E-Commerce is defined under section 2(44) of the CGST Act 2017 as “the supply of goods or services or both, including digital products over digital or electronic network”. It is essentially an activity of buying or selling of products over the Internet.
We will discuss the various aspects of E-Commerce and its operators under the GST laws below:
An E-Commerce operator is any person who owns, operates, or manages a digital or electronic facility or platform for E-Commerce activities.
Example: Amazon and Flipkart are E-Commerce operators who facilitate third party suppliers to supply goods through their (Amazon/Flipkart) online marketplace. However, if Amazon and Flipkart were to supply their own goods on this platform, then they do not come under the definition of E-Commerce operator.
- E-Commerce operator – As per the provisions of the CGST Act, 2017, E-Commerce operators must obtain GST registration, irrespective of the value of supply made by them.
- Foreign E-Commerce operator – Any E-Commerce operator who does not have a physical presence in the taxable territory of India is a foreign E-Commerce operator. To function in India, they have to appoint an agent on their behalf.
Every foreign E-Commerce operator is required to obtain registration under GST mandatorily. Furthermore, they are also required to be registered in each state and union territory where their operations are conducted.
Note: Foreign E-Commerce operators would also be liable to collect tax at source (TCS) on supplies done through their marketplace.
- Supplier – Any person who supplies goods or services or both, through an E-Commerce operator, must compulsorily register under the provisions of the CGST Act 2017 too. However, persons making the supply of specified services (as per Table A below) are allowed to take benefit of the prescribed threshold limit as per Notification No. 65/2017 Central Tax dated 15th November 2017 and Notification No. 10/2019 Central Tax dated 7th March 2019.
An E-Commerce transaction is undertaken between three parties, i.e., the supplier, the buyer, and the E-Commerce operator. For the applicability of GST provisions, there are two distinct transactions:
- Between the supplier and buyer for the supply of goods or services and
- Between the supplier and E-Commerce operator for a commission charged, for the use of the marketplace.
GST is charged on both these transactions.
There are certain specified transactions notified under section 9(5) of the CGST Act 2017 and section 5(5) of the IGST Act 2017, where the E-Commerce Operator is required to pay the GST on behalf of the suppliers (Table A):
|Sl. No.||Description of Supply of Specified Service||Supplier of service|
|1||Transportation of passengers by a radio-taxi, motor cab, maxi cab, and motorcycle||Any person (Individual, HUF, etc.)|
|2||Providing accommodation in hotels, inns, guest houses, clubs, campsites, or other commercial places meant for residential or lodging purposes||Any person, except those who are liable to obtain registration under section 22(1) of the CGST Act|
|3||House-keeping, such as plumbing, carpentering etc||Any person, except those who are liable to obtain registration under section 22(1) of the CGST Act|
Let us look at a few examples (Table B):
|Sector||E-Commerce Operators||Supplier Registration||Who is liable to pay GST?|
|Sale of Goods||Flipkart, Amazon||Supplier is required to obtain GST registration mandatorily.||Supplier (Example: Nike, Adidas)|
|Hotel Aggregator||OYO, MakeMyTrip||Registration required only if the turnover of the Hotel is more than INR 20 Lakhs (INR 10 lakhs for special category states)*||Hotel – if Hotel is registered under GST
E-Commerce Operator – If Hotel is not registered under GST
|Cab Aggregator||Uber, Ola||Registration required only if car owners’ turnover is more than INR 20 lakhs (INR 10 lakhs for special category states)*||Cab Aggregator – irrespective of whether the car owner is registered under GST or not|
|Housekeeping Services Aggregator||UrbanClap, HouseJoy||Registration required only if the turnover of the Service Provider is more than INR 20 lakhs (INR 10 lakhs for special category states)*||Service Provider – if Service Provider is registered under GST
E-Commerce Operator – If Service Provider is not registered under GST
Note: Turnover limit for registration in case of sale of goods has been revised to INR40 lakhs in Notification No. 10/2019-Central Tax dated 7th March 2019
TCS stands for Tax Collection at Source. Where consideration is paid by the buyer (in an E-Commerce transaction) and is collected by the E-Commerce supplier, the E-Commerce operator is required to collect tax at source (TCS) at the rate of 1% of the net value of taxable supplies made through the online marketplace.
‘Net value of taxable supplies’ means the total value of taxable supplies of goods or services or both, reduced by the returns of goods to the suppliers during the same calendar month, through the E-Commerce Portal.
It is common in E-Commerce for buyers to return the goods that have been purchased. In case the sales returns for a supplier are more than the sales in a calendar month, then the E-Commerce operator is not required to collect tax at source.
Note: This shortfall shall not be carried forward nor adjusted in the next calendar month.
The time limit to remit the TCS to the Government (by E-Commerce operators) is 10 days from the end of the calendar month in which such amounts were collected. The remittance is to be done in cash and not via input tax credit available in the electronic credit ledger.
TCS deposited by E-Commerce operators will appear in GSTR-2A ‘Part C’ on the GST Portal of the Suppliers. The Suppliers can use this TCS credit to discharge their GST liability.
An E-Commerce operator files GSTR-1 and GSTR-3B similar to other taxpayers every month. In addition to this, an E-Commerce operator is required to submit an electronic statement called GSTR-8. This statement should contain details of outward supplies of goods and/or services delivered by suppliers through its marketplace, net of returns, along with the TCS during the calendar month. GSTR-8 should be submitted within 10 days from the end of the relevant calendar month.
The E-Commerce operator is also required to file an annual statement/return called GTSR-9B by the 31st of December following the end of the financial year in which the transactions have taken place, and the tax is collected at source.
The details reported by E-Commerce operators in GSTR-8 is required to match the details reported by the respective suppliers in GSTR-1 filed every month. In case the particulars provided do not match, the discrepancy should be communicated to the respective parties by the other. If the E-Commerce Operator or the supplier does not rectify the returns, then, the output tax liability due to the mismatch will be payable in the subsequent calendar month along with interest at the rate of 18% p.a. (Section 50(1) of the CGST Act, 2017).
- When tax officials wish to seek information on details of supply or stock from E-Commerce operators, then, a notice may be issued by any officer, not below the rank of Deputy Commissioner, and such details are to be furnished by the E-Commerce operator within 15 days of the date of issue of notice.
- There may be instances where suppliers store their goods at a warehouse operated by an E-Commerce Operator. The supplier shall register the warehouse as an additional place of business. There is no restriction on the same warehouse being registered as an additional place of business if the supplier has the requisite documents like a rent agreement, etc.
- Where a supplier sells exempted goods or zero-tax goods through the marketplace of an E-Commerce operator, then no tax shall be collected at the source as the net taxable value of the goods is Nil.
- TCS provisions are not applicable when GST is payable under reverse charge mechanism.
- There is no requirement of TCS if the supplier sells their products through their electronic portal.
- An E-Commerce operator is not allowed to take registration under the composition scheme.
- TCS provisions do not apply to the import of goods or services.