GST Updates-8:- Key Terms in Draft GST Law for E-Commerce Platforms engaged in providing or facilitation of services:-
In my last Article I have covered ‘Business models under which E-Commerce Platforms operate and implications in GST‘ and in this articles I have analysed Key Terms in Draft GST Law for E-Commerce Platforms engaged in providing or facilitation of services, which includes what is meant by branded services, aggregator and brand.
1. Definition of Brand Name: The definition of “brand name” as provided in Draft GST Law is similar to the definition provided in Rule 2(bca) of the Service Tax Rules. Clause (b) of Section 43B defines “Brand Name” s follows:
‘brand name or trade name’ means, a brand name or a trade name, whether registered or not, that is to say, a name or a mark, such as an invented word or writing, or a symbol, monogram, logo, label, signature, which is used for the purpose of indicating, or so as to indicate a connection, in the course of trade, between a service and some other person using the name or mark with or without any indication of the identity of that person;
For better understanding, definition of “Brand Name” can be bifurcated as follows:
(a) What is covered: “a brand name or a trade name,”
(b) Whether registration of the Brand Name mandatory: “whether registered or not” ,
(c) What would be covered under the term brand or trade name: “that is to say, a name or a mark, such as an invented word or writing, or a symbol, monogram, logo, label, signature.”
(d) What is purpose of using the brand name: “which is used for the purpose of indicating, or so as to indicate a connection, in the course of trade,”
(e) Between whom the connection is to be proven: “Between a service and some other person using the name or mark with or without any indication of the identity of that person.”
For eg. use of hologram or mark on the bill of service provider would be treated as brand name but merely name of the firm would not be treated as a brand name. Following are the conclusions which can be arrived from the above definition:
a) Applicable only on services: The definition of “brand name” is only applicable on services and not on goods.
b) Registration of the brand name is not at all required. Even, a mark not registered under the law, would be treated as brand name.
c) The meaning of the name or a mark has not been restricted in the definition and only illustrative list has been provided, as the words “such as” has been used in the definition. The Illustrative list includes an invented word or writing, or a symbol, monogram, logo, label, signature, used for reflecting the connection between the service and the person.
Thus, in a nutshell we can say that, where a person while delivering the service, uses mark or name etc. to indicate a connection between the service and himself, and even though his identity may or may not have been revealed, in such case, use of such mark or name etc., would be treated as brand name or trade name.
2. Definition of Branded Service:Online GST Certification Course by TaxGuru & MSME- Click here to Join
Definition of “branded services” provided in Chapter XIB of Draft GST Law as follows:
(c) ‘branded Services’ means services which are supplied by an electronic commerce operator under its own brand name or trade name, whether registered or not;
The definition for better understanding can be divided as follows:
(a) Who should be the supplier of the services: Electronic Commerce Operator (i.e. Please refer to the definition of Electronic Commerce Operator).
(b) Whether the supply of the services should be under the brand name of the Electronic Commerce Operator: Yes, the supply of services has to be under the brand name of the Electronic Commerce Operator.
(c) Whether Brand name needs to be registered: No, it’s not mandatory that the brand name should be registered.
Thus this would mean that although the services have not been supplied on own behalf of the electronic commerce operator but the brand name of the electronic commerce operator has been used by the other person while supplying the service.
This term would be covering the aggregators like Uber, Ola who are not supplying services on their own behalf but services are being supplied under the brand name of Uber, Ola by the service providers.
3. Definition of aggregator:
The definition of the term aggregator gains importance as separate responsibilities for compliance of law regarding registration and payment of taxes, have been casted upon the person who works as an aggregator. The concept of an aggregator is not a new concept, but was introduced under service tax w.e.f. 1st March 2015. Aggregator has been defined under Rule 2(aa) of the Service Tax Rules and the definition provided under the draft GST law is more or less in line with the definition under the service tax law.
The definition of the aggregator as provided in clause (a) of Section 43 of the Draft GST Law is 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 difference in the definition of aggregator as provided in service tax and as provided in Draft GST Law is that the Draft GST law refers to Electronic platform and the Service Tax Legislation refers to web based application. Electronic platform generally being a much wider term than web based application and although it has not been defined anywhere, general examples of electronic platform can be website, mobile application etc.
The concept of brand name as defined above is relevant for the purpose of identifying the person who would be classified as an aggregator. The definition of aggregator can be sub-divided as follows:
(a) Who will fall under the definition of aggregator: “Any person”
(b) What should be the activity of the person covered under the definition of aggregator: “who owns and manages an electronic platform”
(c) What should be the purpose of the activity of the aggregator: “enables a potential customer to connect with the persons providing service of a particular kind”
(d) How the activity should be conducted by aggregator: “by means of the application and a communication device”
(e) Whose brand name should be used by the service provider while providing service: “the brand name or trade name of the said aggregator.”
Following conditions have to be satisfied before a person can be termed as an aggregator:
(a) Person should own and manage an electronic platform,
(b) The person by means of application and communication device enable customers to have connect with the service provider (i.e. a third person or a person other than the aggregator) and
(c) The person should allow the service provider to use his brand name.
The meaning of the brand name would be the same as has been described above. The crucial thing is that the aggregator who owns the brand name and the person supplying service are two different persons.
Example of an Aggregator: E-Commerce platform like Ola, Uber are an example of aggregator.
From the Author: In the next update, I would be classifying the examples given by me in previous updates under various categories i.e. Electronic Commerce Operator, Aggregator or other class of dealers for better understanding of the subject and further what are the responsibilities of registration and payment of taxes of an aggregator, electronic commerce operator and persons supplying goods or services on the platform operated by the electronic commerce operator.