In re Juspay Technologies Pvt. Ltd. (GST AAR Karnataka)
Introduction: In the case of Juspay Technologies Pvt. Ltd., a GST Advance Ruling was sought to determine the company’s status as an e-commerce operator and its liability for GST. The ruling addresses critical questions regarding the definition of an e-commerce operator and the nature of the supply, particularly in relation to Section 9(5) of the CGST Act, 2017, and Notification No. 17/2017 dated 28.06.2017.
Detailed Analysis:
Definition of E-commerce Operator: The first question addressed whether Juspay Technologies qualifies as an e-commerce operator. According to Section 2(45) of the CGST Act, an e-commerce operator is defined as any person who owns, operates, or manages a digital or electronic facility or platform for electronic commerce, which includes the supply of goods or services over digital or electronic networks. The ruling confirms that Juspay Technologies, as the owner of the “Namma Yatri” APP, falls within this definition.
Nature of Supply: The second question examined the nature of supply in accordance with Section 9(5) of the CGST Act. This section allows the government to specify categories of services for which the tax liability falls upon the e-commerce operator if the services are supplied through their platform. Notification No. 17/2017-Central Tax (Rate) dated 28.06.2017 specified that the tax liability for services related to transportation of passengers by vehicles like radio-taxis, motor cabs, etc., would be on the e-commerce operator. However, the crucial point of contention was whether the services provided through the “Namma Yatri” APP were supplied through Juspay Technologies.
Definition of “Through”: The interpretation of the word “through” in Section 9(5) was crucial. The ruling examined its meaning, considering it as indicating means, agency, or intermediacy. In this context, it implies that the services must be supplied by the e-commerce operator, and the operator should have control or agency over the entire service process.
Role of Juspay Technologies: The ruling clarified that Juspay Technologies primarily acts as a connector between auto drivers and passengers. They do not collect payments, have no control over the actual service provision, and are not responsible for ride details or service completion. The supply of services occurs independently of Juspay Technologies, making it clear that the services are not supplied through the e-commerce operator.
Conclusion: The GST Advance Ruling for Juspay Technologies Pvt. Ltd. in Karnataka resulted in the following key conclusions:
a. Juspay Technologies satisfies the definition of an e-commerce operator but is not considered the supplier liable for tax under Section 9(5) of the CGST Act, 2017, in relation to the supply of services specified in Notification No. 17/2017 dated 28.06.2017.
b. The supply made by the service provider (auto drivers) to their customers on the “Namma Yatri” APP does not amount to supply by Juspay Technologies.
c. Juspay Technologies is not obligated to collect and pay GST on the supply of services provided by service providers to their customers through the “Namma Yatri” APP.
This ruling provides clarity on the role and tax liability of e-commerce operators in cases where they act as intermediaries connecting service providers with customers through digital platforms.
In conclusion, the GST AAR Karnataka ruling has significant implications for businesses operating in the e-commerce sector, shedding light on the distinction between e-commerce operators and service providers and clarifying their respective tax obligations.
FULL TEXT OF THE ORDER OF AUTHORITY FOR ADVANCE RULING, KARNATAKA
M/s. Juspay Technologies Pvt. Ltd., (herein after referred to as ‘Applicant’), # 444, Stallion Business Centre, 18th Main, 6th Block, Koramangala, Bengaluru -560 095, having GSTIN 29AACCJ9163G1Z9, have filed an application for Advance Ruling under Section 97 of CGST Act, 2017 read with Rule 104 of CGST Rules, 2017 and Section 97 of KGST Act, 2017 read with Rule 104 of KGST Rules, 2017, in form GST ARA-01 discharging the fee of Rs.5,000/- each under the CGST Act KGST Act.
2. The applicant stated that they are registered under the GST Act and are engaged in the business of providing technology services for merchants to connect to their preferred payment aggregators and payment gateways; they have launched “Namma Yatri” app on ONDC platform. “Namma Yatri” is a ride-hailing SaaS platform / Mobility as a service (MaaS) solution offered to the auto-rickshaw community of Bengaluru which includes a driver-side software and customer-side software. “Namma Yatri” is a software developed, owned and operated by Juspay.
3. In view of the above, the applicant has sought advance ruling in respect of the following questions:-
a. Whether the Applicant satisfies the definition of an e-commerce operator and the nature of supply as conceptualized in Section 9(5) of CGST Act, 2017 r/w Notification No. 17/2017 dated 28.06.2017.?
b. Whether the supply by the service provider (person who has subscribed to Namma yatri) to his customers (who also have subscribed to Namma yatri) on the Applicant’s computer application amounts to supply by the Applicant?
c. Whether the Applicant is liable to collect and pay GST on the supply of services supplied by the service provider (person who has subscribed to Namma Yatri) to his customers (who also have subscribed to Namma Yatri) on the Applicant’s computer application?
