Provision related to GST and TDS on E-commerce Transaction

Summary: In the context of GST, an electronic commerce operator (ECO), as defined by Section 2(44) of the CGST Act, 2017, facilitates the supply of goods or services, including digital products, over electronic networks. This definition encompasses aggregators like OLX, Amazon, Flipkart, Zomato, Swiggy, and Ola. A supplier (Section 2(105)) is the person providing the goods or services, including their agents. A recent proviso includes those organizing or managing digital platforms for specified actionable claims as deemed suppliers. The recipient (Section 2(93)) is the person liable to pay consideration, or to whom goods/services are delivered or rendered, encompassing their agents. Regarding levy and collection, Section 9(5) allows the Government to mandate that ECOs pay GST on specific intra-State services supplied through their platform, treating the ECO as the supplier liable for tax. This applies to services like passenger transportation (radio-taxi, motorcab, maxicab, motorcycle), accommodation (hotels, guesthouses) unless the supplier is liable for registration under Section 22(1), house-keeping services (unless the supplier is liable for registration), and restaurant services (excluding those in specified premises). For these notified services, the ECO is required to pay GST in cash and issue the tax invoice, while ITC cannot be used for payment. Furthermore, Tax Collected at Source (TCS) under GST (Section 52) requires ECOs to collect tax at a rate not exceeding 1% on the net value of taxable supplies made through them by other suppliers, where the ECO collects the consideration. This applies to supplies other than those notified under Section 9(5). The collected amount must be remitted to the Government within ten days of the month-end, and ECOs must file monthly and annual statements detailing these supplies. Discrepancies between ECO and supplier filings can lead to an increase in the supplier’s output tax liability. Separately, TDS provisions also apply: Section 194-O mandates ECOs to deduct 1% TDS (5% if no PAN) on the gross sales/services facilitated, with a threshold of 5 lakh/year. Payments to ECOs for contractual services are also subject to TDS under Section 194C, at 20% if PAN is unavailable, with thresholds of 30,000 per invoice or 1,00,000 annually.

Who is E com Operator?

As per Section 2(44) of CGST Act 2017 E comm means “electronic commerce” means the supply of goods or services or both, including digital products over digital or electronic network;

Examples Amazon Flipkart Zomato Swiggy Ola

Here is an interesting to fact that for GST e comm operator includes aggregators like OLX also therefore for GST purposes there is no difference between e comm operators (to facilities or not facilities in transaction between buyer and seller) and aggregators (Aggregator means provide platform to match buyer and seller)

Who is Supplier?

Section 2(105) “supplier” in relation to any goods or services or both, shall mean the person supplying the said goods or services or both and shall include an agent acting as such on behalf of such supplier in relation to the goods or services or both supplied;

¹⁵[Provided that a person who organises or arranges, directly or indirectly, supply of specified actionable claims, including a person who owns, operates or manages digital or electronic platform for such supply, shall be deemed to be a supplier of such actionable claims, whether such actionable claims are supplied by him or through him and whether consideration in money or money’s worth, including virtual digital assets, for supply of such actionable claims is paid or conveyed to him or through him or placed at his disposal in any manner, and all the provisions of this Act shall apply to such supplier of specified actionable claims, as if he is the supplier liable to pay the tax in relation to the supply of such actionable claims.]

Who is Recipient?

Section 2 (93) “recipient” of supply of goods or services or both, means-

(a) where a consideration is payable for the supply of goods or services or both, the person who is liable to pay that consideration;

(b) where no consideration is payable for the supply of goods, the person to whom the goods are delivered or made available, or to whom possession or use of the goods is given or made available; and

(c) where no consideration is payable for the supply of a service, the person to whom the service is rendered, and any reference to a person to whom a supply is made shall be construed as a reference to the recipient of the supply and shall include an agent acting as such on behalf of the recipient in relation to the goods or services or both supplied;

Now understand Levy and collection in e com  operator

Section 9. Levy and collection.-

As per Section 9 (5) The Government may, on the recommendations of the Council, by notification, specify categories of services the tax on intra-State supplies of which shall be paid by the electronic commerce operator if such services are supplied through it, and all the provisions of this Act shall apply to such electronic commerce operator as if he is the supplier liable for paying the tax in relation to the supply of such services:

Provided that where an electronic commerce operator does not have a physical presence in the taxable territory, any person representing such electronic commerce operator for any purpose in the taxable territory shall be liable to pay tax:

Provided further that where an electronic commerce operator does not have a physical presence in the taxable territory and also he does not have a representative in the said territory, such electronic commerce operator shall appoint a person in the taxable territory for the purpose of paying tax and such person shall be liable to pay tax.

