GST ON E-COMMERCE OPERATORS

CMA N.K.NIMKAR
BACKGROUND :

• E-commerce operations were not covered under tax in the pre-GST period.
• No Sales Tax or CST was payable, as the transactions were not considered as Sale.
• However, in GST, the E-Commerce operators have been brought under GST network. In the recent past
and now in this critical period, E-commerce has attained much more importance.
• It is very important to know which activities are covered under E-commerce and who is liable to pay tax.
• In the same context, Online Information and Database access or Retrieval (OIDAR) services will also be
discussed.
• Tax Collection at Source (TCS) provisions will also be discussed.
 BUSINESS MODELS :

1) C to C (Consumer to Consumer) – Individual consumers may sell variety of products through

auction sites to other consumers. E.g. eBid, onlineAuction.com etc.
2) B to B (Business to Business) – Increased use of internet and reliability has increased the popularity
of this model. E.g. Indiamart.com, Oracle, SAP are major vendors of this model.
3) B to C (Business to Consumer) – Variety of goods and services are offered in this model. Eg.
Amazon, Cleartrip, IRCTC, Big Basket etc.
4) C to B (Consumer to Business) - C2B is a kind of economic relationship that is qualified as an
inverted business type. E.g. work in blogs or internet forums in which the author offers a link back
to an online business thereby facilitating the purchase of a product (like a book on Amazon.com).
DEFINITIONS :

• Section 2(44) of the CGST Act defines – Electronic Commerce as Supply of goods or
services or both including digital products over digital or electronic network.
In simple words, this implies buying and selling of goods and services by business and
consumers through electronic medium without paper document.
• Section 2(45) of the CGST Act defines – Electronic Commerce Operator as any person
who owns, operates or manages digital or electronic facility or platform for electronic
commerce.
Concept of E-commerce operator needs to be understood clearly.
OPERATING MODELS :

• Two models of electronic supply are available –

a) Supplier himself supplying goods and services through e commerce portal. E.g. a manufacturer selling his goods
through his own website. GST provisions are same to such suppliers. This is regular GST transaction and not E-
commerce Operator transaction. OR a person gets contact from JustDial and gets service from him directly. This is
also not E-commerce transaction as the supplier of service has just registered himself with JustDial. Supply
transaction is not taking place through electronic platform.
b) Secondly, the E-commerce operator makes available his portal to the different suppliers. Two types of models work
under this category –
(1) Marketplace Model – E-commerce operator makes available the portal to different suppliers. Customers place orders
on the portal – Makes payment to E-commerce Operator – Order diverted to supplier by Portal -Supply made by supplier
to customer - Payment made to supplier by E-commerce operator after deducting commissioner - E.g. Amazon or
Zomato.
OPERATING MODELS :

2) Aggregator Model - In this case, the E-commerce operator collects information of different
suppliers of goods and services. The suppliers are made partners for providing services. The services
are provided under the brand of E-commerce operator. Since aggregator is a brand, quality and price
has to be maintained by all the partners providing goods / services.
The aggregator makes available information of different products easily to the probable customers.
E.g. Ola / Uber. In this case, the service providers are connected with OLA and they provide service to
customers through the portal made available by OLA.
The difference between E-commerce operator and Aggregator is that in case of Aggregator, the
services are provided under a Brand of the Aggregator.
MODUS OPERANDI :

Modus Operandi of E-Commerce :

1) Between E-commerce Seller and End customer – E.g. ABC Ltd. Sales toys through Amazon and listed their products
on Amazon platform. X orders for a toy on Amazon. Hence this transaction is between ABC Ltd. And X. GST will
be paid by ABC on the price declared.
2) Between E-commerce operator and Supplier of goods – In the above example, if the price of toy is say 1000/- and
the commission of Amazon is 10%, the E-Commerce Operator (Amazon) will raise invoice of Rs. 100/-
(Commission) on the supplier (ABC Ltd)
Thus, there are two separate transactions in E-commerce transactions. The supplier of goods / services are liable to
pay GST even under E-Commerce Transactions. The E-commerce operator provides service to the suppliers by making
available the common portal and for that they charge to the suppliers separately.
REGISTRATION :

