Chapter 15: E-Commerce and GST

Definition (Section 2(44) of CGST Act): “ E-commerce operator (ECO) means any person who owns, operates or manages a digital or electronic facility or platform for electronic commerce. ”

E-commerce has transformed how goods and services are supplied in India. To ensure tax compliance in this digitised ecosystem, the GST law assigns specific obligations to ECOs.

Key Responsibilities of ECOs

Tax Collection at Source (TCS): Collect tax on net value of supplies made through their platform (Section 52).

Liability to Pay Tax for Certain Supplies: In cases notified under Section 9(5) of the CGST Act, the ECO itself is treated as the “deemed supplier.”

Return Filing: File GSTR-8 monthly to report supplies and TCS collected.

Record Maintenance: Maintain detailed transaction-level records of suppliers, recipients, and tax collected.

Reporting to Tax Authorities: Provide information on request for cross-verification of suppliers’ returns.

Statutory Reference: Section 52 of the CGST Act and Rule 67 of the CGST Rules.

Mechanism of TCS Collection

Rate: 1% (0.5% CGST + 0.5% SGST) on the net value of taxable supplies made through the platform.

Net Value of Taxable Supplies: Taxable supplies made through ECO – supplies returned to suppliers.

When to Collect: At the time of payment to the supplier (or credit to their account).

Who Is Responsible: E-commerce operator, not the seller.

Compliance Obligations

Effect on Suppliers: The amount of TCS collected is credited to the supplier’s electronic cash ledger, usable for payment of future tax liabilities.

Illustration: A seller sells goods worth ₹10 lakh through Amazon. → TCS @ 1% = ₹10,000 collected by Amazon and deposited to Government. → The seller gets credit of ₹10,000 in his cash ledger.

Certain services are provided through aggregator platforms where the operator controls pricing and customer interface. To avoid tax leakage from unregistered service providers, the law deems the E-commerce operator as the supplier for specific services.

Statutory Reference: Section 9(5) of the CGST Act, 2017.

Services Covered Under Section 9(5):

(Services may change as per latest notifications.)

Implications:

ECO acts as deemed supplier and pays GST on the entire transaction value.

The actual service provider is exempt from charging and remitting GST on that supply.

ECO may claim ITC for inputs used in the business of providing such taxable supplies.

Definition (Section 2(17), IGST Act): Services whose delivery is mediated through the internet and which are essentially automated involving minimal human intervention — such as digital downloads, music, e-books, streaming, and online advertising.

Taxability:

Example: If a foreign company like Netflix provides subscription services to Indian consumers, it must register under OIDAR and pay IGST on subscription fees collected.

Compliance for OIDAR Suppliers:

Obtain registration under Form GST REG-10 (simplified procedure).

File GSTR-5A monthly and pay IGST in foreign currency or INR as per RBI rules.

Maintain records of services supplied to Indian customers for five years.