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CA Vinod Kaushik

CA Vinod Kaushik

Overview of e-commerce sector in India:

India had an internet user base of about 354 million as of June 2015 and is expected to cross 500 million in 2016.Despite being the second-largest user base in world, only behind China (650 million, 48% of population), the penetration of e-commerce is low compared to markets like the United States (266 million, 84%), or France (54 M, 81%), but is growing at an unprecedented rate, adding around 6 million new entrants every month. The industry consensus is that growth is at an inflection point.*

In India, cash on delivery(COD) is the most preferred payment method, accumulating 75% of the e-retail activities. Demand for international consumer products (including long-tail items) are growing much faster than in-country supply from authorized distributors and e-commerce offerings.

In 2015, the largest e-commerce companies in India were Flipkart, Snapdeal, Amazon India, and Paytm.

*Statistics taken from

Meaning of e-commerce under GST:

‘electronic commerce’ means supply or receipt of goods and / or services, or transmitting of funds or data, over an electronic network, primarily the internet, by using any of the applications that rely on the internet, like but not limited to e-mail, instant messaging, shopping carts, Web services, Universal Description, Discovery and Integration (UDDI), File Transfer Protocol (FTP), and Electronic Data Interchange (EDI), whether or not the payment is conducted online and whether or not the ultimate delivery of the goods and/or services is done by the operator;

Food for thought No. 1:

Whether the business model of Naaptol, Tele shop comes under e-commerce? These companies display its products on T.V show and customer can order through toll free number. Since the definition of e-commerce focuses upon use of internet and internet based application the doubts of its classification cannot be ruled out.

Who is an e-commerce operator?

‘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

FAQ: 1

Q: Where is listing products on its website which will be supplied to customers directly by from its warehouses, whether is e-commerce operator?

Ans: If a person is engaged in supply of goods and services at his own behalf he shall not be termed as e-commerce operator. A person shall be classified as an e-commerce operator only if he is facilitating supply of goods and services.

Concept of ‘aggregators’ under model law:

‘aggregator’ means a person, who owns and manages an electronic platform, and by means of the applicationand 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;

This concept is practically introduced for the major players in online cab facilitators such as OLA, UBER etc.

FAQ 2:

Q: If a person has setup a call centre and collected data of various cab drivers of his local area and the services are provided by individual’s cab drivers to customers without any brand name of said person. Whether this will be termed as an aggregator?

A:In our view to classify a service provider as an aggregator two conditions are necessary to fulfill:

1. The person must own and manages an electronic platform.

2. Services are provided under the brand name of said person.

In this case services have not been provided under brand name of said person hence he cannot be termed as aggregator under law. Secondly electronic platform is also not defined in law hence further clarification awaited in times to come

Various business models under e-commerce:

Stock and sale model or inventory model:

This is one of the model where the company which owns electronic platform also procures goods in his own name. In the initial days  of e-commerce industry in India this was followed by but due to various economic reasons and restrictions of 100% FDI in multi brand retail sector most of the big players do not follow this model.

FAQ 3:

Q: If Titan is supplying watches and jewels through its own website would it be considered as an inventory model?

A:Yes it will be considered as inventory model and accordingly Titan will not be termed as an e-commerce operator under law.

Market place model:

Under market place model goods and services are supplied by vendors who have listed their products on e-commerce platform and e-commerce operator provides services of listing, warehousing, logistics and payment collection services.

For instance, Amazon and Flipkart are e-commerce operators because they are facilitating actual suppliers to supply goods through their electronic platform (popularly called Market place model or Fulfillment Model).

Registration for e-commerce operators:

Section 19 r/w Schedule-III of the MGL, provides that the threshold exemption is not available to e-commerce operators and they would be liable to be registered irrespective of the value of supply made by them

So every e-commerce operators is liable for registration in the state where they have maintained a godown to smoothen the logistics process. This process is going to cause a lot of compliance burden for e-commerce because they will have warehouse in every state.

FAQ 4:

Q: Whether a supplier of goods/services supplying through e-commerce operator would be entitled to threshold exemption?

A: If Mr. X is supplying goods and services through he is liable for registration under GST without any threshold exemption. They are liable for registration irrespective of value of supply made by them.

FAQ 5:

Q:When an aggregator required to be registered under GST?

A: As per section 19 r/w Schedule-III of the MGL, provides that the threshold exemption is not available to aggregatorsand they would be liable to be registered irrespective of the value of supply made by them.

Place of supply in case of e-commerce sector:

Services provided by e-commerce operators to vendors

Place of supply shall be the location of recipient of services and this is applicable for all kinds of services being provided by operators to these suppliers.

Goods supplied by vendors to customer place

Place of supply of goods shall be the location of the goods at the time at which the movement of goods terminates for delivery to the recipient which means the address of customer in their record.

Fungibility of input tax credits under the proposed GST regime:

Under the existing regime of VAT and Service tax both operators and suppliers of goods suffers huge loss of Input Tax Credit. The operators make investments in various assets on which VAT is charged whereas input tax on services received by vendors from operators is again nonadjustable.

The proposed law has allowed such cross offsetting of ITC for both operators as well as vendors which is positive news for industry as a whole. Further availability of ITC will make industry more profitable and prosperous.

Tax collected at source by e-commerce operators:

Every electronic commerce operator shall collect tax 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,out of the amount payable or paid to the supplier, representing consideration towards the supply of goods and /or services made through it.

The amount collected under sub-section (1) shall be paid to the credit of the appropriate Government by the operator within ten days after the end of the month in which such collection is made.

Return by operators:Every operator shall, furnish a statement in form GSTR-8 electronically, of all amounts collected under sub-section (1), towards outward supplies of goods and/or services effected through it, during a calendar month within 10 days after the end of the calendar month to which details pertains.

Matching of returns:The details of supplies and the amount of TCS as furnished by every operator under sub-section (4), shall, in the manner and within the period prescribed, be matched with the corresponding details of outward supplies furnished by the concerned supplier in his valid return for the same calendar month or any preceding calendar month.

In addition to the return furnished by operators for TCS any officer not below the rank of Joint commissioner may ask the details of supplies effected through such operators and details of all stocks of goods held by such operator on behalf of these suppliers.

Issues of e-commerce industry under model GST law:

Registration in every state: Schedule III of model law makes it very clear that every supplier shall be liable to be registered under this Act in the state from where he makes taxable supply of goods and/or services. The operators have to file their normal supply return as well as TCS returns as prescribed under section 43C.

TCS on return of goods: TCS will be collected by operators out of the payment payable to vendors of goods and services at the earliest of credit or payment whichever is earlier. Return of goods is also very common transaction in this sector hence it will be quite difficult to make adjustment of TCS already collected and goods subsequently returned.

E-wallet/promo codes/vouchers: The definition of services under model law also covers actionable claims but excluding money. These wallets and promo codes are covered well within the definition of actionable claims and taxable at the time of its issue and again get taxable at the time of redemption.

Disclaimer: Views expressed are strictly personal. The content of this document are solely for informational purpose. It doesn’t constitute professional advice or recommendation. The Author does not accept any liabilities for any loss or damage of any kind arising out of information in this article and for any actions taken in reliance thereon.

(Author can be reached  at, +91-9953236278)

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Invoice Format under GST

Author Bio

I am a practicing Chartered Accountant specially in area of Indirect Taxation (GST). I have deep interest in understanding the subject and a quick learner. I have been handling litigation, opinion and departmental issues of indirect taxation. I am also pursuing Law from a prestigious institution o View Full Profile

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June 2024