E-invoicing in India saw a smooth implementation overall. However, certain aspects like handling Freight, TCS, and Discounts in E-invoicing can still be a concern for many. Especially now, that the e-invoicing turnover limit has been reduced to small businesses. The present e-invoicing mandate requires companies with an AATO of Rs. 10 Cr. to generate IRN as per the GST Notification 17/2022. This threshold is said to go down further to businesses with an AATO of Rs. 5 Cr. and above soon.

In this article, we will touch upon the most common questions taxpayers have regarding handling Freight, TCS, and Discounts in E-invoicing.

How to calculate GST on Insurance Charges and Freight?

If the other charges like packaging, freight, insurance, etc. are taxable charges then the regular GST rates will be applicable to them. It is advisable to report these as separate line items so these values get considered taxable. Later on, there will be a revised schema for these values for better clarity and ease of reporting.

If you are charging tax on freight etc. and if it falls under composite supply then you have to apply the principal place HSN and the rate you have to provide for freight. There won’t be any specific freight HSN since you are charging the tax rate of the product that is being sold and freight/insurance is on that particular product. So, as per the rules, you have to use the same HSN depending on what it is like for a composite supply. If it is a separate charge then it needs to be shown as a separate line item.

What is TCS on Sales as per Finance Act 2020?

TCS on motor cars, scrap sales, services etc. has been a known concept. The Finance Act, 2020 has expanded the provision to include the sale of goods also under the purview of TCS.

Now many taxpayers are reporting this TCS amount in their invoices and also including the same in their invoice value. Currently, in the e-invoicing schema there is no specific field for TCS and hence as per FAQs provided by NIC, this value of TCS can be reported under Other Charges and in Invoice Remarks Field the same can be mentioned “TCS included in Other Charges”.

Who is liable to collect TCS under GST?

Certain operators who own, operate and manage e-commerce platforms are liable to collect TCS. TCS applies only if the operators collect consideration from the customers on behalf of vendors or suppliers. In other words, when the e-commerce operators pay the consideration collected to the vendors they have to deduct an amount as TCS and pay the net amount.

Here are a few exceptions to the TCS provisions for the services provided by an e-commerce platform:

• Hotel accommodation/clubs (unregistered suppliers)
• Transportation of passengers – radio taxi, motor cab or motorcycle
• Housekeeping services like plumbing, carpentry, etc. (unregistered suppliers)

Whether TCS is applicable to the sale of goods?

Yes, TCS is applicable from 1st October 2020 on a receipt basis.

In which cases is TCS not applicable?

• Goods are exported outside India or imported in India;
• Buyer is liable to deduct tax at source (TDS) on such goods;
• Buyer is Central Government, State Government, Embassy, High Commission, Legation, or trade representation of a foreign state;
• Buyer is a local authority as per section 10(20) of the Act;
• The goods are already covered under the existing provisions of TCS (e.g. alcoholic liquor, scrap, motor vehicles, etc.)

Read more: TCS under Finance Act & impact on E-invoicing

How to handle discounts in e-invoicing?

Discount management is essential for companies that come under the e-invoicing threshold. It is the practice of purchasers paying invoices in accordance with agreed-upon discounted rates. In version 1.1 of E-invoicing Schema (Released on 30th July 2020), the optional field of invoice level discount was added. So, the discount fields at the invoice level as well as the item level are already available in the official e-invoicing schema.

If the discount is given for any product level by the seller which is affecting the taxable value of that product then these discounts need to be reported at the item level. And if any discount deal is given at the invoice level like a rebate or any kind of deductions from invoice values then that is treated as a discount at the invoice level.

Also read: E-invoicing: Handling Specific Business Scenarios

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