What is TCS under GST?

 Section 52. Collection of tax at source.-

(1) Notwithstanding anything to the contrary contained in this Act, every electronic commerce operator (hereafter in this section referred to as the “operator”), not being an agent, shall collect an amount calculated at such rate not exceeding one per cent., as may be notified by the Government on the recommendations of the Council, of the net value of taxable supplies made through it by other suppliers where the consideration with respect to such supplies is to be collected by the operator.

Explanation .-For the purposes of this sub-section, the expression “net value of taxable supplies” shall mean the aggregate value of taxable supplies of goods or services or both, other than services notified under sub-section (5) of section 9, made during any month by all registered persons through the operator reduced by the aggregate value of taxable supplies returned to the suppliers during the said month.

(2) The power to collect the amount specified in sub-section (1) shall be without prejudice to any other mode of recovery from the operator.

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

(4) Every operator who collects the amount specified in sub-section (1) shall furnish a statement, electronically, containing the details of outward supplies of goods or services or both effected through it, including the supplies of goods or services or both returned through it, and the amount collected under sub-section (1) during a month, in such form and manner as may be prescribed, within ten days after the end of such month:

¹[Provided that the Commissioner may, for reasons to be recorded in writing, by notification, extend the time limit for furnishing the statement for such class of registered persons as may be specified therein:

Provided further that any extension of time limit notified by the Commissioner of State tax or the Commissioner of Union territory tax shall be deemed to be notified by the Commissioner.]

²[Explanation : – For the purposes of this sub-section, it is hereby declared that the due date for furnishing the said statement for the months of October, November and December, 2018 shall be the ³[07th February, 2019].]

(5) Every operator who collects the amount specified in sub-section (1) shall furnish an annual statement, electronically, containing the details of outward supplies of goods or services or both effected through it, including the supplies of goods or services or both returned through it, and the amount collected under the said sub-section during the financial year, in such form and manner as may be prescribed, before the thirty first day of December following the end of such financial year

⁴[Provided that the Commissioner may, on the recommendations of the Council and for reasons to be recorded in writing, by notification, extend the time limit for furnishing the annual statement for such class of registered persons as may be specified therein:

Provided further that any extension of time limit notified by the Commissioner of State tax or the Commissioner of Union territory tax shall be deemed to be notified by the Commissioner.]

(6) If any operator after furnishing a statement under sub-section (4) discovers any omission or incorrect particulars therein, other than as a result of scrutiny, audit, inspection or enforcement activity by the tax authorities, he shall rectify such omission or incorrect particulars in the statement to be furnished for the month during which such omission or incorrect particulars are noticed, subject to payment of interest, as specified in sub-section (1) of section 50:

Provided that no such rectification of any omission or incorrect particulars shall be allowed after the ⁵[thirtieth day of November] following the end of the financial year or the actual date of furnishing of the relevant annual statement, whichever is earlier.

(7) The supplier who has supplied the goods or services or both through the operator shall claim credit, in his electronic cash ledger, of the amount collected and reflected in the statement of the operator furnished under sub-section (4), in such manner as may be prescribed.

(8) The details of supplies furnished by every operator under sub-section (4) shall be matched with the corresponding details of outward supplies furnished by the concerned supplier registered under this Act in such manner and within such time as may be prescribed.

(9) Where the details of outward supplies furnished by the operator under sub-section (4) do not match with the corresponding details furnished by the supplier under ⁶[section 37 or section 39], the discrepancy shall be communicated to both persons in such manner and within such time as may be prescribed.

(10) The amount in respect of which any discrepancy is communicated under sub-section (9) and which is not rectified by the supplier in his valid return or the operator in his statement for the month in which discrepancy is communicated, shall be added to the output tax liability of the said supplier, where the value of outward supplies furnished by the operator is more than the value of outward supplies furnished by the supplier, in his return for the month succeeding the month in which the discrepancy is communicated in such manner as may be prescribed.

