Electronic Commerce operator in GST regime

Brief Introduction

“Uber, the world’s largest taxi company, owns no vehicles. Facebook, the world’s most popular media owner, creates no content. Alibaba, the most valuable retailer, has no inventory. And Airbnb, the world’s largest accommodation provider, owns no real estate”- Tom Goodwin (Sr. VP, strategy and Innovation, Havas Media)

• Electronic Commerce is growing at a fast pace in India. Amazon, Flipkart, Uber, Go-MMT, etc. are doing business in large scale in India.
• In E-Commerce order for supply of goods or services is placed through the portal. The E-Commerce companies pass on these orders to actual suppliers of goods or services. Supply of goods or services is done by the third party unknown to the person placing an order.
• So far in India, these E-Commerce companies were not liable to pay VAT or CST as they were not selling goods. Recently, the services provided through these portals were brought under service tax net. (ST on commission etc.)
• Now, these companies selling goods or services are being liable to collect TCS @ 1% under GST at the source.
• This TCS seems to be mainly for control purposes, as balance GST will be payable by the actual supplier of goods or services.
• The actual supplier will be able to take the credit for this TCS paid by e-commerce operator.
• Various models adopted by the E-commerce operators include Managed Market Place Model (MMP); Open Market Place Model (OMP), aggregators model, inventory led models, etc.

Statutory Provisions Of CGST/IGST Act 2017

Definitions:

• 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 the digital or electronic network.
• Electronic Commerce Operator has been defined in Sec. 2(45) of the CGST Act, 2017 to mean any person who owns, operates or manages the digital or electronic facility or platform for electronic commerce.
• Registration of E-commerce operator:
• As per Sec. 24(x) of the CGST Act, the benefit of threshold exemption of Rs. 20 L or 10 L is not available to e-commerce operators and they are liable to be registered irrespective of the value of supply made by them;
• Compulsory registration for the person supplying through ECO’s as per section 24(ix) of the CGST Act. The threshold exemption is also not available to persons supplying goods or services through e-commerce operator and they are liable to get compulsorily registered;
• Exception: N/N 65/2017-CT dtd 15.11.2017 and N/N 17/2017 CTR dtd 28.06.17
• Furthermore, as per Sec. 10(2) (d), a composition dealer cannot supply goods through an ECO who is required to collect TCS u/s 52;
• However, a category of service providers as specified through N/N 17/2017-CTR, u/s 9(5) are exempted from compulsory registration. Eg. Radio Taxi, Hotels, Inns etc. other than those liable for registration normally as per 22(1);
• Such service suppliers are entitled to threshold exemption even if they are providing services through ECO. In respect of such services, the tax shall be paid by the ECO on behalf of such service suppliers if such services are supplied through it and all the provisions of the act shall apply to such ECO as if he is the supplier liable to pay tax in relation to such supply of services. A similar provision for inter-state supply is provided for in Sec. 5(5) of theIGST Act, 2017.
• Levy & Collection
• Every E-Commerce transaction involves 3 parties: Seller, buyer and ECO.
• And it involves 2 types of transactions:
• A.Between seller and buyer- Supply of goods and or services;
• B.Between seller and ECO- Provision of Marketplace service.
• GST shall be levied on both the transactions.
• Between seller & buyer GST on the entire value of goods/services supplied (GST shall be paid by the supplier except in the case of Sec. 9(5) services);
• Seller & ECO= GST on commission value/ other charges earned by ECO for providing the market platform to the seller. (GST shall be paid by the ECO)
• Where an electronic commerce operator does not have a physical presence in the taxable territory, any person representing such electronic commerce operator for any purposes in the taxable territory shall be liable to pay tax.
• Where an electronic commerce operator does not have a physical presence and also does not have a representative in the said territory, such ECO shall appoint a person in the taxable territory for the purpose of paying tax and such person shall be liable to pay tax.

TAX Collection At Source U/S 52

• Every ECO [Other than an ECO who is required to pay tax under Sec. 9(5)] is required to collect TCS @ 2% (1% CGST + 1% SGST) of the net value of taxable supplies made through it by other suppliers where consideration in relation to such supply is to be collected by such ECO.
• ECO should make the tax collection during the month in which the consideration amount is collected from the recipient.
• The amount of TCS collected by the ECO is to be deposited with the government within 10 days after the end of the month in which the amount was so collected.
• Every ECO is required to furnish a statement in FORM GSTR-8, electronically within 10 days after the end of such month, containing the details of outwards supplies of goods or services effected through it, including the supplies returned through it, and the amount collected by it as TCS during a month.
• The amount of TCS paid by the ECO to the government will be reflected in the Form GSTR-2 of the actually registered supplier on the basis of the GSTR-8 filed by the ECO;
• This TCS can be used at the time of discharge of tax liability in respect of the supplies made by the actual supplier.
• The details of the supplies furnished by every ECO in his month’s GSTR-8 will be matched with the corresponding details of outward supplies furnished by the concerned supplier in his monthly or any preceding month GSTR-01;
• Where the details of outward supplies declared by the ECO in his monthly GSTR-8 do not match with the corresponding details declared by the actual supplier in his monthly GSTR-01, the discrepancy shall be communicated to both the persons.
• The amount in respect of which any discrepancy is communicated and which is not rectified by the supplier in GSTR-01 or by the ECO in his GSTR-08 for the month in which the discrepancy is communicated shall be added to the output tax liability of the said supplier in his return for the next 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 supplies along with the interest on the amount so added from the date such tax was due till the date of payment.

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