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GST Compliance for App-Based Service Platforms and E-commerce Operators

Comprehensive GST Compliance Framework for App-Based Service Platforms and Electronic Commerce Operators under the CGST Act, 2017

Scope & purpose. This article explains, from a practising-CA’s perspective, the GST compliance architecture that applies where (a) suppliers and recipients use an app/platform to effect supplies of services (or goods), and (b) the app-owner (platform operator) earns commission / platform fees. It covers registration, who bears tax, invoice & accounting treatment, TCS (Section 52), special liabilities (Section 9(5)), place-of-supply issues for intermediaries/cross-border supplies, return & reporting (GSTR-8, matching), common pitfalls, and key statutory/circular authorities and recent judicial thinking. Citations to the Acts, CBIC circulars and important rulings are provided throughout.

Disclaimer: The information provided is for general educational purposes only and does not constitute professional advice. While every effort has been made to ensure accuracy as per the CGST Act, Rules, Notifications and Circulars updated to date, laws and interpretations may change. Readers should consult a qualified Chartered Accountant or legal professional for advice specific to their situation. The author, MOHD Muaz Malik, disclaims any liability for actions taken or not taken based on this article.

1. Business models — why the GST analysis matters

Typical app models encountered in practice include:

  • Marketplace model (multi-vendor):Platform lists many independent sellers/providers; platform takes order management, payment facilitation and charges commission/fee.
  • Aggregator/lead-generation model: Platform aggregates supply (e.g., rides, food delivery) and manages fulfilment; sometimes platform supplies service itself or acts as an intermediary.
  • Hybrid models / multi-ECO flows: Buyer-side and seller-side apps, or layered platforms (e.g., ONDC-like networks) where more than one digital operator participates in a single transaction.

Different models change (i) who is the supplier for GST purposes, (ii) whether the operator must collect TCS under Section 52, and (iii) whether the operator is liable to pay GST under Section 9(5) (for notified services). These distinctions drive registration, invoicing and return obligations.

2. Key statutory provisions (short list)

1. Section 2(44) “electronic commerce” means the supply of goods or services or both, including digital products over digital or electronic network;

2. Section 2(45) “electronic commerce operator” means any person who owns, operates or manages digital or electronic facility or platform for electronic commerce;

*Section 52. Collection of tax at source.-

(1) Notwithstanding anything to the contrary contained in this Act, every electronic commerce operator (hereafter in this section referred to as the “operator”), not being an agent, shall collect an amount calculated at such rate not exceeding one per cent., as may be notified by the Government on the recommendations of the Council, of the net value of taxable supplies made through it by other suppliers where the consideration with respect to such supplies is to be collected by the operator.

Author Explanation
Rate – not exceeding 1% of the net value of taxable supplies (CGST + SGST/UTGST; IGST 1% in inter-State cases) – actual rate notified vide Notification No. 52/2018–Central Tax, dated 20-09-2018 (effective 01-10-2018): 0.5% CGST + 0.5% SGST or 1% IGST.

Explanation .-For the purposes of this sub-section, the expression “net value of taxable supplies” shall mean the aggregate value of taxable supplies of goods or services or both, other than services notified under sub-section (5) of section 9, made during any month by all registered persons through the operator reduced by the aggregate value of taxable supplies returned to the suppliers during the said month.

(2) The power to collect the amount specified in sub-section (1) shall be without prejudice to any other mode of recovery from the operator.

(3) The amount collected under sub-section (1) shall be paid to the Government by the operator within ten days after the end of the month in which such collection is made, in such manner as may be prescribed.

(4) Every operator who collects the amount specified in sub-section (1) shall furnish a statement, electronically, containing the details of outward supplies of goods or services or both effected through it, including the supplies of goods or services or both returned through it, and the amount collected under sub-section (1) during a month, in such form and manner as may be prescribed, within ten days after the end of such month:

1[Provided that the Commissioner may, for reasons to be recorded in writing, by notification, extend the time limit for furnishing the statement for such class of registered persons as may be specified therein:

Provided further that any extension of time limit notified by the Commissioner of State tax or the Commissioner of Union territory tax shall be deemed to be notified by the Commissioner.]

2[Explanation : – For the purposes of this sub-section, it is hereby declared that the due date for furnishing the said statement for the months of October, November and December, 2018 shall be the 3[07th February, 2019].]

(5) Every operator who collects the amount specified in sub-section (1) shall furnish an annual statement, electronically, containing the details of outward supplies of goods or services or both effected through it, including the supplies of goods or services or both returned through it, and the amount collected under the said sub-section during the financial year, in such form and manner as may be prescribed, before the thirty first day of December following the end of such financial year

4[Provided that the Commissioner may, on the recommendations of the Council and for reasons to be recorded in writing, by notification, extend the time limit for furnishing the annual statement for such class of registered persons as may be specified therein:

Provided further that any extension of time limit notified by the Commissioner of State tax or the Commissioner of Union territory tax shall be deemed to be notified by the Commissioner.]