• Section 22(1) of the CGST Act, provides for registration to supplier of goods or services or both having aggregate
turnover exceeding Rs. 20 lacs. Hence every supplier having turnover more than Rs. 20 lacs is required to register.
• However, Section 24 of the CGST Act provides for registration to specified suppliers irrespective of turnover limit.
The categories of suppliers include –
i) Persons making inter-state supplies
ii) Casual Taxable Person.
iii) Person required to pay tax under reverse charge.
iv) Person who are required to pay tax under section 9(5) of the CGST Act. This provision is applicable to specified
services provided within the state by Electronic Commerce operators through it. Similar provision is available in IGST
Act for inter state supplies.
REGISTRATION :

v) non-resident taxable persons making taxable supply

vi) persons who are required to deduct tax under section 51, whether or not separately registered under this Act;
vii) persons who make taxable supply of goods or services or both on behalf of other taxable persons whether as
an agent or otherwise;
viii) Input Service Distributor, whether or not separately registered under this Act;
ix) persons who supply goods or services or both, other than supplies specified under sub-section (5) of
section 9, through such electronic commerce operator who is required to collect tax at source under section
52;
x) every electronic commerce operator
REGISTRATION :

xi) every person supplying online information and database access or retrieval services
from a place outside India to a person in India, other than a registered person; and
xii) such other person or class of persons as may be notified by the Government on the
recommendations of the Council.
• Thus E-commerce operators are required to register under GST irrespective of their turnover limit.
• Notification 65/2017 CT dt. 15/11/2017 provides that a person supplying services, other than
supplier of services under section 9 (5) of the CGST Act, 2017, through an e-commerce platform
are exempted from obtaining compulsory registration provided their aggregate turnover does not
exceed INR 20 lakhs.
REGISTRATION :

• Section 9(5) of the CGST Act, provides for payment of GST by E-Commerce Operator in
respect of specified services.
• Proviso to this section provides that if the E-commerce operator does not have a physical
presence in the taxable territory, he can appoint a representative in taxable territory who will
be responsible for payment of tax.
• Further, it is also provided that if there is no representative in taxable territory, the E-
commerce operator shall appoint a person who will be responsible to do the compliances.
• The above provisions are important for the operators providing services from outside India.
REGISTRATION :

Category of services covered u/s. 9(5) of the CGST Act –

• This Section provides that services, as may be notified and provided through e-commerce
operator, the tax shall be paid by the E-commerce Operator.
• The Government has issued two notifications specifying the services provided through
Electronic Commerce Operator and the tax is payable by the Electronic commerce
operator. The details are given in the table annexed below :
SPECIFIED SERVICES :

Sr.No. Nature of service Supplier of Person liable to Notification No.

service pay GST
1 Transportation of Any person Electronic 17/2017 –CT (Rate) &
passengers by radio taxi, Commerce 14/2017 –IT(Rate) dt.
motor cab and motor cycle operator 28/6/2017
2 Providing accommodation Any person Electronic 17/2017 –CT (Rate) &
in hotels, inns, guest except liable Commerce 14/2017 –IT(Rate) dt.
houses, clubs, campsites or for regn. u/s operator 28/6/2017
other commercial places 22(1)
meant for residential or
lodging purposes
3 Services by way of house- Any person Electronic 23/2017-CT (Rate) &
keeping, such as plumbing, except liable Commerce 23/2017-IT (Rate) dt.
carpentering etc for regn. u/s operator 22/8/2017
22(1)
SPECIFIED SERVICES :

• In case of sr. no. 2 and 3, two situations can arise –

1) The service provider providing services through E-commerce operator does not take
registration being his turnover less than Rs. 20 lacs. E commerce operator pays tax.
2) The service provider is registered under GST and he provides services through E-
commerce operator. In this case, there will be two transactions –
a) Between actual service provider and actual service receiver.
b) Commission amount receipt by Electronic Commerce Operator and actual supplier of
service.
SPECIFIED SERVICES :

