GST on Online Businesses in India: Registration, TCS, Section 9(5) & OIDAR

Taxability of Online Businesses in India under GST: Registration, TCS, Section 9(5) and OIDAR

Summary: The content explains the GST framework applicable to different online business models, distinguishing marketplace operators, sellers through marketplaces, businesses selling through their own websites, suppliers of notified services under Section 9(5), and foreign providers of OIDAR services. It states that Sections 2(44) and 2(45) of the CGST Act define electronic commerce and electronic commerce operators (ECOs), while GST obligations vary by business model. Sales through a business’s own website attract normal GST without TCS under Section 52, whereas marketplace operators liable to collect TCS must register irrespective of turnover. The content notes that, from 01.10.2023, Notification Nos. 34/2023, 36/2023 and 37/2023-Central Tax relaxed registration requirements for eligible small suppliers of goods and permitted composition dealers to supply through ECOs subject to specified conditions. It further states that the TCS rate under Section 52 was reduced to 0.5% from 10.07.2024, while supplies covered under Section 9(5) remain outside the TCS base, with the ECO paying GST. The article also discusses the OIDAR regime under the IGST Act, Finance Act, 2023 amendments effective 01.10.2023, the separate GST regime for online money gaming, and summarises registration, GST liability and TCS obligations across different online business models.

Introduction: Online businesses under GST do not form a single homogeneous category. The law treats a marketplace operator, a seller supplying through a marketplace, a business selling on its own website, a platform supplying notified services, and a provider of digital services from outside India as distinct persons with distinct obligations. Much of the confusion in practice arises from conflating these roles. This article sets out the taxability framework for each, drawing on the CBIC’s sectoral FAQ on E-Commerce (Directorate General of Taxpayer Services, published on the GST Council portal), the CBIC FAQs on TCS dated 30.11.2018, and the amendments notified after those documents were issued.

A note on sources at the outset: the CBIC E-Commerce FAQ is a pre-amendment document. It correctly states the statutory scheme, but three of its answers have since been overtaken — the TCS rate, the mechanism for claiming TCS credit, and the registration position of small suppliers of goods. These are identified at the relevant places below.

Who is covered: the statutory definitions

Section 2(44) of the CGST Act, 2017 defines electronic commerce as the supply of goods or services or both, including digital products, over a digital or electronic network. Section 2(45) defines an electronic commerce operator (ECO) as any person who owns, operates or manages a digital or electronic facility or platform for electronic commerce.

These definitions are deliberately wide. As clarified in Question 24 of the CBIC FAQ, even a supplier selling only his own products through a website hosted by himself falls within the definition of an ECO. The definitions determine coverage; the obligations that follow, however, differ sharply depending on whether the person supplies through others’ platforms, operates a platform for others, or sells on his own account.

Own website versus marketplace: the foundational distinction

Questions 24 and 25 of the CBIC FAQ settle the position for businesses selling through their own websites. Where a person sells his own goods or services through his own website, no TCS is required to be collected, because Section 52 applies only to supplies made through the platform by other suppliers where the operator collects the consideration. The supplies are simply liable to GST at the prevailing rates, exactly as an offline supply would be.

The FAQ extends this to the inventory model: where a business purchases goods from vendors and sells them on its own website under its own billing, there are two transactions — the inward purchase, on which GST is paid to the vendor and credit is available, and the outward sale on the business’s own account, which attracts GST at the applicable rate with no TCS obligation. The TCS and operator-level provisions discussed below therefore concern the marketplace model, where the platform facilitates supplies between third-party sellers and buyers and collects the consideration.

Registration requirements

For the operator, Section 24(x) of the CGST Act denies threshold exemption: an ECO required to collect tax at source is liable to registration irrespective of the value of supplies. Question 6 of the FAQ confirms the same position for operators liable to pay tax on notified services under Section 9(5).

For sellers supplying through an ECO, Section 24(ix) originally imposed the same rule — compulsory registration irrespective of turnover, where the supply is made through an operator required to collect TCS. This is the position stated in Question 4 of the FAQ, with one exception the FAQ itself records: suppliers of services notified under Section 9(5) retain the benefit of threshold exemption, since the operator discharges the tax on their behalf.

The rigour of Section 24(ix) for small suppliers of goods was relaxed with effect from 01.10.2023. Notification No. 34/2023-Central Tax exempts persons supplying goods through an ECO from obtaining registration where their aggregate turnover does not exceed the threshold under Section 22, subject to conditions including that no inter-State supply is made, supplies are made in only one State or Union territory, the person holds a PAN and obtains an enrolment number on the common portal. Notification No. 37/2023-Central Tax prescribes the corresponding special procedure for the ECO, including the requirement to furnish details of such supplies in FORM GSTR-8. Concurrently, following the Finance Act, 2023 amendment to Section 10, composition dealers may supply goods through an ECO, and Notification No. 36/2023-Central Tax requires the operator to collect TCS on such supplies and to disallow any inter-State supply by such persons.

The net position on registration for online sellers of goods from 01.10.2023 is therefore threefold: sellers above the threshold register compulsorily; sellers below the threshold may operate unregistered through the enrolment route within a single State; and composition dealers may sell through marketplaces subject to the intra-State restriction.

Tax collection at source under Section 52

Section 52(1) requires every ECO, not being an agent, to collect an amount on the net value of taxable supplies made through it by other suppliers, where the consideration is collected by the operator. Net value of taxable supplies means the aggregate value of taxable supplies made through the operator by all registered persons, excluding services notified under Section 9(5), reduced by the value of supplies returned during the month — the adjustment for sales returns that Question 8 of the FAQ specifically addresses.