(6) If any operator after furnishing a statement under sub-section (4) discovers any omission or incorrect particulars therein, other than as a result of scrutiny, audit, inspection or enforcement activity by the tax authorities, he shall rectify such omission or incorrect particulars in the statement to be furnished for the month during which such omission or incorrect particulars are noticed, subject to payment of interest, as specified in sub-section (1) of section 50:

Provided that no such rectification of any omission or incorrect particulars shall be allowed after the 5[thirtieth day of November] following the end of the financial year or the actual date of furnishing of the relevant annual statement, whichever is earlier.

(7) The supplier who has supplied the goods or services or both through the operator shall claim credit, in his electronic cash ledger, of the amount collected and reflected in the statement of the operator furnished under sub-section (4), in such manner as may be prescribed.

(8) The details of supplies furnished by every operator under sub-section (4) shall be matched with the corresponding details of outward supplies furnished by the concerned supplier registered under this Act in such manner and within such time as may be prescribed.

(9) Where the details of outward supplies furnished by the operator under sub-section (4) do not match with the corresponding details furnished by the supplier under 6[section 37 or section 39], the discrepancy shall be communicated to both persons in such manner and within such time as may be prescribed.

(10) The amount in respect of which any discrepancy is communicated under sub-section (9) and which is not rectified by the supplier in his valid return or the operator in his statement for the month in which discrepancy is communicated, shall be added to the output tax liability of the said supplier, where the value of outward supplies furnished by the operator is more than the value of outward supplies furnished by the supplier, in his return for the month succeeding the month in which the discrepancy is communicated in such manner as may be prescribed.

(11) The concerned supplier, in whose output tax liability any amount has been added under sub-section (10), shall pay the tax payable in respect of such supply along with interest, at the rate specified under sub-section (1) of section 50 on the amount so added from the date such tax was due till the date of its payment.

(12) Any authority not below the rank of Deputy Commissioner may serve a notice, either before or during the course of any proceedings under this Act, requiring the operator to furnish such details relating to-

(a) supplies of goods or services or both effected through such operator during any period; or

(b) stock of goods held by the suppliers making supplies through such operator in the godowns or warehouses, by whatever name called, managed by such operator and declared as additional places of business by such suppliers, as may be specified in the notice.

(13) Every operator on whom a notice has been served under sub-section (12) shall furnish the required information within fifteen working days of the date of service of such notice.

(14) Any person who fails to furnish the information required by the notice served under sub-section (12) shall, without prejudice to any action that may be taken under section 122, be liable to a penalty which may extend to twenty-five thousand rupees.

Explanation. -For the purposes of this section, the expression “concerned supplier” shall mean the supplier of goods or services or both making supplies through the operator.

7[(15) The operator shall not be allowed to furnish a statement under sub-section (4) after the expiry of a period of three years from the due date of furnishing the said statement:

Provided that the Government may, on the recommendations of the Council, by notification, subject to such conditions and restrictions as may be specified therein, allow an operator or a class of operators to furnish a statement under sub-section (4), even after the expiry of the said period of three years from the due date of furnishing the said statement]

* Enforced w.e.f. 22nd June, 2017.

1. Inserted by s. 101 of The Finance (No. 2) Act, 2019 (No. 23 of 2019) – Brought into force w.e.f. 01st January, 2020 vide Notification No. 1/2020-C.T., dated 01-01-2020.

2. Inserted by CGST (Fourth Removal of Difficulties) Order, 2018, issued under C.B.I. & C. Order No. 4/2018-C.T., dated 31-12-2018.

3. Substituted by CGST (Second Removal of Difficulties) Order, 2019 for “31st January, 2019”, issued under C.B.I. & C. Order No. 2/2019-C.T., dated 1-2-2019.

4. Inserted by s. 101 of The Finance (No. 2) Act, 2019 (No. 23 of 2019) – Brought into force w.e.f. 01st January, 2020 vide Notification No. 1/2020-C.T., dated 01-01-2020.

5. Substituted (w.e.f. 1st October, 2022 vide Notification No. 18/2022 – CT dated 28.09.2022) by s. 112 of The Finance Act 2022 (No. 06 of 2022) for “due date for furnishing of statement for the month of September”.

6. Substituted (w.e.f. 1-2-2019) by s. 22 of the CGST (Amendment) Act, 2018 (31 of 2018).

7. Inserted (w.e.f. 1st October, 2023 vide Notification No. 28/2023-C.T., dated 31st July, 2023.) by s. 145 of The Finance Act 2023 (No. 8 of 2023).

3. Registration — who must register

  • An ECO must obtain GST registrationirrespective of turnover (threshold exemption not available to ECOs). Practically, every app operator (marketplace, aggregator) that “owns/operates/manages” a platform and facilitates taxable supplies needs registration.
  • Suppliers on the platform:If the supplier is a taxable person and turnover exceeds threshold (as applicable), they must register.

Note important carve-outs: where the ECO is liable under Section 9(5) to pay tax on certain notified services (e.g., restaurant services supplied through ECOs earlier), the underlying supplier may continue to enjoy threshold exemption in some cases—refer to statutory rules and CBIC clarifications for each notification. (ClearTax)

Author: MOHD Muaz Malik – Contact via WhatsApp 8126868553 or Email micozobian@gmail.com for professional GST guidance.