• Service providers providing services other than those notified and mentioned above are
required to obtain registration, if their turnover exceeds Rs. 20 lacs.
• If the service providers are providing only those services which are notified and
mentioned above, are not required to obtain registration even if their turnover is more
than Rs. 20 lacs, as the liability to pay tax is on the E-commerce operator.
• The below table will clarify the position in more details :
 WHO SHOULD PAY GST :

Nature of transaction Examples Regn by seller ? GST to be paid by

Sale of goods Amazon, Flipcart Seller Seller
Hotel booking – Hotel Goibibo, Make my Hotel not required E-commerce operator.
turnover < 20 lacs trip to register.
Hotel booking – Hotel Goibibo, Make my Hotel required to Hotel
turnover > 20 lacs trip register
CAB aggregator – OLA , UBER Car owner if E-commerce operator, even if
irrespective of turnover turnover > 20 lacs the car owner is registered.

Housekeeping services – Urban clap Service provider E-commerce operator.

turnover < 20 lacs not required
House keeping services – Urban Clap Service provider Service provider.
turnover > 20 lacs
PLACE OF SUPPLY :

• Place of supply is very important concept in GST. It determines the Place of supply of goods and
services and accordingly the taxes are charged.
• Taxes move along with goods or services. GST is destination based tax.
• Place of Supply of goods (other than import / export) – Provisions of Section 10 of IGST Act
applicable.
• Place of supply of services – Provisions of Section 12 and 13 of the IGST are applicable.

• In E-commerce transactions also it is very important and critical. Some examples are discussed in
the below table –
PLACE OF SUPPLY :

• Section 10 (a) – Where physical movement of goods takes place – Place of supply is where
the goods are finally delivered.
• Section 10(b) – Where the goods are delivered to any other person at the instructions of third
person, the place of supply is the principal place of business of such person.
• Section 12 – Supplier and Recipient are located in India –
• Section 12 (3)(b) – Hotel accommodation – Place of supply – where the property is located.
• For Residual services (Other than mentioned in sub-section (3) to (14) – Place of supply is
the Location of recipient. For unregistered person – address on record.
PLACE OF SUPPLY : EXAMPLES

Sr.No. Nature of Transaction Place of supply Taxes

1 A from Mumbai orders goods on It is assumed that A has CGST and SGST.
Amazon and asks to deliver goods to received the goods.
Ahmedabad. X supplier from Hence place of supply
Maharashtra processes the order and is Mumbai.
delivers the goods to Ahmedabad.
2 A from Mumbai orders books on Mumbai. IGST
Amazon. Supplier from Karnataka
processes the order.
3 A from Mumbai orders goods on Mumbai IGST
Amazon. Supplier from Gujarat
processes the order and delivers goods
to Mumbai.
INVOICING :

• Every supplier has to maintain proper records of supplies made to registered persons and
aggregate supplies to unregistered persons through e-commerce platform.
• Invoice should be carefully prepared incorporating the mandatory details as per Rule 46
of CGST Rules – particularly the GST No. of buyer, Place of supply, Place of delivery,
Taxes charged etc.
ROUTINE PROCEDURES :

• If the service provider is liable to register as his turnover is more than Rs. 20 lacs, then
the service provider is liable for complying with other provisions viz. filing of GSTR-3B,
GSTR-1.
• If the E-commerce operator is liable to pay GST, he is liable for filing returns in form
GSTR-1 and GSTR-3B.
• The provisions of filing GSTR-9 and GSTR-9C are also applicable to E-commerce
operators, supplier of goods / services also.
• Other provisions like RCM are also required to be followed by E-commerce Operators.
TAX COLLECTION AT SOURCE :

• TCS provisions are made effective from 1 st October, 2018.

