Sourabh Virmani

Sourabh Virmani

In the times of recent changes in the market place there has been a need to adapt to new and changing technologies and methods of doing business.

The growth of the e-commerce sector in terms of revenue and shipments has been nothing but phenomenal. The e-commerce sector, in a jiffy, has managed to capture the mind-space and eye-balls of the consumers like never before and with an unprecedented growth trajectory expected to continue.

The Model GST Law provides a basic infrastructure for indirect tax regime for E Commerce under ‘Chapter XIB’ titled ‘Electronic Commerce’.

Section 43C sub section (1) provides for the provisions of tax collection at source as follows:

Notwithstanding anything to the contrary contained in the Act or in any contract, arrangement or memorandum of understanding, every electronic commerce operator (hereinafter referred to in this section as the “operator”) shall, at the time of credit of any amount to the account of the supplier of goods and/or services or at the time of payment of any amount in cash or by any other mode, whichever is earlier, collect an amount, out of the amount payable or paid to the supplier, representing consideration towards the supply of goods and /or services made through it, calculated at such rate as may be notified in this behalf by the Central/State Government on the recommendation of the Council.

In simple words, it implies TCS on online sales of goods or service i.e., Every E-commerce operator engaged in facilitating the supply of any goods and/or services (like Amazon, Flipkart, etc.) shall collect tax at source at the time of credit or at the time of payment whichever is earlier.

The point of ambiguity arises with respect to the definition of terms ‘Aggregator’ and ‘Electronic commerce operator’.

The term ‘Electronic commerce operator’ has been defined under section 43B sub clause (e) as follows:

 ‘electronic commerce operator’ shall include every person who, directly or indirectly, owns, operates or manages an electronic platform that is engaged in facilitating the supply of any goods and/or services or in providing any information or any other services incidental to or in connection there with but shall not include persons engaged in supply of such goods and/or services on their own behalf.

And the word aggregator has been defined under section 43B sub clause (a) as follows:

Aggregator’ means a person, who owns and manages an electronic platform, and by means of the application and a communication device, enables a potential customer to connect with the persons providing service of a particular kind under the brand name or trade name of the said aggregator.

The provisions of Model GST law specifically provides that every ‘electronic commerce operator’ shall collect tax at source, whereas the law doesn’t bring the ‘aggregators’ within the ambit of such provisions.

In the grey area are companies such as online classifieds, online listing portals and Quikr, online travel operators and, Ola and Uber. According to the GST Bill, these have characteristics of both the terms and different business models have not been considered.

“Operators” are liable to pay tax according to the GST Bill, while aggregators are not. With the rapidly changing models of carrying out business online, grouping existing companies in straitjacketed definitions might be a difficult task. – affirmed by IAMAI in a statement.

Straitjacketing ‘E-commerce’ into poorly defined categories will stifle innovation, which will not only affect the fortunes of E-commerce companies but will also, prevent better services for customers in India.

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