The Long awaited Section 51 of CGST Act 2017 related to Tax Deduction at Source is finally going to be  fortunate for the E-Commerce operator from 1st Oct 2018.

With view to understand the E-commerce modal and applicability of GST on this business an effort is made to lay down the principle compliance in most lucid manner.

We open with fact that in E-commerce business there are three stakeholders-

  1. A person who is doing business through e-commerce, we will say him Supplier for this article.
  2. An E-commerce Operator who is providing the online facilities to third party to execute the business, we use the term Operator for this.
  3. A buyer who uses the online portal to their intended products, will say them Recipient.

It is important to note that the GST compliances  are applicable on Supplier and on Operator and on Recipient unless the tax is payable on RCM basis.

Lets start with GST Compliances for Supplier. A supplier may be the Supplier of Goods or Services. Sec 9(5) and Sec 5(5) refers that in case of Specified Services its OPERATOR who is liable to pay tax and not the Supplier, e.g, Rent a cab and Hotel Booking Services is specified for that purpose (Please note the term Rent a Cab is used for GPS  like OLA and Uber enabled Cab Services and it is different from Radio Taxi and Meter Cab). For Non Specified Services or Goods its Supplier’s Liablity to pay GST and Section 24 of CGST Act refers the Compulsory GST Registration for the person who is doing business through E-commerce Operator who is liable to Collect Tax Under Section 51. Thus Section 24 of Compulsory Registration is not applicable for those Supplier who is doing business through the operator who is not liable for tax collection u/s 51, however section 22 which provides for normal registration will apply to them. Now Section 51 will apply to the OPERATOR only if payment for supply made from Supplier is received in his Bank account.

There is also a service called OIDAR Services (Online Information Database Access Retrieval) and in this case Section 24 makes the provision for Compulsory Registration for the OIDAR service provider located at non Taxable Territory and providing services to non taxable person located in Taxable Territory. Further if the Recipient is Taxable Person then the RCM will apply in view of section 9(3) of the CGST Act.

Apart from Legal Definition of ODIAR Services we can understand OIDAR services as a Technology based services (more loosely application based services) where no supplier actually exist to supply the services but the owner of the technology used to supply services is in existence. Watching Movie or listening music on You Tube may be one of the ODIAR services as there is no person physically available to serve you but its technology itself through whom you made a request and you are served.

Actually the OIDAR Services are also cannot be separated from E-commerce gamut for practical purpose.

Now coming to the operator it must be very clear that an operator will always be a supplier of Services only as it provides facilities to third party to do the online business. As discussed above in case of Specified service in view of Sec 9(5) Operator is always liable to pay tax. Taking discussion further an Operator is providing Services to “Supplier” as well as to “Recipient”  but the provision of services to the recipient is not Supply in view Sec 7(1)(a) hence not liable to GST whereas provision of services to the Supplier for Consideration is Supply in view of Sec 7(1)(a) hence liable for GST. Further in  E-commerce Business Modal where the payment for the supply made from the supplier is being received by the Operator himself in that case Operator is liable to collect the Tax (@ 1%  for CGST and 1% for SGST) from the supplier. What is quite interesting that Payment is received by the Operator and he will reimburse this payment to the supplier after deducting the applicable commission along with GST and also he will deduct the Tax which he is required to collect under section 51 of the CGST Act.

Hyper Confusion floats when the Supplier is Required to deduct tax under Section 194H of the Income tax Act on commission which already had been deducted by the Operator at the time of Reimbursement to the Supplier. (will discuss the issue some time later).

One should also Note that an E-commerce Operator has to get himself compulsorily registered under section 24 of the CGST Act hence even in a case where the Operator is providing non Specified Services he has to comply all the provisions of the GST. GSTR-8 the detail of tax collected from supplier has to be furnished by the Operator on Monthly Basis.

I must underline that the above provision has been discussed on the E-commerce business modal where stock is not maintained with the Operator in his designated Stock. In case of Warehousing Modal the compliances and situation could be a little bit more cumbersome which will discuss in next article in detail.

(Author CA Pratyush Parashar can be reached at 9555310584 / [email protected])

Author Bio

Qualification: CA in Practice
Company: Pratyush Parashar & Co.
Location: EAST DELHI, New Delhi, IN
Member Since: 18 Jul 2018 | Total Posts: 2
Chartered Accountant with 10 years of Industry Experiences in the field of Direct and Indirect Taxes. View Full Profile

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