In this article, an attempt is made to understand the benefits under GST available to the registered persons selling goods through e-commerce operators. Before understanding the benefits available under the law, let’s understand by taking an example of how a transaction is taken place.
Suppose M/s. ABC Limited is a registered seller selling goods through amazon to customers and the goods are costing Rs. 1050/-(Rs. 1000/- base price & Rs. 50/- would be the GST component. After the delivery of the goods, the customer is paying Rs.1050/- to Amazon.
In case, amazon will deduct the following amounts
i. Commission(suppose the said amount is 6%) & the GST 0f 18% on the commission amount
ii. TCS under GST of 2% on the Net Value
iii. TDS under Income Tax @ 1%.
Thereby in the instant case, the amount which the supplier (in our case M/s. ABC Limited) would receive is Rs.944.16/-.
Here the error committed by the supplier is that they reduce the GST on commission and the TDS amount from the amount received and the remaining amount they book it as an expenditure in the books of accounts. Thereby clearly losing the credit of TCS which the e-commerce operator must have deposited.
The second is as the supplier is taking the credit of 18% on the commission invoice, the input tax credit gets accumulated in the electronic credit ledger. Due to this, the registered persons have a huge Input Tax Credit being accumulated in the Electronic Credit Ledger.
The benefits which are available are
1. Many suppliers are booking the difference amount in the profit and loss account and writing it off. Instead, the supplier must file the TCS return and the said amount would in turn be reflected in the Electronic Cash Ledger and the supplier can claim the refund for the balance lying in the electronic credit ledger.
2. The supplier can apply for the refund of ITC accumulated in the electronic credit ledger under the GST on account of the inverted duty structure and en-cash the balance which is lying in the electronic credit ledger [as per Rule 89(5) of the CGST Rules, 2017] and submit all the documents as mentioned in the Circular. The supplier would not be eligible to claim the complete amount as a refund but yes the supplier could claim the refund of around 40-60% of the balance lying in the electronic credit ledger, due to the revised formula prescribed under Rule 89(5).
Remember you have to claim the refund of the balance in the electronic credit ledger within 2 years from the due date of filing GSTR-3B for the said month.
By doing the above steps the supplier can increase the profitability of the business and increase the working capital of the business.
Author Bio
Can we set off the ITC received from commission invoice of Amazon against outward supply while filing 3b?