GST on E-Commerce Operators

Introduction: This article discusses in detail about GST on E-Commerce Operators & its related aspects.

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.

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.

Registration of e-commerce operator

As per Section 24(x) of the CGST Act, 2017 the benefit of threshold exemption of Rs. 20L or 10L is not available to e-commerce operators and they are liable to be registered irrespective of the value of supply made by them.

As per Section 24(ix) of the CGST Act, 2017, the threshold exemption is also not available to persons supplying goods or services through e-commerce operator and they would be liable to be registered irrespective of the value of supply made by them where such electronic commerce operator is required to collect tax at source under section 52 of the CGST Act, 2017.

However, where the e-commerce operators are liable to pay tax on behalf of the suppliers under a notification issued under section 9 (5) of the CGST Act, 2017, the suppliers of such services are entitled for threshold exemption.

In case of services notified under sec. 9(5) of the CGST Act, 2017, tax shall be paid by the electronic commerce operator if such services are supplied through it and all the provisions of the Act shall apply to such electronic commerce operator as if he is the supplier liable to pay tax in relation to the supply of such services. A similar provision for inter-State supply is provided for in Sec. 5(5) of the IGST Act, 2017. (Refer to Notification No. 17/2017- Central Tax (Rate) and 14/2017-lntegrated Tax (Rate) dated 28.06.2017).

Services notified u/s 9(5)

(i) services by way of transportation of passengers by a radio-taxi, motorcab, maxicab and motor cycle;

(ii) services by way of providing accommodation in hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes, except where the person supplying such service through electronic commerce operator is liable for registration under sub-section (1) of section 22 of the said Central Goods and Services Tax Act

The threshold exemption is not available to e-commerce operators who are re uired to pay tax on notified services supplied through them.

Tax Collection at source

As per section 52 of CGST Act Every e-commerce operator (other than an e-commerce operator who is required to pay tax under section 9(5) of the CGST Act, 2017) is required to collect TCS (tax collected at source) @  one percent (0.5% CGST  + 0.5% SGST) of the net value of taxable supplies made through it where consideration with respect to a taxable supply is collected by such e-commerce operator.

The e-commerce operator should make the collection during the month in which the consideration amount is collected from the recipient. .

The amount collected by the operator is to be paid to the Government within 10 days after the end of the month in which amount was so collected.

The amount of TCS paid by the e-commerce operator to the government will be reflected in the GSTR-2 of the actual registered supplier (on whose account such collection has been made) on the basis of the statement filed by the e-commerce operator. The same can be used at the time of discharge of tax liability in respect of the supplies made by the actual supplier.

Every e-commerce operator is required to furnish, a statement in FORM GSTR-8, electronically, 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 collected by it as TCS during a month within 10 days after the end of such month.

The operator is also required to file an annual statement by 31^st day of December following the end of the financial year in which the tax was collected.

The details of supplies furnished by every operator in his statement for the month will be matched with the corresponding details of outward supplies furnished by the concerned supplier in his valid return for the same month or any preceding month.

Where the details of outward supplies declared by the operator in his statement do not match with the corresponding details declared by the supplier, the discrepancy shall be communicated to both persons.

The amount in respect of which any discrepancy is communicated and which is not rectified by the supplier in his valid return or the operator in his statement for the month in which discrepancy is communicated shall be added to the output liability of the said supplier in his return for the 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 supply along with interest on the amount so added from the date such tax was due till the date of its payment.

Any officer not below the-rank of Deputy Commissioner may issue a notice to the electronic commerce operator to furnish such details within a period of 15 working days from the date of service of such notice.

Many sellers supplying goods through e-commerce operators (ECO) may have common places of business, especially if their goods are stored in a shared facility operated by the ECO. This will result the same additional place of business being registered by multiple suppliers.

Under GST, there is no restriction about use of a premise by multiple persons provided if he has requisite documents for use of the premises as his place of business (like ownership document, agreement with the owner etc.) and the registered person shall have to comply with the requirements of maintaining records as per section 35 of the CGS T Act, 2017 and Rules 56 to 58 of the CGST Rules, 2017.

Online travel agents providing services through digital or electronic platform will fall under the category of ECOs liable to deduct TCS under Section 52 of the CGST Act, 2017.

In cases of transaction involving 2 or more e-commerce operators, each transaction needs to be treated separately and examined according to the provisions of Section 52 of the CGST Act, 2017 & TCS will be deducted accordingly.

Many a times it happens that which the ECO does not provide invoicing solution to the Seller. In such cases, invoice is generated by the seller and received by the buyer without ECO getting to know about it. The payment flows through the ECO.

In such case TCS is to be collected on the net taxable value of such supplies in respect of which the ECO collects the consideration. The amount collected should be duly reported in GSTR-8 and remitted to the Government. Any such amount collected will be available to the concerned supplier as credit in his electronic cash ledger.

There are sellers who are selling exempted or zero-tax goods like books through e-commerce operators.  But, TCS is to be collected on “the net value of taxable supplies” made through an e-commerce operators. When the supply itself is not taxable, the question of TCS does not arise.

If someone is selling his own products through a web site hosted by himself, then he shall come under the definition of an “electronic commerce operator” as per section 2 (44) and 2(45) of the CGST Act, 2017.

However, according to Section 52 of the Act ibid, TCS is required to be collected on the’ net value of taxable supplies made through it by other suppliers where the consideration is to be collected by the e-commerce operator.

In such cases where someone is selling their own products through his own website, there is no requirement to collect tax at source as per the provisions of this Section. These transactions will be liable to GST at the prevailing rates.

GST on goods returned after Sale

An e-commerce company is required to collect tax only on the net value of taxable supplies.

In other words, the values of supplies which are returned are adjusted in the aggregate 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.

The author is a practising CA and is registered Insolvency Professional. He can be reached at [email protected] , Mob. +91 9953587496.