This has reference to the circular no. 74/48/2018-GST dt.05.11.2018, issued by Ministry of Finance, Department of Revenue, Central Board of Indirect Taxes and Customs, GST Policy Wing to clarify TCS collection by tea board of India.
About Tea board of India under GST Law
The Tea Board of India being the operator of the electronic auction system for trading of tea across the country. This is including for collection and settlement of payments, certainly falls under the category of electronic commerce operator liable to collect Tax at Source(TCS). Also, this is in accordance with the provisions of section 52 of the Central Goods and Service Tax Act, 2017 i.e CGST Act.
Participants of the Auction system
The participants in the electronic auction system are the sellers i.e. the tea producers and auctioneers who carry out the auction on behalf of such sellers and buyers.
Payment Receipt by Tea board
The buyers under the electronic auction system makes the payment of a consolidated amount to an escrow Account maintained by the Tea Board of India.
Therefore, the said consolidated amount is towards the value of the tea, the selling and buying brokerages charged by the auctioneers. Also, this amount includes the charges by the Tea Board from sellers, auctioneers and buyers.
Thereafter, the tea Board make the payment to the sellers (i.e. tea producers), from the said escrow account. This is for for the supply of goods made by them (i.e. tea). Also, board makes the payment to the auctioneers for the supply of services made by them (i.e. brokerage).
Further, there are no circumstances; that the payment is made by the Tea Board to the auctioneers on account of supply of goods i.e., tea sold at auction.
Seeking Clarification by Tea board
In the said circular, the government said that a representation has been received from Tea Board, seeking clarification whether they should collect TCS under section 52 of the CGST Act from:
- The sellers of tea (i.e. the tea producers),
- Or from the auctioneers of tea or from both.
Clarification provided by the Government
The matter has been examined by the government. According to the sub-section (1) of section 168 of the CGST Act, for the purpose of equality in the implementation of the Act, it is clarified that:
“TCS at the notified rate, in terms of section 52 of the CGST Act, shall be collected by Tea Board respectively from the –“
(i) sellers (i.e. tea producers) on the net value of supply of goods i.e. tea; and
(ii) auctioneers on the net value of supply of services (i.e. brokerage)
