Goods are Services Tax [GST] has been imposed on ‘supply of goods or services’ It is immaterial as to under what mode of communication the supply contract is negotiated. Tax remains the same even when contract is negotiated orally, in writing or through e-communication. Thus, on a fundamental level, GST on e-commerce operator remains similar to any other mode of supply. Nevertheless, there are a few distinctly specific provisions applicable to e-commerce operators and suppliers of goods or service supplying through e-commerce portals. This article is an attempt to explain those provisions.
This article shall be helpful who wish to start sell their products on an e-commerce platform and understand on the GST registration requirement , GST liability and Provision of Tax Collection at Source.
Definition of Electronic Commerce and Electronic Commerce Operator :
“Electronic commerce” means the supply of goods or services or both, including digital products over digital or electronic network – section 2(44)
“Electronic commerce operator” means any person who owns, operates or manages digital or electronic facility or platform for electronic commerce – section 2(45).
Levy and collection:-
Every e-commerce transaction involves below three parties and two types of transactions:
3. E- Commerce Operator (ECO)
Types of transaction:
1. Between Seller & Buyer – Sale of Goods ;
2. Between Seller & ECO – Provision of market place
GST shall be levied on both transactions:
Between seller & buyer: GST on entire value of goods/ services supplied (GST shall be paid by the supplier except in case of services specified u/s9(5))
Seller & ECO: GST on commission value/ other charges earned by ECO for providing market platform to seller. (GST shall be paid by the ECO)
As per the provisions of Section 22 of CGST Act,2017 registration under GST shall become mandatory only when the value of goods or services supplied exceeds threshold limit (In case of Goods-it’s Rs.40 Lakhs and in case of Services- its Rs.20 Lakhs). However Section 24 of CGST Act,2017 contains certain supplies which are required to get compulsorily registered irrespective of the threshold limit.
Under Section 24 (ix) of the CGST Act, every person supplying goods or services through electronic commerce operators are required to be compulsorily registered, without any threshold exemption limit. However, the Government has power to exempt specified supplier from registration. Vide Notification No. 65/2017-C.T., dated 15-11-2017; the Central Government, exempted persons making supplies of services, through an electronic commerce operator and having an aggregate turnover, to be computed on all India basis, not exceeding an amount of twenty lakh rupees in a financial year.
Thus, persons supplying services other than those mentioned in Section 9(5) of the CGST Act are required to register and collect GST only if their turnover is more than the threshold limit.
If your services are listed in Section 9(5) of CGST Act, then benefit of threshold limit shall be applicable, however till that E-commerce Operator shall be liable to pay i.e reverse charge mechanism provision shall become applicable.
What are specified services u/s 9(5) of CGST Act?
|Sr No||Description of Service||Supplier of Service||Person Liable to pay GST|
|1||Transportation of passengers by a radio-taxi, motorcab, maxicab and motor cycle||Any Person||E – commerce operator|
|2||Providing accommodation in hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes||Any person except who is liable for registration under section 22(1) of the CGST Act||E – commerce operator|
|3||Services by way of house- keeping, such as plumbing, carpentering etc||Any person except who is liable for registration under section 22(1) of the CGST Act||E – commerce operator|
So to sum up following summary table shall be helpful to understand:-
|Description of Supply||Threshold Limit exemption applicability||Registration mandatory (Yes/No)||Person liable to pay GST|
|Supply of Goods||NO||YES||Supplier of Goods-Forward Charge Mechanism Applicable|
|Supply of Services||Yes||Yes (only when turnover exceeds Rs.20 Lakhs)||Supplier of Services-Forward Charge Mechanism Applicable|
|Supply of Passenger Transportation Services||Not required||Not required||E-Commerce Operator-Reverse Charge Mechanism Applicable|
|Supply of House Keeping Services||YES||Yes (only when turnover exceeds Rs.20 Lakhs)||E-commerce Operator- Reverse Charge Mechanism Applicable. Once Supplier is liable to get registered, Supplier shall be liable to pay GST|
|Supply of Accomodation Services||YES||Yes (only when turnover exceeds Rs.20 Lakhs)||E-commerce Operator- Reverse Charge Mechanism Applicable. Once Supplier is liable to get registered, Supplier shall be liable to pay GST|
E-commerce portals are charging a commission from various suppliers. It amounts to support services, falling under Tariff heading 9985, and shall attract GST at the rate of 18%. E-commerce portals are required to be compulsorily registered under Section 24(ix) of the CGST Act, and shall be paying GST on commission amount received, without availing any exemption threshold limit. The tax shall be charged in the invoices raised against supplier of goods or services; and such suppliers can avail ITC on such GST charged, if otherwise eligible.
Collection of tax at source (Section-52) : Every electronic commerce operator, not being an agent, shall collect TCS at such rate not exceeding 1% (1% CGST + 1% 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. Provision of Tax Collected at Source (TCS) has been introduced w.e.f. 1-10-2018. The rate for TCS is 1% for IGST for inter-state taxable supply
Meaning of ‘Net value of taxable supplies’ – The expression “net value of taxable supplies” shall mean the aggregate value of taxable supplies of goods & services (other than services notified under section 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
Non Applicability of TCS Provisions : TCS provisions are not applicable where GST is payable under reverse charge. TCS provisions also do not apply in case of exempt supply.
There is no TCS if you are selling your own products through electronic portal
Suppose if a t-shirt supplier, supplies T-shirt through Amazon. Cost of T-shirt is Rs.500 and applicable GST rate is 5%, so he will supply at Rs.525 (500+25). Amazon would charge 10% commission on the value of the product i.e Rs.50 (500*10%) as commission along with GST @ 18% on the value of commission. So in total Amazon would charge Rs.59 (Rs.50+9) from the Supplier and would return Rs.466 (Rs.525-59). Now following calculations shall be made by the Supplier while paying GST liability:-
GST charged on T-shirt at the time of Supply:-
|GST charged on T-shirt at the time of Supply||25|
|Less:Input tax on Commission||9|
|Net GST liability||16|
In nutshell Supplier would have earned Rs.450 after making GST payment of Rs.16 (Rs.466-16).
Considering the above example, if TCS would have been applicable then Amazon would have collected 1% on the value of Supply as Tax i.e Rs. 5 (500*1%) and deposited it to the Government. In that case Supplier would have received Rs.461 (Rs.466-5). The amount of TCS shall be the reflected in the electronic cash ledger of the Supplier and can be utilised while disbursing GST liability. GST liability shall be paid as follows:-
|GST charged on T-shirt at the time of Supply||25|
|Less:Input tax on Commission||9|
|Less:- Tax already collected by E-commerce||5|
|Net GST liability||11|
So Supplier would have still earned Rs.450 after discharging GST liability. (Rs.461-11)
E-commerce transactions look a bit complicated because many transactions are happening simultaneously. Thus, when a person is buying goods on Amazon, two transactions are happening simultaneously. The supplier is supplying goods through e-commerce portal and the e-commerce portal is supplying services to the supplier. Both the transactions are different transactions and subject to GST in its own nature. TCS provisions comes into operations at the end of the month, when the e-commerce operator is transferring considerations received to the supplier of goods or services. The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
The above article is written by Suyash Tripathi and can be reached at [email protected] or at Linked https://www.linkedin.com/in/suyash-tripathi-b3b80371/