4. Who is the ‘supplier’? app owner = supplier or intermediary?

This is the most critical fact pattern in advisory work.

  • Intermediary (mere facilitator):If the app merely facilitates a contract between supplier and recipient, and the supplier is the principal to the supply, the supplier remains the supplier for GST.

However, the app’s own services (commission, facilitation fee) are a separate supply of service by the platform to the supplier (or to the recipient, depending on contract). Place-of-supply / cross-border rules and whether the app is an ‘intermediary’ under IGST definitions (Section 2(13) of IGST/Section 13 place of supply) must be examined. (TaxGuru)

  • Operator treated as supplier (by statute/notification):For certain notified services (see Section 9(5) and CBIC lists), the ECO can be treated as the supplier and thus liable to pay GST on such supplies. A classic example is the treatment of certain restaurant/delivery services when notified; Circulars clarified the mechanics and invoicing. (ClearTax)
  • Aggregator acting as principal: Where the app/operator contracts with the customer as principal (bills the customer in the name of the operator and is responsible for performance), the operator is the supplier and must discharge GST on the full consideration; the driver/seller is then paid by operator and treated as supplier to the operator (or as a subcontractor), per commercial arrangements.

Practical test: examine contract, invoice issued, who collects consideration, who bears refund/quality/fulfilment risk, and how parties portray themselves to customers — facts trump labels.

5. TCS (Section 52) — obligations of the app owner (ECO)

  • What is TCS under GST?

Section 52 requires every ECO (not being an agent) to collect an amount (not exceeding 1% or such notified rate) as TCS on the net value of taxable supplies made through it by other suppliers, where consideration is collected by the operator. The rate is notified; administrative guidance/FAQs explain computation (net of returns).

The ECO must deposit this TCS and furnish Form GSTR-8 monthly with details. The credit of TCS is made available to the suppliers in their electronic ledgers (matching process). (Tax Portal)

  • When TCS does NOT apply:

If the ECO itself is treated as supplier and pays tax under Section 9(5) on notified services, collection of TCS on those notified services is typically not required — see CBIC Circular No. 167/2021 (clarifies that ECO paying tax under Section 9(5) need not collect TCS for restaurant services it treats as its own supply). (CBIC GST)

  • Multiple ECOs involved: CBIC Circular No. 194/06/2023 clarifies which ECO is responsible for TCS where multiple ECOs are present in one transaction (buyer-side ECO vs seller-side ECO / ONDC-type flows). The circular lays down tests to determine ECO liable to collect TCS (e.g., which ECO collects consideration, which ECO is engaged by the supplier, contractual responsibilities). This is important for newer networked marketplace models. (Karnataka GST)

Practical compliance items for ECOs (TCS):

  • Register for TCS, ensure POS and reconciliation systems track net taxable supplies per supplier.
  • Compute TCS on “net value” after returns/adjustments; deposit timely.
  • File GSTR-8by the due date (10th of next month) — populate supplier-wise details so recipient suppliers can claim credit. (ClearTax)

6. Section 9(5) — ECO treated as supplier for notified services (reverse charge style)

  • The GST Council and CBIC have notified certain services (e.g., restaurant services furnished through ECOs) where the ECO is liable to pay tax(effectively ECO treated as supplier of those services). This is anchored in Section 9(5) of the CGST Act and implemented by notifications and CBIC circulars. For such services, ECO will pay GST (and issue invoice) and the supplier’s reporting differs. CBIC Circular No. 167/2021 and follow-ons explain operational issues (billing, ITC reversal questions). (ClearTax)

Implications:

  • ECO pays GST on the notified services irrespective of supplier’s registration status (e.g., restaurants).
  • In such cases, TCS need not be collected on those notified services (CBIC clarifies ECO should not collect TCS for supplies on which it pays under Section 9(5)). (CBIC GST)
Author: MOHD Muaz Malik – Contact via WhatsApp 8126868553 or Email micozobian@gmail.com for professional GST guidance.

7. Commission / platform fee — GST treatment

  • The commission or platform feecharged by the app to the supplier (or to the recipient) is itself a taxable supply of service by the operator. GST is payable on the commission at applicable rate (standard rates normally applicable depending on nature of services). The operator must raise invoice for such commission and discharge GST (output tax). This is separate from any TCS obligations. (TaxGuru)
  • Accounting & invoice practice: ECO should issue tax invoices for commission/fees as per Section 31 and rule provisions; retain documentation of settlement with sellers (to substantiate netting and TCS computations).

8. Place of supply, cross-border supplies and intermediaries

  • Intermediary rules (IGST Section 13(8)(b)): For cross-border services, the place of supply for intermediary services is the location of the supplier (overrides general rules). This matters when app operator intermediates between a foreign supplier and Indian recipient (or vice versa) — determines whether supply is taxable in India or outside. (TaxGuru)
  • B2C vs B2B distinction: For B2C supplies, often place of supply is recipient location; for cross-border B2C digital services, the operator may be required to treat supplies as exported/imported per IGST rules — check Section 13 and related notifications. Always map the commercial facts to the place of supply rules.

