GST on E-Commerce Operators – Detailed Analysis

Introduction

Today E-Commerce and E-Commerce Operator plays an important role in nation building as well as plays a vital role in the present age of digital era especially in this tough times of COVID-19.

Definitions under the GST Act

“Electronic Commerce” means supply of goods or services or, including digital products over digital or electronic network- Section 2 (44) of the CGST Act, 2017.

“Electronic Commerce Operator” means any person who owns, Operators or manages digital or electronic facility or platform electronic commerce- Section 2(45) of the CGST Act, 2017.

Types of E-Commerce Models

> Business to Business (B to B) – In this model, both the supplier and recipient are carrying on business / profession. Consequently, transaction takes place between manufacturers, wholesalers, retailers etc. Thus the final consumer is not involved in this model.

> Business to Consumer (B to C) – In this model, the supplier makes supply of goods or services directly to the consumer. Example: Flipkart, Amazon etc.

> Consumer to Consumer (C to C) – In this model, Consumers are connected with each other where one consumer dispose-off their used goods and assets directly to another interested consumer. Example: OLX, Quikr etc.

>  Consumer to Business (C to B) – In this model, the consumer provides a good or some service to the company.

Compliances under the GST Act

• Registration

Compulsory Registration for ECO – As per section 24(x) of the CGST Act 2017, every electronic commerce operator (ECO) who is required to collect tax at source under section 52 would have to be compulsorily registered under GST. Every ECO is required to obtain GST registration in each state if it has suppliers in different states.

However, those electronic commerce operators (ECOs) who are not required to collect tax at source under section 52 shall not be required to take registration if their aggregate turnover in a financial year does not exceed the threshold exemption limit.

Compulsory Registration for persons supplying through ECO – As per section 24(ix) of the CGST Act 2017, persons who supply goods or services or both, other than supplies specified under section 9(5), through such electronic commerce operator who is required to collect tax at source under section 52 are mandatorily required to be registered under GST.

However, those persons can’t take registration under Composition Scheme under section 10.

Application form for Registration and Grant of Registration – E-Commerce Operator need to file Form REG-07. Part A of the application contains the name of the state where TCS is required to be collected but does not have physical presence whereas Part B of the form contains name of the state of its principal place of business.

The proper officer may grant registration after due verification and issue a registration certificate in Form REG-06 within a period of 3 working days from the date of submission of application.

• Returns

Every ECO is required to furnish Form GSTR-8, electronically within 10 days after the end of such month, containing the details of outward supplies of goods or services effected through it, including the supplies of goods or services returned through it, and the amount of TCS collected during a month.

The ECO is also required to file an annual return in Form GSTR-9B within 31st December of the following year in which the tax was collected.

• Specified Services under section 9(5) / 5(5) of the CGST Act / IGST Act

In respect of the specified services, tax is to be paid by the ECO on behalf of the service suppliers if such services are supplied through it and all the provisions of this Act shall apply to ECO as if ECO is the supplier liable to pay tax in relation to supply of such services. Following were such services supplied through ECO:

Sl. No.	Description of supply of Service	Supplier of Service	Person liable to pay GST	Notification No.
1	Transportation of Passengers by a radio taxi, motorcab, maxicab and motorcycle	Any person	E-Commerce Operator	Notification No. 17/2017-Central Tax (Rate) dated 28th June 2017.
2	Providing accommodation in hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes	Any person except those liable to registration under section 22(1) of CGST Act	E-Commerce Operator	-do-
3	Services by way of house-keeping, such as plumbing, carpentering etc.	Any person except those liable to registration under section 22(1) of CGST Act	E-Commerce Operator	Inserted vide Notification No. 23/2017-Central Tax (Rate) dated 22nd August 2017.

The supplier of these services covered under section 9(5) of the CGST Act and hence exempted from compulsory registration and can take the benefit of threshold limit.

Collection of tax at source (TCS-Section 52)

Every Electronic commerce operator, not being an agent, shall collect TCS at such rate not exceeding 1% (i.e. 0.5% CGST +0.5% SGST) 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.

Net value of Taxable Supplies – “Net value of taxable supplies” shall mean the aggregate value of taxable supplies of goods & services (other than those specified u/s 9(5) of CGST Act) made during any month by all registered taxable persons through the operator reduced by the aggregate value of taxable supplies returned to the suppliers during the said month- [Explanation to section 52(1) of CGST Act].

The net value of Taxable supplies will be calculated for each supplier separately at GSTIN level and not at gross level.

Basis for TCS – The TCS by electronic commerce operator shall be on billing basis and not on collection basis.

Non-Applicability of TCS Provisions

Following are the cases where provisions of TCS does not apply:

i) TCS Provisions does not apply where GST is payable under reverse charge on specified services under section 9(5) of the CGST Act.

ii) These provisions also not apply in case of exempt supply.

iii) In case of import or export of goods or services.

iv) There is no TCS if you are selling your own products through electronic portal.

Levy and Collection

Every E-Commerce transaction involves three parties- Buyer, Seller, and ECO.

Types of transaction between them are-

1. Between Seller and Buyer – Supply of Goods or Services.

2. Between Seller and ECO – Provision of market place

GST shall be levied on both the transactions:

Between seller and buyer: GST shall be levied on entire value of goods / services supplied by the seller to buyer (except in case of services specified u/s 9(5) of the CGST Act).

Between Seller and ECO: ECO receives the commission from the seller for providing them online market place. Hence, GST will be charged on such commission. GST will be paid by the ECO on such commission.

Export through post by e-commerce operators – E-Commerce Operators can export goods through any Foreign Post Office (FPO). These exports will be considered as zero-rated. For this, Declaration is to be filed in PBE-1 (Postal Bill of Export-1). However, exports under MEIS can be only from Foreign post offices situated at Delhi, Mumbai and Chennai. Details procedures of such export has been specified by the CBIC in Circular No. 14/2018-Cus dated 04.06.2018.

In case of small value consignments, single payment is received by exporters from the e-commerce companies. In such cases, multiple shipments addressed to multiple consignees are permitted under PBE-II (Postal Bill of Export-II) – MF (DR) Circular No. 18/2018-Cus dated 13.06.2018.