deduction from invoice values, is given at the invoice level, it is treated as a discount at the invoice level.

Conclusion

Finally, These are the connection between GST and TCS, Freight & Discount Management. The information in this article will assist you in better understanding the concepts and tackling these elements with ease. Follow GSTrobo to learn more about various GST topics.