GST TCS Rate Cut: E-Commerce Operators Pay 0.5% Now

Auto-drafted from official sources and under review by CA Rajeev Ranjan. Verify against the original notification before you act.

What Changed

The Tax Collected at Source (TCS) rate applicable to e-commerce operators under GST has been cut from 1% to 0.5%. The revised rate breaks down as:

• 0.25% CGST + 0.25% SGST/UTGST for intra-state supplies
• 0.5% IGST for inter-state supplies

This follows a recommendation made at the 57th GST Council meeting. The intention is to reduce the working capital burden on sellers who list and sell through online marketplaces.

Who Is Affected

Two groups need to pay attention:

E-commerce operators (platforms like marketplaces that facilitate third-party sales), they collect TCS on the net value of taxable supplies made through their platform and deposit it with the government. Their collection obligation is now halved.

Sellers on e-commerce platforms, TCS is deducted from the amounts these sellers receive. A lower TCS rate means less money is locked up in tax credits, improving their cash flow.

If you sell directly from your own website and are not operating as a marketplace facilitating other sellers, this specific TCS provision does not apply to you.

Why This Matters in Practice

TCS under GST is not a final tax, sellers can claim credit for the TCS deducted when filing their own GST returns. However, the deduction still ties up working capital until the credit is utilised. For small sellers and MSMEs operating on thin margins, even a 0.5% reduction can make a meaningful difference to monthly liquidity.

For operators, the compliance mechanics remain the same, collect, deposit, and report TCS, just at the new lower rate.

What You Should Do

• E-commerce operators should update their billing and tax computation systems to apply the revised 0.5% rate as soon as the change takes effect per the official notification.
• Sellers should verify that the TCS being deducted on their payouts reflects the new rate, and reconcile any differences in their GSTR filings.
• Both parties should check the official notification (refer to the PIB press release and the corresponding CBIC circular) for the exact effective date, since the summary does not specify one. Do not assume the rate applies until you have confirmed the notification date.

Bottom Line

This is a straightforward rate reduction, same rules, lower percentage. The compliance framework does not change. Priority action is confirming the effective date from the official notification and updating your systems before that date to avoid collecting at the old rate.

Source: Official notification