9. Returns, matching and reconciliation (practical)

  • GSTR-8 (ECO TCS return):Monthly return with supplier-wise supplies and TCS details; due by 10th of next month. TCS deposited must match GSTR-8. Suppliers see TCS credit through their auto-populated tables (matching). (ClearTax)
  • GSTR-1 / GSTR-3B:Suppliers must report outward supplies in their GSTR-1 (and claim TCS credit in GSTR-3B). ECOs must report their supplies and commission in their returns. Mismatches between ECO’s GSTR-8 and supplier filings lead to notices. (ClearTax)
  • Annual statement:ECO also required to furnish annual statement (by 31st December following financial year) of tax collected under Section 52. (Refer to Section 52(4)/(5) and official FAQs.) (Goods and Services Tax Council)

10. Input Tax Credit (ITC) issues — practical points

  • Suppliers:TCS collected by ECO is available as credit to suppliers once the ECO files GSTR-8 and deposits the tax. Suppliers must reconcile 2A/2B and GSTR-8 supplierwise details to claim ITC. (ClearTax)
  • ECO paying under Section 9(5):CBIC Circular No. 240/34/2024 clarified that an ECO paying tax under Section 9(5) for specified services is not required to reverse ITC proportionately on its inputs in respect of those supplies (practical relief). Read circular for details and conditions. (Goods and Services Tax Council)

11. Penalties, notices and common areas of dispute

  • Non-collection / short collection of TCScan attract penalties under Section 122 and related penal provisions. Mismatches in GSTR-8 v/s supplier returns often trigger inquiry. (Tax Portal)
  • Characterisation disputes(is operator supplier or intermediary?) are common. Recent judicial trends show courts scrutinise factual matrix (contract, invoices, who bears obligations) rather than labels. Example: a Karnataka High Court decision in 2025 narrowed the scope of ‘intermediary’ for GST purposes in a factual setting (useful precedent when advising on whether operator is intermediary or supplier). Always examine latest judgments for industry-specific guidance. (Tax At Hand)
Author: MOHD Muaz Malik – Contact via WhatsApp 8126868553 or Email micozobian@gmail.com for professional GST guidance.

12. Practical compliance checklist for app operators (short actionable list)

1. Obtain GST registration(ECOs cannot claim threshold exemption). (Goods and Services Tax Council)

2. Decide commercial model & document(terms of use/vendor agreement): who is supplier, payment collecting party, liability matrix, invoicing. This fact pattern determines whether ECO pays GST under Section 9(5) or collects TCS under Section 52.

3. Implement transaction logging: capture supplier-wise taxable supplies, returns/refunds to compute net taxable supplies for TCS.

4. TCS compliance: collect (if applicable), deposit and file GSTR-8monthly and annual statement as required. Reconcile with supplier returns. (ClearTax)

5. GST on commission: invoice suppliers for platform fees; account GST on commission as output tax. (TaxGuru)

6. If ECO treated as supplier under Section 9(5): ensure invoicing, GST payment, and understand ITC implications per Circulars (no automatic ITC reversal in certain cases as clarified). (Goods and Services Tax Council)

7. Multiple ECO workflow: where several ECOs participate, apply CBIC Circular No. 194 tests to identify the ECO responsible for TCS. (Goods and Services Tax Council)

8. Cross-border/intermediary mapping: apply IGST Section 13 tests; keep documentation proving place of supply. (TaxGuru)

13. Selected primary authorities & reading list (to attach to advisory memos)

Author: MOHD Muaz Malik – Contact via WhatsApp 8126868553 or Email micozobian@gmail.com for professional GST guidance.

14. Common advisory templates / clauses to include in vendor agreements

(keep these short, factual and GST-compliant)

  • Who is supplier: explicit clause specifying whether supplier or platform is the supplier to buyer for each category of transaction.
  • Invoicing & consideration collection: specify party collecting consideration and issuing invoices. (This affects TCS liability and who must register.)
  • GST treatment & indemnity: supplier confirms taxability status; platform may reserve right to collect TCS/reverse charge and indemnify platform for incorrect representations.
  • Data sharing for reconciliation: supplier must allow platform access to invoices/sales data for matching GSTR-8 v/s supplier returns.

15. Practical examples (short, illustrative)

1. Marketplace (platform only facilitates order; supplier bills customer):Supplier is supplier; platform charges commission to supplier (platform invoices supplier and charges GST on commission). Eco collects money on behalf of supplier → TCS under Section 52 applies (platform collects TCS on net value). Supplier claims TCS credit upon matching. (Tax Portal)

2. Aggregator (platform bills customer, operator delivers service as principal):Operator is supplier and charges GST on full value; operator pays supplier (driver/partner) for delivery services — no TCS for those supplies as operator is supplier. If operator is liable per Section 9(5) for notified services, operator pays tax accordingly. (ClearTax)

3. Networked flow (buyer-app + seller-app):Apply Circular 194 to determine which ECO collects consideration and therefore which ECO should collect TCS. (Goods and Services Tax Council)