4. Admissibility of the application :
The advance rulings are sought by the applicant on the questions, at para 3 supra, in respect of the issues of (i) applicability of a notification issued under the provisions of the CGST Act 2017, (ii) determination of the liability to pay tax on any goods or services or both and (iii) whether any particular thing done by the applicant with respect to any goods or services or both amounts to or results in a supply of goods or services or both, within the meaning of that term, which are covered under Section 97(2)(b), 97(2)(e) & 97(2) (g) respectively and hence the application is admissible under Section 97(2)(b), 97(2)(e) & 97(2)(g) of the CGST Act 2017.
5. BRIEF FACTS OF THE CASE: The applicant furnished the following facts relevant to the issue/s:
5.1 The Applicant submitted that the computer application services that are being provided by them are for facilitating business transactions of supply of services connecting through the platform of suppliers/ sellers and recipients/ buyers; they, for the application services (herein after referred to as “Namma yatri”) so provided by them, shall charge membership & subscription fee to the person who enrolls by furnishing the application in the presubscribed form; they intend to discharge output tax on the membership/ subscription fee received from the members registered for availing the benefits in Namma yatri App; currently, they are not charging any membership fee/ subscription fee to the enrolled persons.
5.2 The Applicant submited that, every person desirous of availing of their APP “Namma yatri” services, shall make an application on line in the pre-subscribed form duly filled and confirmed along with the specified soft copies of documents. Accordingly, granting of license to use the “Namma yatri” is subject to the “Terms and Conditions between applicant and Driver” (herein after referred as Driver’s Terms and Conditions). A sample copy of the “Driver’s Terms and Conditions” is submitted as ANNEXURE-4.
5.3 The Applicant submitted that it is settled proposition of law that where there is an agreement/contract, the nature of the contract shall be determined on the basis of the terms and conditions contained therein and by reading the contract as a whole. Consequently, when the “Driver’s Terms and Conditions”, are read, especially, the clauses- 3, 4, 9 and 11, it is designed to establish the nature of the said agreement/contract, which is limited to providing of licence or permission to use “Namma yatri” by the subscribers of the “Namma yatri”. The clauses 3, 4, 9 and 11, contained in the “Driver’s Terms and Conditions” are re-produced in Annexure – 5 for ready reference”:
5.4 Further, when the “Driver’s Terms and Conditions” is read as a whole, it confirms and establishes the facts that where the licensee creates “Business User Account” (“BSA” for short), in terms of clause 2 and 3 of the “Driver’s Terms and Conditions”; the subscriber of the “Namma Yatri” enters into business deals/transactions on their own with their clients and business associates for supply of services, the terms and conditions governing such contracts of supply, such as quality, price, etc., are as mutually agreed upon by them and the Applicant neither has a say/ a role in that regard nor the Applicant is involved directly or indirectly in such supply and providing of services as the case may be. The Applicant is not in any way concerned with collection of the consideration for supply from the clients / business associates of the subscribed suppliers. All such matters are only within the knowledge and domain of the subscribers of the “Namma Yatri” of the Applicant and their business clients and associates. Clauses 4 and 9 of the “Driver’s Terms and Conditions” establish the conditions regarding consideration.
5.5 Consequently, the Applicant submits that the subscribers of “Namma yatri” are not under any obligation to furnish the details of business transactions entered into by using the “Namma Yatri” of the Applicant, such as, nature of supply at any time during the period covered by the license or at any time thereafter. However, this information is available in “Namma Yatri”. For the purposes of the CGST, SGST and IGST Acts, the taxable supplies effected by the Applicant is limited to providing of “Namma Yatri” and collection of “registration & monthly subscription fee from its subscribers of “Namma yatri” and charging, collecting and remitting tax following in terms of the charging provisions of Section 9(1) of the CGST and IGST Acts and Notification No. 11/2017-Central Tax (Rate) dated 28.6.2017 issued under the CGST Act and similar/identical notification issued under Section 9(1) of the Karnataka SGST Act.
5.6 Applicant is focused on creating a system that helps link consumers to service providers whilst maintaining a safe digital ecosystem for both parties. With a commission-free monetization model, Namma yatri is a service provider’s hub wherein the supplier has absolute ownership of his supply and the applicant has no rights over their supply.
