I have tried my level best to cover all the applicable provisions of GST on e-commerce transaction, today we are living in 21st century and day by day e-commerce transaction is increasing rapidly in the view of this even government introduced some new provisions through GST which was not there before the commencement of GST laws, 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 and this article might not be the comprehensive guide to the e-commerce transaction but i have to try to cover all the relevant aspects through this article.
“For e-commerce firms, the three most important infrastructure items are information flow, cash flow and delivery- By Jack Ma, Founder Alibaba”
First of all before discussing the technical and the legal aspect of the GST on E-commerce we have to understand some basic aspects:
E-commerce i.e Electronic commerce which simply means supply of goods and services through electronic mode over the internet moreover, in legal term 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 digital or electronic network.
E-commerce Operator (ECO) i.e. Electronic commerce operator is a person providing any information or any other services incidental to or in connection with such supply of goods and services through electronic platform would be considered as an Operator moreover, in legal term Electronic Commerce Operator has been defined in Sec. 2(45) of the CGST Act, 2017 to mean any person who owns, operates or manages digital or electronic facility or platform for electronic commerce.
Every E-commerce transaction involves below 3 parties :
Normally the E-commerce transaction were of two models:
e.g. Titan is selling watches through its own website.
e.g. Titan is selling watches to the customer through its flipkart here in this case flipkart will act as operator which establish the link between customers and provide a marketplace to Titan.
Now the question is how it is different and what we are going to discuss in this article?
In this article we will discuss the applicability of Goods and Service tax on the aggregator model of the e-commerce where there is involvement of operator or aggregator in this emerging model two separate and distinct transaction were involved to execute the sale:
1. Supplier supplying goods or services to the consumers, and
2. The e-commerce operator supplying services to the supplier for using its platform
In furtherance of the above example there were two transactions one is where the Titan is supplying the watches to the customer and the other one is where the Flipkart is supplying service to the Titan for using its platform.
These above are the two distinct transactions and attract GST on their own which makes them different as compared to the normal sale and purchase and in the GST Act there were some specific provisions for these types of transactions.
“A Better Service Is Keeping The Promise You Made To The Customer – By Sachin Bansal, co-founder Flipkart”
Applicable provisions of Goods and Service Tax Act, 2017 on the E-commerce transactions:
Before proceeding further i would like to highlight one of the specific provisions of GST Act, 2017 which specifically apply in cases where specific services provided through e-commerce operators.
“Section 9(5) of the CGST Act, 2017 which deals with the chargeability of some aspects of e-commerce transactions as per this section government through notification specify categories of services specify the tax on which shall be paid by the electronic commerce operator if such services are supplied through it, and all the provisions of this Act shall apply to such electronic commerce operator as if he is the supplier liable for paying the tax in relation to the supply of such services.
Note: The above provisions are applicable on inter state supply as well as per similar provision of section 5(5) of the IGST Act, 2017 shall mutatis-mutandis apply on the e-commerce operators.
Note: Three services, namely (i) Motor Cab (ii) Hotels and accommodation* and (iii) Housekeeping* services have been notified under Section 9(5) of the CGST Act, 2017.
*if a person dealing in these service and liable for registration under section 22(1) of the CGST Act,2017 then this notification shall not apply to them”
After understanding the basic terminology related to e-commerce and what the e-commerce transactions are, we will proceed further for technical and legal aspects of these types of transactions.
Registration under the Goods and Service Tax Act, 2017
Under Section 24 (ix) of the Central Goods and Service Tax Act, 2017 every person supplying goods or services through electronic commerce operators is required to be compulsorily registered, without any threshold exemption limit.
However, the Government has power to exempt specified suppliers from registration and moreover, Vide Notification No. 65/2017-C.T., dated 15-11-2017; the Central Government, exempted persons making supplies of services, other than supplies specified under sub-section (5) of section 9 of the said Act 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.
Note: Section 9(5) of CGST ACT, 2017 refers to some services where e-commerce operators are liable to pay GST instead of suppliers.
Thus, final position after notification is, If a person supplying services other than those mentioned in Section 9(5) of the CGST Act are required to register and collect GST only if his turnover is more than the threshold limit and for those service providers who were covered under section 9(5) were not liable to be registered under GST, as liability to pay GST is on the e-commerce operator and If a person supplying goods through e-commerce operator is compulsorily required to get themselves registered under GST irrespective of turnover.
Moreover, As per Section 24(x) of the CGST Act, 2017 the benefit of threshold exemption is not available to e-commerce operators and they are liable to be registered irrespective of the value of supply made by them.
Who is liable to pay Goods and Service Tax:
As per general rule, the liability to pay GST is on the supplier of goods or services but in the case where the supply is executed through e-commerce operators then some specific provisions also apply along with the normal provisions unless and until contrary with the specific provisions.
In case of services notified under Section 9(5) of CGST Act, 2017 provided through e-commerce operator then in that case e-commerce operator is liable as if he is a supplier of the service even if payment is not directly received by the e-commerce operator.
In rest of the cases suppliers of goods or services as the case may be liable to pay the GST on such supply.
Liability in case where Commission Charged from Suppliers by the e-commerce operator then, supplier i.e. operator is liable for GST and normal provision shall apply in this particular case, supplier will issue invoice to the receiver for using its service and shall levy GST on such supply.
Tax Collection at Source:
“Before discussing the provisions of the TCS, I would like to discuss the mischief of this provision as we all know whenever sale is executed through an e-commerce platform operator collect the payment and remits the same to the seller, in some cases it has been found that sellers are not properly reporting the sale to the government.
Now in the GST regime the government has now placed the responsibility of collecting TCS on operators, once the operator has submitted the details of TCS the government would have the accurate information of the sales and they would be able to check if the seller has properly reported all the sales”
This is the one of the most important provision of the GST which is specifically for the e-commerce transactions Section 52 of the CGST Act, 2017 deals with the TCS provisions according to this section every e-commerce operator will deduct 1% TCS before making payment to the supplier or vendor and such value shall be computed on the net value* of taxable supplies.
*The “net value of taxable supplies” means the aggregate value of taxable supplies of goods or services or both, other than the services on which entire tax is payable by the e-commerce operator, made during any month by all registered persons through such operator reduced by the aggregate value of taxable supplies returned to the suppliers during the said month.
TCS deducted is reflected in the electronic cash ledger of the supplier. However, the Government has clarified that TCS shall be deducted only when the supplier is liable to pay GST therefore, TCS is not required to be collected on exempt supplies. For the purposes of TCS, an e-commerce operator has to obtain separate registration for TCS, irrespective of the fact that it is already registered under GST as a supplier or otherwise and has GSTIN.
“What’s Dangerous is not to evolve- By jeff Bezos, Founder Amazon”
In conclusion, although it’s not easy to conclude such a vast topic but In my opinion GST is one of the biggest fiscal reforms that our country has witnessed. It is a unified taxation system in a federal country like India.
Though the compliance under GST has increased for the E-commerce industry, still it improves the market for the local suppliers as they can sell in any state with same tax rates, this will promote more sellers to go online and provide best services to the customers.
In simple terms it can be understood that the State will be able to make revenue from this sector, but some practical implications are there, but overall implementation of GST on e-commerce is appreciable.
At the end I must say this write up shall help you in understanding the GST on the e-commerce industry and the roll out of GST may lead to greater compliance for e- commerce players but along with this it provides transparency and increases the revenue for the Government.