The GST Council in its 45th meeting held on 17th September 2021 recommended notifying, Restaurant Services under Section 9(5) of the CGST Act, 2017 i.e., payments of Tax to be made by E-Commerce Operator instead of the supplier. Accordingly, the tax on supplies of restaurant service when made through e-commerce operators shall be paid by the e-commerce operator and not by the suppliers. To effectuate this recommendation, Notification No. 17/2021 (CTR) dated 18.11.2021 has been issued and has now a separate clarification vide Circular No. 167/23/2021 – GST, dated: 17-12-2021, also has been issued to the extent that the e-commerce operators are liable to pay GST on restaurant services.
A:- Liability to pay tax on Restaurant Services_:-
In the context of the above, as ‘restaurant service’ has been notified under section 9(5) of the CGST Act, 2017, the E-Commerce Operator shall be liable to pay GST on restaurant services with effect from 1st January 2022. To make it clear, the provisions of Section 9(5) of the CGST Act 2017 will cover the supply of restaurant services other than the services supplied by restaurants, eating joints, etc. located at specified premises. Consequent upon this change in the liability, the E-Commerce Operators will no longer be required to collect TCS on Restaurant Services and file the monthly return under GSTR 8 in terms of Section 52 of the CGST Act 2017, in respect of such restaurant services on which it pays tax in terms of section 9(5) of CGST Act 2017.
B: Liability to pay tax on other Supplies of Goods and Services_:-
The E-Commerce Operator may be carrying out other supplies over and above restaurant services as part of their business interest. In respect of such supply of other goods or services made by E-Commerce Operators, which are not notified Section 9(5) of CGST Act 2017, E-Commerce Operators will continue to pay TCS in terms of section 52 of CGST Act, 2017 in the same manner as they are doing at present. Thus, present dispensation continues for E-Commerce Operators, on supplies other than restaurant services. On such supplies (other than restaurant services made through E-Commerce Operators) GST will continue to be billed, collected, and deposited in the same manner as is being done at present. E-Commerce Operators will deposit TCS on such supplies. Also, considering that liability to pay GST on supplies other than ‘restaurant service’ through the E-Commerce Operators, other compliances under the Act, including the issuance of invoice to the customer, continue to lie with the respective suppliers (and E-Commerce Operators being liable only to collect tax at source (TCS) on such supplies), it is suggested that E-Commerce Operators raises separate bill on restaurant service in all such cases where E-Commerce Operators provides other supplies to a customer under the same order conjointly. The invoice in respect of restaurant service supplied through E-Commerce Operators under section 9(5) SHALL be issued by E-Commerce Operators.
C: Registration Requirements: –
As E-Commerce Operators are already registered in terms of Rule 8 of CGST Rules 2017, by filing Application for Registration in Form GST-REG 01 and obtaining a GSTIN in GST REG-06, as a supplier of their own goods or services, there would be no mandatory requirement of taking separate registration as E-Commerce Operators for the purpose of payment of tax on restaurant service under section 9(5) of the CGST Act, 2017.
D: Supplies from Unregistered Persons:-
It has to be borne in mind categorically that the E-Commerce Operators will be liable to pay GST on any restaurant service supplied through them including the supplies made by an unregistered person. This is an important compliance obligation to be carefully noted.
E: Aggregate Turnover:-
The aggregate turnover of the person supplying restaurant service through E-Commerce Operators shall be computed as defined in section 2(6) of the CGST Act, 2017, which says that
“aggregate turnover” means the aggregate value of all taxable supplies (excluding the value of inward supplies on which tax is payable by a person on reverse charge basis), exempt supplies, exports of goods or services or both, and inter-State supplies of persons having the same Permanent Account Number, to be computed on all India basis but excludes central tax, State tax, Union territory tax, integrated tax, and cess.
Hence, it shall include the aggregate value of supplies made by the restaurant through E-Commerce Operators. Accordingly, it is clear now that for threshold consideration or any other purpose in the Act, where a reference is made to aggregate turnover, the person providing restaurant service through E-Commerce Operators shall account such services in his aggregate turnover and cannot be attributed to the turnover of the E-Commerce Operators. Actually, E-Commerce Operators are not the recipient of restaurant service supplied through them.
F: Commission / Fees charged for providing own service liability and ITC:-
As a separate vertical, E-Commerce Operators provide their own services as an electronic platform and an intermediary for which it would acquire inputs/input service on which they can avail input tax credit (ITC). The E-Commerce Operators charges commission/fee etc. for the services it provides. The ITC so availed is utilized by E-Commerce Operators for payment of GST on such services provided by E-Commerce Operators on its own account (say, to a restaurant for example). The situation in this regard remains unchanged even after E-Commerce Operators is made liable to pay tax on restaurant service. E-Commerce Operators would continue to be eligible to ITC as before. Therefore, E-Commerce Operators shall not be required to reverse ITC on account of restaurant services on which it pays GST in terms of section 9(5) of the CGST Act 2017. However, it may also be noted with caution, that on restaurant service, E-Commerce Operators shall pay the entire GST liability in cash as no ITC could be utilized for payment of GST on restaurant service supplied through E-Commerce Operators notified in terms of Section 9(5) of the CGT Act 2017.
A number of other services are already notified under section 9(5) of CGST Act 2017. In respect of such services, E-Commerce Operators are presently paying GST by furnishing details in GSTR 3B. There is no change with reference to that. The E-Commerce Operators may, on services notified under section 9 (5) of the CGST Act,2017, including on restaurant service provided through E-Commerce Operators, may continue to pay GST by furnishing the details in GSTR 3B, Table 3.1 (c) (i.e., Other outward supplies under RCM) reporting them as outward taxable supplies for the time being, till a specific column in inserted in the respective forms. Besides, E-Commerce Operators may also, furnish the details of such supplies of restaurant services under section 9(5) in Table 7A(1) – i.e., Consolidated Rate-wise Outward Supplies to unregistered persons, or Table 4A (RCM on inward supplies) of GSTR-1, as the case maybe, for accounting purpose.
Before bidding adieu……….
These clarifications issued well ahead of the date of implementation will go a long way in a correct understanding of the legislative requirements and compliance of the same. A pro-active step indeed!
I think ECO will show the Supply in Col. 3.1(a) as outward supply. The Registered Person supplying Restaurant service through ECO will show it Col 3.1.(c) as other outward supply ( Nil rated, exempted ). Thanks.