5.7 Applicant submits that on Namma Yatri the auto driver, after making payment of membership fee, becomes the registered member on the App; can publish the nature of services provided, nature of facilities provided or any other activity undertaken benefiting the users.
5.8 Applicant submits that the relationship between the members registered on our Namma Yatri and the customers would be of supplier and recipient and any monetary consideration involved between them is purely privy to their contract and the Applicant in no way connected with such contract. If there is any dispute between the members registered on Namma yatri and the recipients of services it is purely between them and the Applicant is not responsible for any dispute between them. Kindly refer clause 9 of “Driver’s Terms and Conditions” which establishes the same.
5.9 Applicant submits that in their case the transaction between the supplier and buyer takes place with the use of Namma yatri and there is no involvement of the Applicant in either arranging for supply of services from the members registered on the Namma yatri or arranging for collection of any consideration or any other form of agreed means of payment from the buyers to the registered members.
5.10 Therefore, the business model of the Applicant is neither in the nature of “market place electronic commerce” or “fulfillment electronic commerce” nor “hybrid electronic commerce” models.
6. Applicant’s understanding of Law: The applicant furnished their understanding / interpretation of law inter alia stating as under:
6.1 In the light of the terms and conditions contained in “Driver’s Terms and Conditions” and the facts narrated and explained as above, it is bonafide belief and understanding that the Applicants liability to pay tax is limited to payment of tax at the rate of 18% under Section 9(1) of CGST and SGST Acts and Section 5(1) of the IGST Act, read with Notification No. 11/2017-Central Tax (Rate) dated 28.6.2017 issued under the CGST Act and similar/identical notification issued under Section 9(1) of the Karnataka SGST Act and Notification No. 8/2017-Integrated Tax (Rate) dated 28.6.2017, on the consideration received/receivable of “registration fee and monthly subscription” that the Applicant collects from the subscribers of their a “Namma yatri” app and nothing more.
6.2. Besides, it is also the understanding and bonafide belief of the Applicant that, the Applicant is not liable to pay tax under Section 9(5) of the CGST and SGST Acts and Section 5(5) of the IGST Act, read with Notifications Nos. 17/2017-Central Tax (Rate) dated 28.6.2017 issued under the CGST Act and similar/identical notification issued under Section 9(1) of the Karnataka SGST Act and 14/2017-Integrated Tax (Rate) dated 28.6.2017, respectively.
6.3. REASONS:
(i) As per the provisions of Section 9(1) of the CGST and SGST Acts and Section 5(1) of the IGST Act, which are principal charging provisions of the Act, the liability to pay tax on “outward” taxable supplies of services, as the case may be, is on the “supplier”. The expression “supplier” has been defined under Section 2(105) of the CGST/ SGST Acts, which reads as under:
SECTION 2(105) OF CGST/SGST ACT:
“2. In this Act, unless the context otherwise requires: –
(105) “supplier” in relation to any goods or services or both, shall mean the person supplying the said goods or services or both and shall include an agent acting as such on behalf of such supplier in relation to the goods or services or both supplied;”
In the present matter of the Applicant, it is not in dispute that in so far as taxable supplies effected by the subscribers of the “Namma yatri” of the Applicant to their clients / business associates by using the Applicants “Namma yatri”, the “suppliers” for the purposes of the CGST, SGST & IGST Acts are the subscribers of the “Namma yatri” of the Applicant and not the Applicant and therefore, the liability to pay tax on the value of all such supplies is on the respective suppliers and certainly not on the Applicant.
(ii) It is also the understanding and bonafide belief of the Applicant that the provisions of Section 9(1) and 5(1) of the CGST/SGST Acts and IGST Act is not subject to Section 9(5) and 5(5) of the said Acts, respectively.
(iii) Further, harmonious reading of the definitions of the expressions “electronic commerce” and “electronic commerce operator” occurring in Sections 2 (44) and 2(45) of the CGST/SGST Acts, respectively, and Section 9(5) of the CGST/SGST Acts, and 5(5) of the IGST Act, which are re-produced hereunder, it is Applicants belief that the said provisions and the notifications issued thereunder, shall have applicability only to “electronic commerce operator” like Reliance Jio or Amazon or such other taxable persons who supply goods and/or services or both on their own account or on account of others with the aid and application of the “APP PLATFORM” and they either undertake to supply goods and/or services or both on their own account/ on account of other taxable persons and directly or indirectly connected with entering into contract for supply, storing/warehousing, packing, delivery of goods, collection of consideration, etc.