16. Errors to avoid (practical red flags)

  • Assuming label “intermediary” in contract is conclusive — courts & tax authorities examine substance. (Tax At Hand)
  • Not registering as ECO because turnover is low — ECOs cannot claim threshold exemption. (Goods and Services Tax Council)
  • Failing to reconcile GSTR-8 and supplier returns (common cause for notices). (ClearTax)
  • Treating commission as non-taxable (it is a taxable service unless specific exemption). (TaxGuru)

17. Conclusion — counsel points for auditors / tax advisers

  • Document the commercial reality: contracts, invoices, settlement flows and risk allocation — these determine tax incidence.
  • Run a mapping matrix for each revenue stream: (i) who collects consideration, (ii) who issues invoice to end customer, (iii) who bears fulfilment risk, (iv) whether service is notified under Section 9(5). That matrix will determine registration, TCS, output tax, and accounting entries.
  • Maintain robust IT reconciliation: platform ledger → TCS computation → GSTR-8 filing → supplier GSTR-1 matching. Use CBIC circulars and FAQs as operational guideposts (Circulars 167, 194, 240 are essential reading). (CBIC GST)
Annex — Selected links & citations (primary references)

1. FAQ — E-commerce (GST Council) (definitions, registration requirements). (Goods and Services Tax Council)

2. CGST Act — Section 52 (TCS) (official text). (Tax Portal)

3. CBIC Circular No. 167/23/2021-GST (clarifications on Section 9(5) interaction with Section 52). (CBIC GST)

4. CBIC Circular No. 194/06/2023-GST (clarification re multiple ECOs and TCS liability). (Goods and Services Tax Council)

5. CBIC Circular No. 240/34/2024-GST (clarifications on ITC and Section 9(5)). (Goods and Services Tax Council)

6. GSTR-8 filing guidance (GST Portal/FAQs). (GST Tutorial)

7. IGST Section 13 — Place of supply / intermediary rules. (TaxGuru)

8. Recent Karnataka High Court coverage on intermediary scope (2025) — illustrative case law to consider for fact-intensive disputes. (Tax At Hand)

 –

Practical Examples
1. Marketplace for Home-Cleaning Services

Facts

  • “CleanBuddy” is an app that connects independent home-cleaning professionals with customers.
  • CleanBuddy collects the entire payment from customers, deducts its 10 % commission + GST, and remits the balance to the cleaners.
  • The cleaners issue invoices to the customers in their own name.
  • Service is intra-State (Delhi).

GST treatment

  • Supplier of cleaning service = each cleaner.
  • CleanBuddy is an Electronic Commerce Operator (ECO) u/s 2(45) and collects consideration → Section 52 applies.

Computation of TCS for August 2025

Particulars Amount (₹) Total taxable supplies (before GST) 10,00,000 Value of supplies returned during the month 50,000 Net value of taxable supplies 9,50,000

TCS rate (Delhi intra-State): 0.5 % CGST + 0.5 % SGST.

  • TCS to be collected = 9,50,000 × 1 % = ₹9,500 (₹4,750 CGST + ₹4,750 SGST).

Compliance

  • CleanBuddy pays ₹9,500 to Government by 10 September 2025 and files GSTR-8 for August.
  • Each cleaner sees the TCS credit of ₹9,500 (split supplier-wise) in their electronic cash ledger and uses it to pay their own GST liability in GSTR-3B.

2. Food Delivery Platform – Section 9(5) NOTIFIED Service

Facts

  • “FoodFast” operates a food-delivery app.
  • From 1-Jan-2022, restaurant services supplied through ECOs are notified under Section 9(5).
  • FoodFast collects ₹20 lakh of restaurant bills in a month.

Effect

  • For these notified services FoodFast itself is treated as the supplier and pays GST on the entire ₹20 lakh.
  • Because Section 9(5) applies, Section 52 TCS does NOT apply on those restaurant supplies (CBIC Circular No. 167/23/2021-GST).

Other income

  • FoodFast charges the restaurants a platform fee (say ₹2 lakh) – that fee is its own taxable supply and FoodFast pays GST on it in the normal way.

3. Multiple-Operator Model (Buyer-side & Seller-side ECOs)

Facts

  • A new network (similar to ONDC) involves:
    • Buyer-app that fronts the customer interface and collects money, and
    • Seller-app that onboards the actual seller.
  • Both apps qualify as ECOs.

Clarification

  • CBIC Circular No. 194/06/2023-GST explains:
    • The ECO which actually collects consideration from the customer is liable to collect TCS under Section 52.
    • Other ECOs involved only in facilitating the supply are not required to collect TCS.

Illustration

  • Buyer-app collects ₹5 lakh, deducts 1 % TCS (₹5,000 IGST in inter-State case) and deposits it through GSTR-8.
  • Seller-app has no TCS liability for that transaction.

4. Cross-Border Intermediary Service

Facts

  • “SkillLink” is an Indian app that connects foreign tutors with Indian students.
  • Tutors (located outside India) supply online education services to Indian students.
  • SkillLink collects fees from students in India and remits to tutors after deducting commission.

Analysis

  • Tutors are the actual suppliers of OIDAR services; but because they are outside India and SkillLink collects consideration, SkillLink may fall under OIDAR provisions of IGST.
  • For TCS under Section 52:
    • If tutors are not registered and consideration is collected by SkillLink, Section 52 applies on the net value of taxable supplies (OIDAR being taxable in India).
    • TCS deposited in IGST (1 % rate) and tutors can claim it only if they are registered; otherwise it remains a collection mechanism to safeguard revenue.

