Amidst ongoing spurt of pandemic , every business entity is finding alternative way to conduct their businesses. One of the popular method is Online Selling of Goods / providing Services to the customers to fulfill their needs. However one needs to take into account provisions of Goods & Services Tax before starting online businesses.
Definition of Electronic Commerce & Electronic Commerce Operator
Electronic Commerce: As per Section 2(44) of CGST Act, 2017 “electronic commerce” means the supply of goods or services or both, including digital products over digital or electronic network.
Electronic Commerce Operator (ECO): As per Section 2(45) of CGST Act, 2017 “electronic commerce operator” means any person who owns, operates or manages digital or electronic facility or platform for electronic commerce.
Provisions of Section 24 of CGST Act,2017 Relevant to Online Business
Brief analysis of applicability of Section 24: Section 24 of CGST Act,2017 has overriding effect on Section 22(1) which deals with threshold limit for registering under GST. In simpler terms categories covered under Section 24 shall be liable to be registered compulsorily under GST irrespective of turnover.
Section 24(i) – persons making any inter-State taxable supply;
Section 24 (iv) – person who are required to pay tax under sub-section (5) of section 9;
Brief analysis of Section 9(5): The government has notified certain services vide Notification No 17/2017-Central Tax (Rate) dated 28.06.2017 further amended by Notification 23/2017 –Central Tax (Rate) dated 22.08.2017 for which e commerce operator shall be liable to pay tax. Services Notified are – services by way of transportation of passengers by a radio-taxi, motor cab, maxi cab and motor cycle, etc.; accommodation in hotels, inns, guest houses, clubs, campsites; services by way of housekeeping, such as plumbing, carpeting etc.
Section 24(vii) persons who make taxable supply of goods or services or both on behalf of other taxable persons whether as an agent or otherwise.
Section 24 (ix)- persons who supply goods or services or both, other than supplies specified under sub-section (5) of section 9, through such electronic commerce operator who is required to collect tax at source under section 52.
Brief analysis of Section 52 : Electronic Commerce Operator as defined under Section 2(45) shall collect an amount at such rate as may be prescribed not exceeding 1% 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.
In Simpler terms every person supplying through ECO (who is liable to collect TCS under section 52) will be liable to be registered under Section 24(ix) irrespective of turnover except services covered under Section 9(5) as discussed above.
Section 24(x) – every electronic commerce operator [who is required to collect tax at source under section 52] w.e.f. 01.02.2019.
Different Case Scenarios and applicability of Section 24 of CGST Act,2017
Case Scenario-1 Selling through your own website
Suppose an entity is starting its own website for selling your products online in addition to physical retail outlet or solely through website, in this case though entity will be a Electronic Commerce Operator under Section 2(45) but will not be liable to be registered since entity will be collecting money on own (i.e. through a payment gateway) and provisions of Section 52 (TCS) of CGST Act,2017 will not be applicable.
Compulsory registration under Section 24(ix) is required only if ECO is liable to collect TCS. Therefore, threshold limit for turnover shall be applicable (i.e. 10 lakhs/20lakhs/40 lakhs) as the case may be. (Special & Non special category of states).
However if entity want to sell goods interstate then entity shall be liable to get registered under Section 24(i) compulsorily. If entity is providing interstate services then also threshold limit will be available for registration as per Notification No .10/2017 –Integrated Tax Dated 13th October,2017.
Conclusion of Case Scenario-1:
| Selling Goods through own website within the state | Threshold limit will be applicable, not required to be compulsorily registered |
| Providing Services through own website within the state or Outside State | Threshold limit will be applicable, not required to be compulsorily registered |
| Selling Goods through own website outside state (Interstate) | Threshold limit will not be applicable, required to be compulsorily registered under Section 24(i) |
Case Scenario-2 Selling goods through online e commerce website like Flipkart, Amazon etc.
Suppose an entity wants to supply its goods though online e commerce websites like Flipkart, Amazon etc. then entity shall be liable to get registered compulsorily under Section 24(ix) irrespective of turnover. In Simpler terms even if you supply goods worth Rs.1 through e commerce website then entity will be liable to get registered under GST.
Conclusion of Case Scenario -2 Compulsory Registration required under Section 24(ix).
Case Scenario-3 Supplying services through online operators like oyo rooms , ola etc.
Suppose an entity wants to provide its specified services through online operators then threshold limit will be applicable & entity shall not be liable to get registered as per provisions of Section 24(ix).
Specified Services:
- services by way of transportation of passengers by a radio-taxi, motorcab, maxicab and motor cycle (Notification No 17/2017-Central Tax (Rate) dated 28.06.2017)
- services by way of providing accommodation in hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes, (Notification No 17/2017-Central Tax (Rate) dated 28.06.2017
- services by way of house-keeping, such as plumbing, carpentering etc (Notification 23/2017 Central Tax (Rate) Dated 22nd August 2017)
Conclusion of Case Scenario -3 In entity is providing specified services then threshold limit will be available and entity will be liable to registered only if turnover exceeds threshold limit. However any services other than above supplied through online operators then compulsory registration required under GST.
Case Scenario-4 Supplying through other websites & money received directly by selling entity
Suppose an entity is supplying goods or providing services through a platform which only connects buyer & seller and payments are collected directly by seller, then in such case arrangement needs to be carefully analysed in light Section 24(vii) & accordingly decision need to be taken for registration under GST.
There are two circulars clarifying scope of transactions between principal and agent:
- Circular No 57/31/2018-GST Dated 4th September,2018
- Circular No 73/47/2018-GST Dated 5th November,2018
Conclusion of Case Scenario 4: Arrangement needs to be analysed in light of Section 7(1)(c ) read with Schedule I entry no.3 read with Section 24(vii).
In case of any query author may be reached at anandsaurabh1997@gmail.com
Disclaimer: The above interpretation & opinion is personal view of author, readers are advised to take professional advice before acting on the basis of above.
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