(11) The concerned supplier, in whose output tax liability any amount has been added under sub-section (10), shall pay the tax payable in respect of such supply along with interest, at the rate specified under sub-section (1) of section 50 on the amount so added from the date such tax was due till the date of its payment.

(12) Any authority not below the rank of Deputy Commissioner may serve a notice, either before or during the course of any proceedings under this Act, requiring the operator to furnish such details relating to-

(a) supplies of goods or services or both effected through such operator during any period; or

(b) stock of goods held by the suppliers making supplies through such operator in the godowns or warehouses, by whatever name called, managed by such operator and declared as additional places of business by such suppliers,

as may be specified in the notice.

(13) Every operator on whom a notice has been served under sub-section (12) shall furnish the required information within fifteen working days of the date of service of such notice.

(14) Any person who fails to furnish the information required by the notice served under sub-section (12) shall, without prejudice to any action that may be taken under section 122, be liable to a penalty which may extend to twenty-five thousand rupees.

Explanation. -For the purposes of this section, the expression “concerned supplier” shall mean the supplier of goods or services or both making supplies through the operator.

⁷[(15) The operator shall not be allowed to furnish a statement under sub-section (4) after the expiry of a period of three years from the due date of furnishing the said statement:

Provided that the Government may, on the recommendations of the Council, by notification, subject to such conditions and restrictions as may be specified therein, allow an operator or a class of operators to furnish a statement under sub-section (4), even after the expiry of the said period of three years from the due date of furnishing the said statement].

 Further to discussion Central Govt issued  Notification No.17/2017-CentralTax(Rate)New Delhi, dated the 28thJune 2017,In exercise of the powers conferred by sub-section (5) of section 9 of the Central  Goods   and   Services   Tax   Act,   2017   (12of   2017),   the   Central   Government,   on   the recommendations  of  the  Council,  hereby  notifies  that  in  case  of  the  following  categories  of services, the tax on intra-State supplies shall be paid by the electronic commerce operator –

• services by way of transportation of passengers by a radio-taxi, motorcab, maxicab and motorcycle;
• services by way of providing accommodation in hotels, inns, guest houses, clubs, campsites or  other  commercial  places  meant  for  residential  or  lodging  purposes,  except where the person supplying such service through electronic commerce operator is liable for registration under sub-section (1) of section 22 ofthe said Central Goods and Services TaxAct.

Explanation.-For the purposes of this notification,-(a)“radio taxi” means a taxi including a radio cab, by whatever name called, which is in two-way  radio  communication  with  a  central  control  office  and  is  enabled  for  tracking  using Global Positioning System (GPS) or General Packet Radio Service (GPRS);(b)“maxicab”, “motorcab” and “motor cycle” shall have the same meanings as assigned to them respectively in clauses (22),(25)and (26)of section 2 of the Motor Vehicles Act, 1988 (59 of 1988).2. This notification shall come into force with effect from the 1stday of July, 2017

Add on 23^rd August 2017 via Notification No. 23/2021-Central Tax (Rate

“(iii) services by way of house-keeping, such as plumbing, carpentering etc, except where the person supplying such service through electronic commerce operator is liable for registration under sub-section (1) of section 22 of the said Central Goods and Services Tax Act.”

Add on 18th November, 2021 via Notification No. 17/2021-Central Tax (Rate

“(iv) supply of restaurant service other than the services supplied by restaurant, eating joints etc. located at specified premises.”

Circular No. 167/23/2021-GST, dated 17.12.2021

→ Clarifies implementation of Section 9(5) for restaurant services via ECOs

→ States that ECOs must pay GST in cash and issue the tax invoice

 CBIC Circular No. 167/23/2021‑GST (Dated 17 Dec 2021)

Clarifies implementation details for services under Section 9(5):

1.ECOs liable to file GSTR‑3B and pay GST in cash (no ITC use) on notified services including restaurant service

2. ECOs need not collect TCS under Section 52 on restaurant sales but must continue TCS on other supplies.

3. ECO issues invoice for restaurant service, while other supplies remain under the supplier’s invoicing

4. ITC cannot be used for paying GST on restaurant services—must be paid in cash

Section 194-O – TDS by E-commerce Operator (ECO)

Section 194C TDS on Payment to  Ecom operator – Section 194C (Contractual Services)

Threshold Limit₹30,000 per invoice OR ₹1,00,000 in a financial year

TDS Rate (if PAN not available)20% (as per Section 206AA)