–

Circular No. 194/06/2023-GST

File No. CBIC-20001/5/2023-GST
Government of India
Ministry of Finance
Department of Revenue
Central Board of Indirect Taxes and Customs
GST Policy Wing

****

New Delhi, Dated the 17th July, 2023

To,

The Principal Chief Commissioners/Chief Commissioners/Principal Commissioners/ Commissioners of Central Tax (All)
The Principal Directors General/ Directors General (All)

Madam/Sir,

Subject: Clarification on TCS liability under Sec 52 of the CGST Act, 2017 in case of multiple E-commerce Operators in one transaction.

Reference has been received seeking clarification regarding TCS liability under section 52 of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as “CGST Act”), in case of multiple E-commerce Operators (ECOs) in one transaction, in the context of Open Network for Digital Commerce (ONDC).

2.1 In the current platform-centric model of e-commerce, the buyer interface and seller interface are operated by the same ECO. This ECO collects the consideration from the buyer, deducts the TCS under Sec 52 of the CGST Act, credits the deducted TCS amount to the GST cash ledger of the seller and passes on the balance of the consideration to the seller after deducting their service charges.

2.2 In the case of the ONDC Network or similar other arrangements, there can be multiple ECOs in a single transaction – one providing an interface to the buyer and the other providing an interface to the seller. In this setup, buyer-side ECO could collect consideration, deduct their commission and pass on the consideration to the seller-side ECO. In this context, clarity has been sought as to which ECO should deduct TCS and make other compliances under section 52 of CGST Act in such situations, as in such models having multiple ECOs in a single transaction, both the Buyer-side ECO and the Seller-side ECO qualify as ECOs as per Section 2(45) of the CGST Act.

3. In order to clarify the issue and to ensure uniformity in the implementation of the provisions of law across the field formations, the Board, in exercise of its powers conferred by section 168 (1) of the CGST Act, hereby clarifies the issues as under:

————————————————————————————————————————

Issue 1: In a situation where multiple ECOs are involved in a single transaction of supply of goods or services or both through ECO platform and where the supplier-side ECO himself is not the supplier in the said supply, who is liable for compliances under section 52 including collection of TCS?

supply

Clarification: In such a situation where multiple ECOs are involved in a single transaction of supply of goods or services or both through ECO platform and where the supplier-side ECO himself is not the supplier of the said goods or services, the compliances under section 52 of CGST Act, including collection of TCS, is to be done by the supplier-side ECO who finally releases the payment to the supplier for a particular supply made by the said supplier through him.

e.g.: Buyer-side ECO collects payment from the buyer, deducts its fees/commissions and remits the balance to Seller-side ECO.

Here, the Seller-side ECO will release the payment to the supplier after deduction of his fees/commissions and therefore will also be required to collect TCS, as applicable and pay the same to the Government in accordance with section 52 of CGST Act and also make other compliances under section 52 of CGST Act.

In this case, the Buyer-side ECO will neither be required to collect TCS nor will be required to make other compliances in accordance with section 52 of CGST Act with respect to this particular supply.

————————————————————————————————————————————

Issue 2: In a situation where multiple ECOs are involved in a single transaction of supply of goods or services or both through ECO platform and the Supplier-side ECO is himself the supplier of the said supply, who is liable for compliances under section 52 including collection of TCS?

ECO is himself the supplier

Clarification: In such a situation, TCS is to be collected by the Buyer-side ECO while making payment to the supplier for the particular supply being made through it. e.g. Buyer-side ECO collects payment from the buyer, deducts its fees and remits the balance to the supplier (who is itself an ECO as per the definition in Sec 2(45) of the CGST Act). In this scenario, the Buyer-side ECO will also be required to collect TCS, as applicable, pay the same to the Government in accordance with section 52 of CGST Act and also make other compliances under section 52 of CGST Act.

4. It is requested that suitable trade notices may be issued to publicize the contents of this Circular.

5. Difficulty, if any, in implementation of this Circular may please be brought to the notice of the Board. Hindi version would follow.

(Sanjay Mangal)
Principal Commissioner (GST)

FAQ: E-Commerce 

FAQs original PDF link ( Click here)

Question 1: What is Electronic Commerce?

Answer: Electronic Commerce has been defined in Sec. 2(44) of the CGST Act, 2017 to mean the supply of goods or services or both, including digital products over digital or electronic network.

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Question 2: Who is an e-commerce operator?

Answer: Electronic Commerce Operator has been defined in Sec. 2(45) of the CGST Act, 2017 to mean any person who owns, operates or manages digital or electronic facility or platform for electronic commerce.

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Question 3: Is it mandatory for e-commerce operator to obtain registration?

Answer: Yes. As per Section 24(x) of the CGST Act, 2017 the benefit of threshold exemption is not available to e-commerce operators and they are liable to be registered irrespective of the value of supply made by them.

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Question 4: Whether a person supplying goods or services through e-commerce operator would be entitled to threshold exemption?

