GST on Ecommerce Operators
In this article we discusses in detail about
GST on E-commerce and its effect including the following:
• E Commerce Business Models
• Understanding on ECO
• Registration of ECO & applicable forms
• Specified services u/s 9(5)
• Tax collected at source
• Reporting Mismatch
• Penalty
• Declaration of warehouse maintained by ECO
as additional place of business by multiple supplier - Any problem?
• Place of supply
• Reporting in GSTR-1 by ECO
A). E
Commerce Business Models
E-Commerce or Electronics Commerce business
models can generally categorized in following categories.
• Business - to - Business (B2B)
• Business - to - Consumer (B2C)
• Consumer - to - Consumer (C2C)
• Consumer - to - Business (C2B)
• Business - to - Government (B2G)
• Government - to - Business (G2B)
• Government - to - Citizen (G2C)
Business-to-Business
(B2B): Website following B2B business
model sells its product to an intermediate buyer who then sells the product to
the final customer. As an example, a wholesaler places an order from a
company's website and after receiving the consignment, sells the end product to
final customer who comes to buy the product at wholesaler's retail outlet.
Business-to-Consumer
(B2C): Website following B2C business
model sells its product directly to a customer. A customer can view products
shown on the website of business organization. The customer can choose a
product and order the same. Website will send a notification to the business
organization via email and organization will dispatch the product/goods to the
customer.
Consumer-to-Consumer
(C2C): Website following C2C business
model helps consumer to sell their assets like residential property, cars,
motorcycles etc. or rent a room by publishing their information on the website.
Website may or may not charge the consumer for its services. Another consumer
may opt to buy the product of the first customer by viewing the
post/advertisement on the website.
Consumer-to-Business
(C2B): In this model, a consumer
approaches website showing multiple business organizations for a particular
service. Consumer places an estimate of amount he/she wants to spend for a
particular service. For example, comparison of interest rates of personal loan/
car loan provided by various banks via website. Business organization who
fulfills the consumer's requirement within specified budget approaches the
customer and provides its services.
Business-to-Government
(B2G): B2G model is a variant of B2B
model. Such websites are used by government to trade and exchange information
with various business organizations. Such websites are accredited by the
government and provide a medium to businesses to submit application forms to
the government.
Government-to-Business
(G2B): Government uses B2G model
website to approach business organizations. Such websites support auctions,
tenders and application submission functionalities.
Government-to-Citizen
(G2C): Government uses G2C model
website to approach citizen in general. Such websites support auctions of
vehicles, machinery or any other material. Such website also provides services
like registration for birth, marriage or death certificates. Main objectives of
G2C website are to reduce average time for fulfilling people requests for
various government services.
B) Definitions
Electronic Commerce has been defined In Sec.
2(44) of the CGST Act, 2017 to mean the supply of goods or services or both
including digital products over digital or electronic network.
Electronic Commerce Operator (ECO) has been
defined in Sec. 2(45) of the CGST Act, 2017 to mean any person who owns,
operates or manages digital or electronic facility or platform for electronic
commerce. In common parlance, provision of market place over internet is called
e-commerce & the person who owns, operates or manages such market place is
called Electronic Commerce Operator (ECO).
C) Registration
of e-commerce operator
Compulsory
Registration for ECO
As per sec. 24(x) of the CGST Act, 2017 the
benefit of threshold exemption of Rs. 20L or 10L is not available to e-commerce
operators and they are liable to be registered irrespective of the value of
supply made by them. Compulsory Registration for person supplying through ECO
As per Section 24(ix) of the CGST Act, 2017, the threshold exemption is also
not available to persons supplying goods or services through e-commerce
operator and they would be liable to be registered irrespective of the value of
supply made by them where such electronic commerce operator is required to
collect tax at source under section 52 of the CGST Act, 2017. Furthermore, as
per sec. 10(2)(d), a composition dealer cannot supply goods through an ECO who
is required to collect TCS u/s 52. Specified services u/s 9(5) however, a
category of service providers as specified through notification u/s 9(5) are
exempted from compulsory registration.
Examples are: Housekeeping services such as
plumbing, carpentering etc. Radio taxi, Motorcab, Maxicab, Motor cycle, Hotels,
inns, guest houses, clubs, campsites or other commercial places meant for
residential or lodging purposes other those liable for registration u/s 22(1)
Related
notifications
Such service suppliers are entitled for
threshold exemption even if they are providing their service through ECO. In
respect of such services, tax shall be paid by the ECO on behalf of the such
service suppliers if such services are supplied through it and all the
provisions of the Act shall apply to such ECO as if he is the supplier liable
to pay tax in relation to the supply of such services. A similar provision for
inter-State supply is provided for in Sec. 5(5) of the IGST Act, 2017.