The rate stated in Question 7 of the FAQ — one per cent — no longer applies. The TCS rate was reduced to 0.5% (0.25% CGST + 0.25% SGST/UTGST, or 0.5% IGST) with effect from 10.07.2024. Practitioners should also read Question 13 of the FAQ, which refers to credit flowing through GSTR-2, in light of the current return architecture: the TCS collected and reported by the operator is now reflected in the supplier’s TDS/TCS credit statement on the portal and, upon acceptance, credited to the supplier’s electronic cash ledger, from which it may be used to discharge liability.

The mechanics otherwise remain as stated in the FAQ. Collection is made in the month in which consideration is collected from the recipient; the amount is remitted to the Government within ten days after the end of that month; the monthly statement is furnished in FORM GSTR-8 within the same ten-day window; and an annual statement is due by 31 December following the financial year. Interest applies under Section 52(6) on failure to collect or short collection, and details furnished by the operator are matched against the supplier’s outward supplies, with unrectified discrepancies added to the supplier’s output liability with interest under Sections 52(10) and 52(11). Officers of the rank of Deputy Commissioner and above may call for supply and stock information from an operator, to be furnished within fifteen working days.

Three FAQ clarifications of continuing practical relevance deserve mention. First, TCS applies only to taxable supplies; where a seller supplies exempt or nil-rated goods such as books through a marketplace, no TCS arises (Question 23). Second, where the seller invoices the buyer directly but the payment flows through the operator, TCS is still to be collected on the net taxable value of supplies for which the operator collects the consideration (Question 21). Third, where more than one ECO is involved in a transaction, each transaction is to be examined separately under Section 52 (Question 20) — in practice, the obligation falls on the operator that collects the consideration and makes payment to the supplier. The FAQ also confirms that online travel agents operating through digital platforms qualify as ECOs liable to collect TCS (Question 19), and that multiple sellers may register the same shared warehouse or fulfilment centre as an additional place of business, subject to documentation and record-keeping under Section 35 read with Rules 56 to 58 (Question 18).

Notified services: Section 9(5)

Section 9(5) of the CGST Act (with Section 5(5) of the IGST Act for inter-State supplies) empowers the Government to notify categories of services on which the tax is payable by the ECO as if the operator were the supplier. Question 5 of the FAQ identifies the source notifications: Notification No. 17/2017-Central Tax (Rate) and No. 14/2017-Integrated Tax (Rate), both dated 28.06.2017. As the notification stands amended, the covered services are:

For these services, the operator pays the entire tax in cash, issues the invoice, and reports the supplies separately — in Table 3.1.1 of GSTR-3B and Table 15 of GSTR-1. Supplies taxed under Section 9(5) are excluded from the TCS base under Section 52. The actual supplier retains threshold exemption for these services, which is why a small home-stay owner or an individual service provider listed on an aggregator platform need not register merely on account of such listings, provided aggregate turnover remains within the threshold.

Digital services from abroad: OIDAR

Online information and database access or retrieval (OIDAR) services — cloud services, streaming, e-books, online advertising, software delivered online and similar digital supplies — are governed by the IGST Act. Where the supplier is located in a non-taxable territory and the recipient is a non-taxable online recipient, Section 14 of the IGST Act places the liability to pay integrated tax on the foreign supplier, who must obtain registration under the simplified scheme and file FORM GSTR-5A. Where the Indian recipient is registered, tax applies under reverse charge in the recipient’s hands.

Two amendments made by the Finance Act, 2023, operative from 01.10.2023, materially widened this regime. The definition of OIDAR in Section 2(17) of the IGST Act was amended to omit the requirement that the supply be essentially automated and involve minimal human intervention, bringing digitally delivered services with human involvement — online education programmes being the prominent example — within the fold. Simultaneously, the definition of non-taxable online recipient in Section 2(16) was recast to cover any unregistered person receiving OIDAR services in the taxable territory, irrespective of the purpose of receipt, ending the earlier exemption for services received by government bodies and by individuals for non-business purposes.

Online money gaming: a distinct regime

Online money gaming was carved out of OIDAR by the amendments effective 01.10.2023 and taxed as a specified actionable claim — treated as goods — at 28% on the full amount paid or deposited with the supplier, with valuation prescribed under the amended CGST Rules and a mandatory registration requirement for offshore suppliers. The Supreme Court in the Gameskraft batch of appeals has since upheld the levy and its retrospective application. The rate on specified actionable claims, including online money gaming, was raised to 40% with effect from 22.09.2025 pursuant to the 56th GST Council meeting, with the Rule 31A valuation multiplier amended from 128 to 140. It should, however, be noted that the Promotion and Regulation of Online Gaming Act, 2025 has prohibited online money gaming in India from August 2025, so the practical incidence of this rate is now confined to the other specified actionable claims and to legacy-period disputes.

Summary of obligations by business model

The framework rewards a correct characterisation of the business model at the outset. The registration question, the person liable to pay, the rate, the return forms and the credit flow all follow from that single classification, and most disputes in this sector trace back to getting it wrong.

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Disclaimer: The contents of this article are for general informational purposes only and do not constitute professional advice. The provisions discussed are as per the CGST Act, 2017, the IGST Act, 2017, the rules and notifications issued thereunder, and official FAQs published by the CBIC/GST Council, as in force on the date of writing. Official FAQs are clarificatory in nature and do not have the force of law. Readers are advised to verify the current legal position and consult a professional before acting on any information contained herein. The author accepts no liability for any loss arising from reliance on this article.