Answer: No. Section 24(ix) of the CGST Act, 2017 lays down that the threshold exemption is not available to such persons and they would be liable to be registered irrespective of the value of supply made by them. This requirement is, however, applicable only if the supply is made through such electronic commerce operator who is required to collect tax at source under section 52 of the CGST Act, 2017.

However, where the e-commerce operators are liable to pay tax on behalf of the suppliers under a notification issued under section 9 (5) of the CGST Act, 2017, the suppliers of such services are entitled for threshold exemption.

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Question 5: Will an e-commerce operator be liable to pay tax in respect of supply of goods or services made through it, instead of actual supplier?

Answer: Yes, but only in case of services notified under Sec. 9(5) of the CGST Act, 2017. In such cases tax shall be paid by the electronic commerce operator if such services are supplied through it and all the provisions of the Act shall apply to such electronic commerce operator as if he is the supplier liable to pay tax in relation to the supply of such services. A similar provision for inter-State supply is provided for in Sec. 5(5) of the IGST Act, 2017. (Refer to Notification No. 17/2017- Central Tax (Rate) and 14/2017- Integrated Tax (Rate) dated 28.06.2017).

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Question 6: Will threshold exemption be available to electronic commerce operators liable to pay tax on notified services?

Answer: No. Threshold exemption is not available to e-commerce operators who are required to pay tax on notified services supplied through them.

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Question 7: What is Tax Collection at Source (TCS)?

Answer: The e-commerce operator is required to collect an amount at the rate of one percent (0.5% CGST + 0.5% SGST) of the net value of taxable supplies made through it, where the consideration with respect to such supplies is to be collected by such operator. The amount so collected is called as Tax Collection at Source (TCS). (Refer to Section 52(1) of the CGST Act, 2017).

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Question 8: It is very common that customers of e-commerce companies return goods. How these returns are going to be adjusted?

Answer: An e-commerce company is required to collect tax only on the net value of taxable supplies. In other words, the value of supplies which are returned are adjusted in the aggregate value of taxable supplies. (Refer to Explanation to Sec. 52(1) of the CGST Act, 2017).

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Question 9: What is meant by “net value of taxable supplies”?

Answer: The “net value of taxable supplies” means the aggregate value of taxable supplies of goods or services or both, other than the services on which entire tax is payable by the e-commerce operator, made during any month by all registered persons through such operator reduced by the aggregate value of taxable supplies returned to the suppliers during the said month.

(Refer to Explanation to Section 52(1) of the CGST Act, 2017).

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Question 10: Is every e-commerce operator required to collect tax on behalf of actual supplier?

Answer: Yes, every e-commerce operator (other than an operator required to pay tax under section 9(5) of the CGST Act, 2017) is required to collect tax where consideration with respect to a taxable supply is collected by such e-commerce operator. (Refer to Section 52(1) of the CGST Act, 2017).

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Question 11: What time should the e-commerce operator make such collection? 

Answer: The e-commerce operator should make the collection during the month in which the consideration amount is collected from the recipient.

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Question 12: What is the time within which such TCS is to be remitted by the e-commerce operator to Government?

Answer: The amount collected by the operator is to be paid to the government within 10 days after the end of the month in which amount was so collected. (Refer to Section 52(3) of the CGST Act, 2017).

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Question 13: How can actual suppliers claim credit of this TCS?

Answer: The amount of TCS paid by the operator to the government will be reflected in the GSTR-2 of the actual registered supplier (on whose account such collection has been made) on the basis of the statement filed by the operator. The same can be used at the time of discharge of tax liability in respect of the supplies made by the actual supplier. (Refer to Section 52(7) of the CGST Act, 2017)

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Question 14: Is the e-commerce operator required to submit any statement? What are the details that are required to be submitted in the statement?

Answer: Yes, every operator is required to furnish a statement, electronically, containing the details of outward supplies of goods or services effected through it, including the supplies of goods or services returned through it, and the amount collected by it as TCS during a month within ten days after the end of such month. The statement will be filed in FORM GSTR-8. The operator is also required to file an annual statement by 31st day of December following the end of the financial year in which the tax was collected. (Refer to Section 52(4) and Section 52(5) of the CGST Act, 2017).

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Question 15: What is the concept of matching in e-commerce provisions and how it is going to work? 

Answer: The details of supplies furnished by every operator in his statement for the month will be matched with the corresponding details of outward supplies furnished by the concerned supplier in his valid return for the same month or any preceding month.

Where the details of outward supplies declared by the operator in his statement do not match with the corresponding details declared by the supplier, the discrepancy shall be communicated to both persons. (Refer to Section 52(8) and Section 52(9) of the CGST Act, 2017).

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Question 16: What will happen if the details remain mismatched?

Answer: The amount in respect of which any discrepancy is communicated and which is not rectified by the supplier in his valid return or the operator in his statement for the month in which discrepancy is communicated shall be added to the output liability of the said supplier in his return for the month succeeding the month in which the discrepancy is communicated. The concerned supplier in whose output tax liability any amount has been added, shall be liable to pay the tax payable in respect of such supply along with interest on the amount so added from the date such tax was due till the date of its payment. (Refer to Section 52(10) and Section 52(11) of the CGST Act, 2017).