• Section 52(1) of the CGST Act provides that the E-Commerce operator shall collect tax @ 1% 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.
• The Net value implies the amount reduced after considering goods returned.
• Thus, when the customers orders are processed through the Operator’s platform, the payment for such supplies are
received by the operator, then the operator has to remit the value of supply to the original supplier of goods. At
this stage, the E-commerce Operator has to collect 1% tax and deposit the same to the Govt. account. (0.5%
CGST + 0.5% SGST or 1% IGST)
• The TCS amount deposited with Govt. is reflected in the Electronic Cash Ledger of the supplier and the same can
be claimed and used for tax payment by the supplier. (Sec. 52(7))
TAX COLLECTION AT SOURCE :

• E.g. Goods worth Rs. 10000/- are sold through the E-commerce platform. The supplier will charge
18% GST – Rs. 1800/-. Hence total value of invoice will be Rs. 11,800/-.
• Suppose, goods worth Rs. 1000/- are returned during the month.
• The E-commerce operator charges Rs. 500/- as their commission to the supplier of goods.
• The net value to be considered for the purpose of calculation of TCS will be –
Net Value of goods – Rs. 9000/- (Taxes not to be considered) + service value Rs. 500/- = Rs.
9500/-. 0.5% CGST – Rs. 48/- + 0.5% SGST Rs. 48/- will be deducted as TCS and paid to Govt.
• E-commerce operator will remit the balance amount to the supplier.
TAX COLLECTION AT SOURCE :

• The TCS provisions apply only in the cases where the supplier is liable to pay GST. The provisions do
not apply to exempt supplies.
• Suppliers supplying goods on their own are not covered under TCS provisions. Also, if the E commerce
operator is not receiving the payment, but the same is received by the actual supplier directly, TCS
provisions are not applicable.
• The E-commerce operator is required to obtain separate registration for depositing TCS.
• Registration is required to be taken in every state as the obligation to collect tax is on every intra state
and inter state transaction.
• The TCS is to be deposited to Govt. account by 10 th of the following month. (Sec.52(3))
• Person who is engaged in making any supply of goods through an electronic commerce operator who is
required to collect tax at source under section 52 can’t take registration under composition scheme u/s 10.
TAX COLLECTION AT SOURCE :

• TCS provisions are not applicable where the E-commerce operator is liable to pay tax under RCM.
• TCS to be collected in the month of supply and not in the month when consideration is received.
E.g. supply is made on 30th October and payment is received in November on 15th . TCS to be paid
by 10th of November only.
• The operator is also required to file a statement in form GSTR-8 showing the details of outward
supplies of goods or services or both including returns received and the amount collected by 10 th of
the following month. (sec. 52(4))
• TCS payment has to be done in cash only. (Input tax credit cannot be utilised.)
• The operator is also required to file Annual return in form GSTR 9-B by 31 st Dec. – Sec.52(5)
CORRECTIONS AND MATCHING :

• Section 52 (6) of the CGST Act provides that if the operator discovers any omissions or
wrong filing of information in the monthly return, he can rectify the same in the
subsequent return, subject to payment of interest. However, no such corrections are
allowed after the due date for furnishing statement for September following the end of
financial year or filing of annual return whichever is earlier.
• It is important that the details filed by Operator in GSTR-8 must match with GSTR-1
filed by the supplier. In case of discrepancies both the parties are communicated vide
GST-MIS-3 to the supplier and GST-MIS-04 to the operator. As per CGST Rule 79(2)
and (3), both the supplier and operator should rectify the statements.
CORRECTIONS AND MATCHING :

• If the rectification is not done in the month of communication, and if the value of outward
supply declared by the operator is more than that of supplier, the tax liability to the extent
of discrepancy is added in the monthly outward liability of the supplier. The supplier will
be required to pay this additional liability along with interest. (Sec.52(11))
• E.g. Value declared by Supplier in GSTR-1 is Rs. 5 lacs and by E-commerce operator in
GSTR-8 is Rs. 5.50 lacs, the difference needs to be reconciled.
• The various issues relating to E-commerce Operator and TCS have been clarified in the
FAQ issued by the Law Committee of GST Council on 28/09/2018 and FAQ on GST
Chapter 8 Q issued by CBI&C on 15-12-2018.
INFORMATION BY OFFICERS :