D) Levy and
collection Every e-commerce transaction involves below 3 parties:
1. Seller;
2. Buyer;
3. ECO.
And it
involves below 2 types of transaction:
1. Between Seller & Buyer - Sale of Goods
;
2. Between Seller & ECO - Provision of
market place service.
GST shall be levied on both transactions:
Between seller & buyer = GST on entire
value of goods / services supplied (GST shall be paid by the supplier except in
case of Sec 9(5) services)
Seller & ECO = GST on commission value /
other charges earned by ECO for providing market platform to seller. (GST shall
be paid by the ECO)
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. 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.
Tax Collection at source u/s 52 Every ECO
[other than an ECO who is required to pay tax under section 9(5)] is required
to collect TCS @2% (1% CGST + 1% SGST) of the net value of taxable supplies
made through it by other supplier where consideration with respect to a taxable
supply is to be collected by such ECO. ECO should make the tax collection
during the month in which the consideration amount is collected from the
recipient. The amount of TCS collected by the ECO is to be deposited to the
Government within 10 days after the end of the month in which amount was so
collected. Reporting Every ECO is required to furnish, a statement in FORM
GSTR-8, electronically within 10 days after the end of such month, containing
the details of outward supplies of goods or services effected through it,
including the supplies of goods or services returned through it, and the amount
collected by it as TCS during a month.
The amount of TCS paid by the ECO to the
government will be reflected in the GSTR-2 of the actual registered supplier
(on whose account such collection has been made) on the basis of the GSTR-8
filed by the e-commerce operator. This TCS can be used at the time of discharge
of tax liability in respect of the supplies made by the actual supplier. The
operator is also required to file an annual statement in Form GSTR-9B by 31st
day of December following the end of the financial year in which the tax was
collected.
Q. How to
report in taxable outward supplies done through ECO in monthly GSTR-1?
1. Taxable outward supplies made to
registered persons through ECO is to be reported in point no. 4C of GSTR-1 for
every ECO & rate wise showing below details:
GSTIN of ECO b) GSTIN / UIN of every buyer c)
Invoice details d) Tax rate e) Taxable value f) Tax amount g) Place of supply
2. Taxable outward inter-state supplies made
to unregistered persons (where the invoice value is more than Rs. 2.5 Lakhs)
through ECO is to be reported in point no. 5B of GSTR-1 for every ECO &
rate wise showing below details:
a) GSTIN of ECO b) Invoice details c) Tax
rate d) Taxable value e) Tax amount f) Place of supply
3. Taxable outward inter-state supplies made
to unregistered persons (where the invoice value is upto Rs. 2.5 Lakhs) through
ECO is to be reported in point no. 7B of GSTR-1 for every ECO & rate wise
showing below details:
a) GSTIN of ECO b) Consolidated rate wise
outward supply c) Tax rate d) Taxable value e) Tax amount f) Place of supply
4. Taxable outward intra-state supplies made
to unregistered persons through ECO is to be reported in point no. 7A(2) of
GSTR-1 for every ECO & rate wise showing below details:
a) GSTIN of ECO b) Consolidated rate wise
outward supply c) Tax rate d) Taxable value e) Tax amount Reporting Mismatch
The details of supplies furnished by every
ECO in his month GSTR-08 will be matched with the corresponding details of
outward supplies furnished by the concerned supplier in his monthly or any
preceding month GSTR-01.
Where the details of outward supplies
declared by the ECO in his monthly GSTR-08 do not match with the corresponding
details declared by the actual supplier in his monthly GSTR-01, the discrepancy
shall be communicated to both persons.
The amount in respect of which any
discrepancy is communicated and which is not rectified by the supplier in his
GSTR-01 or by the ECO in his GSTR-08 for the month in which discrepancy is
communicated shall be added to the output liability of the said supplier in his
return for the next month succeeding the month in which the discrepancy is
communicated. The concerned supplier in whose output tax liability any amount
has been added, shall be liable to pay the tax payable in respect of such
supply along with interest on the amount so added from the date such tax was
due till the date of its payment. Notice to ECO u/s 52(12) Any officer not
below the-rank of Deputy Commissioner may issue a notice to the ECO to furnish
such details in respect of below items within a period of 15 working days from
the date of service of such notice:-
i. Supplies of goods or services effected
through such ECO;
ii. Stock of goods belonging to suppliers
held in the godowns or warehouse managed by such ECO and declared as additional
palace of business by such suppliers. Penalty for failure to comply with above
notice u/s 52(13): up to Rs. 25,000/- u/s 122 Additional Place of Business Many
sellers supplying goods through ECO may have common places of business,
especially if their goods are stored in a shared facility operated by the ECO.
