Who Really Pays GST in E-Commerce: The Seller, the Buyer, or the Platform?

Introduction

E-commerce has changed the way people in India purchase and sell goods, but it has also created confusion regarding tax obligations. When a consumer clicks “Buy Now,” various parties—the marketplace, the seller, and the final consumer—are involved in the transaction process. So, who ultimately shoulders the GST burden: the seller who lists the item, the platform that enables the transaction, or the buyer who pays the total price? The response is not merely a single entity; it relies on the structure of the transaction and the application of GST regulations such as supply, place of supply, reverse charge, and collection mechanisms.

Understanding E-Commerce Operator (ECO)

According to Section 2(45) of the CGST Act, 2017, an E-Commerce Operator refers to any individual or entity that owns, oversees, or manages a digital platform which enables the supply of goods 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. For ex:- Myntra, Swiggy, Rapido and Airbnb etc. In numerous instances, ECOs function not just as facilitators but are recognized as suppliers or tax collectors under GST regulations.

Who Pays GST in E-Commerce?

The core of the discussion surrounding GST in e-commerce revolves around addressing a straightforward yet essential question: Who ultimately bears the burden of the tax — the seller, the buyer, or the platform? The GST legislation offers a defined structure through Section 9(5) and Section 52 of the CGST Act, 2017, which together define the responsibility for tax payment and collection.

a) ECO Liability under Section 9(5): Notified Services

For specific notified services, the legislation regards the E-Commerce Operator (ECO) as the supplier, even though it merely serves as a facilitator. In these instances, the ECO is directly responsible for paying GST.

The government has notified the following services under Section 9(5):

In such situations, the ECO is considered the supplier, meaning that the actual supplier (such as the driver, hotel owner, or restaurant) is not obligated to pay GST on that service. The ECO is responsible for remitting GST straight to the government, and the individual service provider bears no liability.

b) ECO Liability under Section 52: Tax Collected at Source (TCS)

For services and goods provided through an e-commerce platform, the ECO is not responsible for remitting GST on behalf of sellers. Instead, it must collect Tax Collected at Source (TCS) based on the net value of taxable supplies conducted via the platform.

TCS Rate: Effective July 10, 2024, the rate has been lowered to 0.5% overall (0.25% CGST + 0.25% SGST/UTGST or 0.5% IGST). Previously, this rate was 1%.

Net Value of Supplies = Total taxable value – returns – exempt supplies.

This amount is deposited by the ECO with the government, and the seller can later claim it as credit while filing returns. The seller, however, remains primarily responsible for paying the actual GST on their outward supplies.

c) The Role of the Buyer

Buyers bear the cost of GST within the price they pay, whether it is directly assessed by the seller or through the ECO. However, buyers never pay GST directly to the government; they only cover the tax portion that is included in their invoice.

No Threshold Exemption for Sellers on ECOs

One distinctive aspect of GST in the realm of e-commerce is that sellers are not eligible to receive the standard turnover-based exemption. In typical business scenarios, small suppliers with a turnover of less than ₹20 lakh (or ₹40 lakh for certain states’ goods) are exempt from needing GST registration.

However, according to Section 24(ix) of the CGST Act, any individual providing goods or services via an E-Commerce Operator (ECO) is required to register for GST, regardless of their turnover. This regulation means that even small home-based sellers on platforms like Amazon or Flipkart, who might otherwise stay under the threshold, are subject to the GST framework.

v Let’s examine two typical situations to understand the workings of GST in e- commerce :-

i. Food Delivery through Zomato (Section 9(5)) – You place an order for food costing ₹500 on Zomato. In this case, Zomato, acting as the e-commerce operator (ECO), is recognized as the supplier and pays the GST directly to the government. The restaurant solely prepares the food and is not accountable for GST on that transaction.

ii. Selling on Flipkart (Section 52) – A seller offers products worth ₹50,000. Flipkart deducts TCS at a rate of 5% amounting to ₹250. As a result, the seller gets ₹49,750 (after deducting platform fees). The seller then submits GST returns and claims the ₹250 TCS credit.

These examples demonstrate how GST liability varies based on the nature of the transaction.

Comparison between Section 9(5) vs Section 52

Critical Analysis: Burden or Boon?

Government’s Perspective → The framework guarantees that all digital transactions are subject to taxation. It broadens the tax base and secures governmental revenue.

E-Commerce Operators’ Perspective → It raises operational costs, necessitates technology investments, and heightens compliance risks, which can deter platforms from venturing into smaller services.

Sellers’ Perspective → They face cash flow difficulties due to TCS deductions and the requirement for registration, yet gain increased credibility and access to broader markets.

Buyers’ Perspective → They still pay GST as part of the overall price, but benefit from the assurance of transaction transparency.

Overall, while the system might seem burdensome initially, it ultimately serves as an advantage, establishing a transparent and accountable tax structure that strengthens India’s digital economy.

Conclusion

The question of “Who really pays GST in e-commerce?” does not have a one-size-fits-all answer. Instead, it depends on the legal framework:

• For notified services → ECO pays GST.
• For goods & other services → Seller pays GST, but ECO collects TCS.
• Buyers → Always bear the tax burden in

By transferring tax responsibilities to large, organized platforms, the GST system facilitates efficient monitoring and curtails tax evasion in India’s rapidly expanding e-commerce industry. Although sellers and platforms encounter compliance difficulties, the enduring advantages of transparency, accountability, and revenue protection significantly outweigh these challenges. Therefore, the next time you use Uber for a ride or order from Swiggy, keep in mind: you’re not merely enjoying convenience—you’re also engaging with a thoughtfully structured tax system that supports India’s digital advancement.