Whether Electronic Commerce Operator has to take registration in each state where they are required to deduct TCS from supplier? – CA ARUP DASGUPTA

In the wake of Covid 19 a number of businesses have taken the business online wherein they are selling their services or goods through some e commerce operator. Hence many new e commerce operators have also started expanding since the last year and during the second wave, there are many new players in the block. However though they are clear about the fact that being an electronic commerce operator they would need to be registered as per the provisions of Section 24, they are in a dilemma as to whether registration as a TCS collector has to be obtained only in the state where they have their principal place of business or also in the states where they are required to deduct TCS from the suppliers.

Today we will discuss the provisions which need to be considered to take the above decision.

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

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;

Hence any person who is supplying his own goods or services will not be treated as an electronic commerce operator.

2(44) of CGST Act 2017 defines “electronic commerce” means the supply of goods or services or both, including digital products over digital or electronic network;

As per Section 24 of CGST Act, 2017, Notwithstanding anything contained in sub-section (1) of section 22, the following categories of persons shall be required to be registered under this Act, ( inter alia)

………………..

(x) every electronic commerce operator who is required to collect tax at source under section 52.

Hence the liability to get registered will arise as soon as the liability to collect tax at source arises in a particular state or an union territory.

Now lets see as to when the person is required to collect tax at source.

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.

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.

So amongst other things, the following conclusion emanates from the above provision

1. TCS needs to be collected by every electronic commerce operator ( ECO)

2. TCS needs to be collected at the specified rate not exceeding 1%

3. TCS will have to be collected on net value of taxable supplies

4. TCS will have to be collected from supplies made through the ECO by other suppliers

5. TCS will be collected only where the consideration with respect to such supplies where consideration is to be collected by the ECO.

So now lets take an illustration to understand the different scenarios that will emerge in case of supplies through ECO.

Illustration 1

Raj Stationery – Delhi – Supplier

Stazone – Delhi – ECO

Mr Z – Odisha – Customer

Type of Supply – Inter state

Place of Supply – Odisha

Tax charged – IGST

Hence TCS collected – IGST

In this situation the IGST TCS deposited by Stazone can be claimed by Raj stationery.

Illustration 2

Chata Shoes – Delhi – Supplier

Lookers – Delhi – ECO

Mr P – Delhi – Customer

Type of Supply – Intra state

Place of Supply – Delhi

Tax Charged – CGST / SGST Delhi

Hence TCS Collected – CGST / SGST

In this situation the SGST/CGST deposited by Lookers can be claimed by Chata Shoes.

Illustration 3

Valli sarees – Karnataka – Supplier

Lookers – Delhi – ECO

Mr Raj –  Karnataka – Customer

Type of Supply – Intra state

Place of Supply – Karnataka

Tax Charged – CGST / SGST Delhi

Hence TCS that needs to be Collected – CGST / SGST

In this situation since Lookers is not registered in Karnataka as a TCS collector, it cannot deposit the TCS collected by it. Hence in this case TCS registration has to be obtained by Lookers in Karnataka also.

Illustration 4

Key Sports – Delhi – Supplier

Cool Bazar – Gujarat – ECO

Mr Z – Odisha – Customer

Type of Supply – Inter state

Place of Supply – Odisha

Tax charged – IGST odisha

Hence TCS collected – IGST

In this situation the IGST TCS has to be   deposited by Cool Bazar in Delhi  and since it is not registered there it can not deposit the same.

Hence in this situation also Cool Bazar will need to be registered in Delhi.

Basis the above discussion it is now clear that the Electronic commerce operator will have to obtain TCS registration in every state where they are liable to collect tax at source. Now one more question may come to our mind as to how registration can be obtained in states where the ECO does not have a place of business as it is not possible to open offices across states just for the purpose of registration.

For more clarification on this we will need to refer to Rule 12 of CGST Rules, 2017.

RULE 12(1) Any person required to deduct tax in accordance with the provisions of section 51 or a person required to collect tax at source in accordance with the provisions of section 52 shall electronically submit an application, duly signed or verified through electronic verification code, in FORM GST REG-07 for the grant of registration through the common portal, either directly or through a Facilitation Centre notified by the Commissioner.

RULE 12[(1A) A person applying for registration to deduct or collect tax in accordance with the provisions of section 51, or, as the case may be, section 52, in a State or Union territory where he does not have a physical presence, shall mention the name of the State or Union territory in PART A of the application in FORM GST REG-07 and mention the name of the State or Union territory in PART B thereof in which the principal place of business is located which may be different from the State or Union territory mentioned in PART A.

So as can be seen from the above a practical solution has been provided in the rules in case of businesses which do not have a physical presence in a particular state or union territory.

So continuing with the above illustration no 3, if lookers of Delhi has to take registration in Karnataka they need to mention the name of Karnataka in Part A and Delhi details in part B as details of its principal place of business. I think it would be pertinent to mention that each State/ UT has notified one jurisdiction as the administrative jurisdiction under which all ECO having business in that State/ UT may register even if they don’t have physical presence there. So while applying for the registration we need to carefully find out the same and choose the same as the administrative jurisdiction for easier processing of the application for registration.

In case there are any further doubts on this issue please do reach out to me.

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