This will result the same additional place of
business being registered by multiple suppliers. Under GST, there is no
restriction about use of a premise by multiple persons provided if he has
requisite documents for use of the premises as his place of business (like
ownership document, agreement with the owner etc.) and the registered person
shall have to comply with the requirements of maintaining records as per
section 35 of the CGS T Act, 2017 and Rules 56 to 58 of the CGST Rules, 2017.
Online Travel agents as ECO Online travel
agents providing services through digital or electronic platform will fall
under the category of ECOs liable to deduct TCS under Section 52 of the CGST
Act, 2017. In cases of transaction involving 2 or more e-commerce operators,
each transaction needs to be treated separately and examined according to the
provisions of Section 52 of the CGST Act, 2017 & TCS will be deducted accordingly.
Query 1:
Many a times it happens that ECO does not provide invoicing solution to the
Seller. In such cases, invoice is generated by the seller and received by the
buyer without ECO getting to know about it. The payment flows through the ECO.
Ans TCS is to be collected on the net taxable
value of such supplies in respect of which the ECO collects the consideration.
The amount collected should be duly reported in GSTR-8 and remitted to the
Government. Any such amount collected will be available to the concerned
supplier as credit in his electronic cash ledger.
Query 2:
Whether TCS is to be collected on exempted or zero-tax goods like books through
e-commerce operators.
Ans: TCS is to be collected on "the net
value of taxable supplies made through an e-commerce operators. When the supply
itself is not taxable, the question of TCS does not arise.
Query 3: If
someone is selling his own products through a web site hosted by himself, then
he shall come under the definition of an "electronic commerce
operator" as per section 2 (44) and 2(45) of the CGST Act, 2017. Is TCS
u/s 52 applicable to him?
Ans: According to Section 52 of the Act, TCS is
required to be collected on the' net value of taxable supplies made through it
by other suppliers where the consideration is to be collected by the e-commerce
operator. In such cases where someone is selling their own products through his
own website, there is no requirement to collect tax at source as per the
provisions of this Section. These transactions will be liable to GST at the
prevailing rates.
Query 4:
What is the impact of GST on goods returned after Sale?
Ans: An e-commerce company is required to collect
tax only on the net value of taxable supplies. In other words, the values of
supplies which are returned are adjusted in the aggregate value of taxable
supplies. As per explanation to sec. 52(1) : 'Net value of taxable supplies=
Aggregate value of taxable supplies through the operator Less: Supplies
returned Less: Supplies under Section 9(5) Place of supply in respect of Goods
sold through E-commerce operator under GST
Q1. Whether
E-commerce operator (ECO) like FILPKART, AMAZON, SNAPDEAL is to be considered
as agent or dealer of the manufacture / trader & provisions of section
10(1)(b) of IGST Act, 2017 as applicable to Bill to Ship to transactions shall
apply?
Ans. Sec. 2(45) of CGST Act, defines the term
'electronic commerce operator as any person who owns, operates or manages
digital or electronic facility or platform for electronic commerce; Sec. 2(45)
of CGST Act, defines the term 'Electronic commerce as means the supply of goods
or services or both, including digital products over digital or electronic
network. So, an ECO cannot be considered to acting as agent or otherwise as
required by section 10(1)(b) of IGST Act, 2017.
Further to clarify this point, attention is
invited to the opening lines of section 52(1) of CGST Act, which provides that:
'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. From the above, it may construed
that the ECO shall not be agent for the purpose GST. ECO is an independent
service provider and earning commission for the services rendered by it and its
primary responsibility is collect TCS @ 2% on 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.
From the above discussion, it is amply clear
that the ECO is not working in the capacity of agent or otherwise. It is only
providing the online market place services and earning subscription fees or
commission on the sale value from the listed sellers. So the provisions of
section 10(1)(b) of IGST Act, i.e. bill to ship to provisions are not
applicable to ECO.
Q2. In above
situation, how to determine place of supply in goods are sold by a manufacture
/ trader through E-commerce operator (ECO) & how to report these supply in
monthly GSTR-1?
Ans. In continuation with answer to Q1, the
subject transaction involves below 3 parties:
1. Seller;
2. Buyer;
3. ECO.
And it involves below 2 types of transaction:
1. Between Seller & Buyer Sale of Goods ;
2. Between Seller & ECO - Provision of
market place service.
For answering subject question, we shall be
concentrating only on 1st type transaction i.e. transaction between seller
& buyer sale of goods The seller shall discharge his GST liability on full
value of sales made to the buyer as is being done in normal sale. The place of
supply of goods shall be as per section 10 & 11 of IGST Act, 2017 except
section 10(1)(b) as bill to ship to provisions are not applicable in the given
case.
Disclaimer: The views expressed in this article are
strictly personal. The content of this document are solely for informational
purpose. It doesn't constitute professional advice or recommendation. The
Author does not accept any liabilities for any loss or damage of any kind
arising out of information in this article and for any actions taken in
reliance thereon.