• Section 52(12) provides that any officer not below the rank of Deputy Commissioner may serve notice
on the E-commerce operator, requiring him to furnish information relating to-
a) supplies of goods or services or both effected through such operator during any period;
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.
• Sec. 52(13) - The operator is required to furnish the information within 15 days of serving such notice.
• Sec. 52(14) - Failure to submit such information attracts penalty of Rs. 25000/- and the operator is also
liable for other actions u/s 122 wherein penalty equal to tax evaded can be imposed.
OIDAR SERVICES :

• In the digital world, mode of business has changed drastically.

• Business is now possible without one to one interaction, without paper, without going to market……
• Online Information and Database Access or Retrieval services (OIDAR) is advanced form of service
provided through internet without manual interface.
• In order to classify the service into OIDARs, the services should necessarily be mediated by
information technology over internet and nature of such supply should involve minimal human
intervention.
• OIDAR services requires a special treatment in GST as these services can be provided from remote
locations. Hence, their taxation is a challenge.
OIDAR SERVICES :

Section 2(17) of the IGST Act, 2017 states that, “Online information and database access or
retrieval services” mean services whose delivery is mediated by information technology
over the internet or an electronic network, nature of which renders their supply essentially
automated, involving minimal human intervention & impossible to ensure in the absence of
information technology and includes electronic services such as,
• Advertising on the internet;
• Providing cloud services;
• Provision of movie, software, e-books, music, and other intangibles through
telecommunication networks or internet;
OIDAR SERVICES :

• Providing data or information, retrievable or otherwise, to any person in electronic form

through a computer network;
• Online supplies of digital content (movies, television shows, music and the like);
• Digital data storage; and
• Online gaming.
Thus services provided through Google Drive, Hotstar, Amazon Prime Video etc. are
covered under OIDAR services.
OIDAR SERVICES :

Services not covered under OIDAR services –

• Technical, financial, legal opinions communicated through e-mails.
• Ticket booking, hotel booking services provided through internet.
• Professional courses conducted through internet.
• Offline physical repair services of computers.
• Repairs of hardware, software provided from remote location.
• Internet services (BSNL broadband) etc….
The below table gives some examples of OIDAR services -
OIDAR SERVICES - EXAMPLES :

Service Whether service Whether automated and Whether

given through impossible to provide in OIDAR service
IT over absence of IT ? – Yes / NO
internet ?
PDF document emailed Yes No No
by provider
PDF document Yes Yes Yes
automatically mailed by
providers system
PDF document Yes Yes Yes
automatically
downloaded from site
Photographs available for Yes Yes Yes
automatic download
OIDAR SERVICES - EXAMPLES :

Service Whether service Whether automated and Whether

given through IT impossible to provide in OIDAR service
over internet ? absence of IT ? – Yes / NO
Online course Yes Yes Yes
provided through
lectures and
downloading material
Same above + live Yes No No
tutor
Individual prepared Yes No No
reports, photographs
sent in digital form
PLACE OF SUPPLY - OIDAR SERVICES :

• Section 13 of the IGST Act has specific provisions relating to determination of Place of
Supply where the Location of the Supplier of service OR Recipient of Service is out of India.
• Section 13 (12) of the IGST Act provides that the place of supply of online information and
database access or retrieval services shall be the location of the recipient of services.
Explanation.––For the purposes of this sub-section, person receiving such services shall be
deemed to be located in the taxable territory, if any two of the following noncontradictory
conditions are satisfied, namely:––
(a) the location of address presented by the recipient of services through internet is in the
taxable territory;
PLACE OF SUPPLY - OIDAR SERVICES :

(b) the credit card or debit card or store value card or charge card or smart card or any other card by which the
recipient of services settles payment has been issued in the taxable territory;
(c) the billing address of the recipient of services is in the taxable territory;
(d) the internet protocol address of the device used by the recipient of services is in the taxable territory;
(e) the bank of the recipient of services in which the account used for payment is maintained is in the taxable
territory;
(f) the country code of the subscriber identity module card used by the recipient of services is of taxable
territory;
(g) the location of the fixed land line through which the service is received by the recipient is in the taxable
territory.
APPLICABILITY OF GST IN OIDAR SERVICES:

Location of Location of recipient Taxability Forward charge / Examples

supplier of of service Reverse charge
service
India India Yes Forward charge Hotstar regd.in
India allows
Indian viewers to
watch movies.
Outside India India (Registered) Yes RCM Indian regd
company asks
foreign co. to
provide web
services.
Outside India India (unregistered) Yes Forward charge Unregistered
person watching
movies on Netflix
APPLICABILITY OF GST IN OIDAR SERVICES:

Location of Location of recipient Taxability Forward charge / Examples

supplier of of service Reverse Charge
service
India Outside India No (Export NA Hotstar allows
service) foreigners to
watch movies.
India Outside India Yes (If any two Forward Charge Hotstar allows
conditions in person outside
provision to India to watch
Sec.13(12) movies who pays
fulfilled) through Credit
card in Indian
Bank and address
is in India.
REGISTRATION :

Section 24 (xi) of the CGST Act has provision to compulsory registration for suppliers
providing ODIAR services from outside India to a person in India, other than registered
person.
This means any ODIAR service provided from outside India to an unregistered person in
India, the tax will be paid by the service provider by obtaining registration in India.
 PAYMENT OF TAX :

Section 14 of the IGST Act prescribes special provisions for payment of tax by ODIAR
service providers –
a) ODIAR service provider located in non taxable territory and provides service to a
unregistered person in India, the liability to pay tax is on the service provider – i.e. the
person located outside India.
b) If such services are provided through an Intermediary, registered in India, who
facilitates supply of such services, shall be deemed to be the recipient of service and
supplying such service to unregistered person in India.
 PAYMENT OF TAX :

c) The supplier of ODIAR services providing services from outside India to an unregistered
person in India, is required to take a single registration for payment of IGST. Further, if
there is a person in taxable territory representing the supplier of service, he shall get himself
registered on behalf of the supplier and pay the taxes.
d) If the supplier does not have a physical presence or representative in the taxable
territory, he may appoint a person representing him and such person shall be liable to pay
the tax.
 RETURNS :

• OIDAR service providers supplying services from taxable territory are required to file
regular returns under GST – i.e. GSTR-1, GSTR-3B and pay the taxes before 20 th of the
following month.
• The above category service providers are also required to file annual return in Form GSTR-
9 and GSTR-9C
• OIDAR services provided by suppliers located outside India are required to file monthly
return in Form GSTR-5A every month before 20th of the following month.
• OIDAR service providers located outside India are exempted from filing Annual return in
Form GSTR-9 and GSTR-9C (Notification No. 30/2019 CT dt. 28/06/2019)
 OTHER ISSUES :

• Tea Board of India, being the operator of the electronic auction system for trading of tea across the
country including for collection and settlement of payments, admittedly falls under the category of
electronic commerce operator liable to collect Tax at Source.
• CBIC vide circular No. 74/48/2018-GST dt. -5/11/2018 has clarified that TCS provisions are applicable for
Tea Board of India. Tax to be collected from the payment to be made to the sellers (tea producers) on the net
value of supply of goods and also on the brokerage paid to be auctioneers. Tea Board is covered under the
provisions of E-commerce operator.
• E-way bill – Information in Part A of Form EWB-01 may be furnished by e-commerce operator or courier
agency on an authorization from consignor and a unique number will be generated on the E-way bill Portal.
(Notfn 12/2018 – CT).
 TO SUMMARISE :

• Important to understand who is required to register in case of E-commerce operator.

• Specific services are notified where the tax is to be paid by the E-commerce operator.
• Place of supply is very important and critical issue and needs to be dealt with carefully.
• E-commerce operators are liable to collect TCS and pay to the government.
• Separate registration is required in each state for collecting TCS.
• OIDAR services are also critical and proper interpretation needs to be done.
Thanks for your patient hearing ……..