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Question 17: Are there any powers given to tax officials under the GST Act to seek information on supply/stock details from e-commerce operators? 

Answer: Yes. Any officer not below the rank of Deputy Commissioner may issue a notice to the electronic commerce operator to furnish such details within a period of 15 working days from the date of service of such notice. (Refer to Section 52(12), (13) and (14) of the CGST Act, 2017).

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Question 18: The sellers supplying goods through e-Commerce operators (ECO) may have common places of business, especially if their goods are stored in a shared facility operated by the ECO. This will result in the same additional place of business being registered by multiple suppliers. Is this allowed?

Answer: Yes, this is allowed. Any registered person can declare a premises as a place of business if he has requisite documents for use of the premises as his place of business (like ownership document, agreement with the owner etc.) and there is no restriction about use of a premises by multiple persons. The registered person shall have to comply with the requirements of maintaining records as per section 35 of the CGST Act, 2017 and Rules 56 to 58 of the CGST Rules, 2017.

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Question 19: Do travel agents providing services through digital or electronic platform qualify as ECOs? Will they be required to collect tax at source as per the provisions of Section 52 of the GST Act?

Answer: Online travel agents providing services through digital or electronic platform will fall under the category of ECOs liable to deduct TCS under Section 52 of the CGST Act, 2017.

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Question 20: There are transactions in which two or more ECOs are involved. In such cases who would deduct the TCS?

Answer: In such cases, each transaction needs to be treated separately and examined according to the provisions of Section 52 of the CGST Act, 2017. The TCS will be deducted accordingly.

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Question 21: There are cases in which the ECO does not provide invoicing solution to the seller. In such cases, invoice is generated by the seller and received by the buyer without ECO getting to know about it. The payment flows through the ECO. In such cases, on what value is TCS to be collected? Can TCS be collected on the entire value of the transaction?

Answer: Section 52(1) of the CGST Act, 2017 mandates that TCS is to be collected on the net taxable value of such supplies in respect of which the ECO collects the consideration. The amount collected should be duly reported in GSTR-8 and remitted to the Government. Any such amount collected will be available to the concerned supplier as credit in his electronic cash ledger.

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Question 22: GST requires a dealer to maintain a consecutive serial number for invoices. If we are supplying from multiple locations, do we need to centrally maintain the invoice numbers serially?

Answer: Section 46 of the CGST Rules, 2017 provides that invoice may have “a consecutive serial number not exceeding sixteen characters, in one or multiple series, containing alphabets or numerals or special characters hyphen or dash and slash symbolised as “-” and “/” respectively, and any combination thereof, unique for a financial year”.

Therefore, a supplier can have multiple series for the same year, so long as the same series is not used across financial years. Therefore, you may have a different invoice series for each location having consecutive serial numbers running across that series.

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Question 23: There are sellers who are selling exempted or zero-tax goods like books through ECOs. Will marketplaces be required to collect TCS on such supplies?

Answer: As per Section 52(1) of the CGST Act, 2017 TCS is to be collected on “the net value of taxable supplies” made through an ECO. When the supply itself is not taxable, the question of TCS does not arise.

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Question 24: I am a supplier selling my own products through a web site hosted by me. Do I fall under the definition of an “electronic commerce operator”? Am I required to collect TCS on such supplies?

Answer: As per the definitions in Section 2 (44) and 2(45) of the CGST Act, 2017, you will come under the definition of an “electronic commerce operator”.

However, according to Section 52 of the Act ibid, TCS is required to be collected on the net value of taxable supplies made through it by other suppliers where the consideration is to be collected by the ECO. In cases where someone is selling their own products through a website, there is no requirement to collect tax at source as per the provisions of this Section. These transactions will be liable to GST at the prevailing rates.

 

Question 25: We purchase goods from different vendors and are selling them on our website under our own billing. Is TCS required to be collected on such supplies?

Answer: No. According to Section 52 of the CGST Act, 2017, TCS is required to be collected on the net value of taxable supplies made through it by other suppliers where the consideration is to be collected by the ECO. In this case, there are two transactions – where you purchase the goods from the vendors, and where you sell it through your website. For the first transaction, GST is leviable, and will need to be paid to your vendor, on which credit is available for you. The second transaction is a supply on your own account, and not by other suppliers and there is no requirement to collect tax at source. The transaction will attract GST at the prevailing rates.

Note: Reference to CGST Act, 2017 includes reference to SGST Act, 2017 and UTGST Act, 2017 also.

*****

Disclaimer: The information provided is for general educational purposes only and does not constitute professional advice. While every effort has been made to ensure accuracy as per the CGST Act, Rules, Notifications and Circulars updated to date, laws and interpretations may change.
Readers should consult a qualified Chartered Accountant or legal professional for advice specific to their situation.The author, MOHD Muaz Malik, disclaims any liability for actions taken or not taken based on this article.

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Name: Mohd Muaz Malik
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One Comment

  1. Mohd Muaz Malik says:

    Disclaimer : – In Introduction, I wrongly mention, practising-CA’s perspective,………. I’m not a practising-CA’s [ I’m not a CA ]

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