ACCOUNTING & TAXATION:
Starting From Definitions To Get Understanding of The Terms
Electronic Commerce – Means Supply of Goods or Services or Both, Including digital products over digital or Electronic Network.
Electronic Commerce Operator – Means Any Person Who owns, operates or Manages Digital or Electronic Facility Or Platform For Electronic Commerce.
So E-Commerce operator is the person Who Provides, Manages, owns Any electronic platform Which is Used to Sell The Products/Services.
- Possible Types of E-Commerce Operator As Per GST Provisions
There Can Be Three Types of E-Commerce Operators
- First, The E-Commerce Platforms on Which Those Notified Services Are Provided by Various Suppliers, Which Attract Reverse Charge Provisions. So, They Have to Follow the Provisions of Section 9(5) of CGST Act. Example- Ola, Uber, Rapido.
- Second, The Operators Who Have to Collect the TCS As Per GST Law on The Supplies Made by Other Suppliers Through Their Portal. They Have to Follow the Provisions of Section-52 of CGST Act.
First 2 types are mutually exclusive i.e. if one is collecting TCS on the supplies made through it, then it will not have to charge reverse charge on that type of supplies and If one is paying GST under reverse charge on supplies made through it, then he will not have to collect TCS on the value to such supplies.
- Third, the operator who owns and runs the digital platform for selling of its own goods/services, i.e. Services/goods of other suppliers are not supplied through it.
So, for these type of e-commerce operators the provisions of reverse charge or TCS will not apply.
2. Reverse Charge Applicability On Electronic Commerce Operator
section – 9(5)
RCM is applicable only if the services notified by govt. in notification no. 17/2017-CT(R), are supplied through the electronic platform of operator. the output tax on these services will be paid by the operator as if he is the supplier of these services, and all provisions of the act shall apply as if he is liable for paying the tax related to such supplies, for example: payment of tax, return filing etc.
TCS provisions shall not apply on such operators regarding such supplies.
if the Electronic Commerce Operator do not have physical existence in taxable territory, any person representing such e.c.o shall be liable to pay tax. otherwise he must appoint any person in taxable territory for the purpose of paying such tax.
Notification No. 17/2017-CT(R)– notified services under RCM
In case of following categories of services, tax shall be paid under RCM by the Electronic Commerce Operator
- services by the way of transportation of passengers by a radio-taxi, motorcar, maxi cab and motorcycle;
Example – OLA, UBER, RAPIDO.
- Services by the way of providing accommodation on hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes, except – where the person supplying such services through e.c.o is liable for registration u/s 22(1) of CGST act.
Example – Oyo Rooms, MakeMyTrip.
- Services by the way of housekeeping such as plumbing, carpentering etc.
Except – where the person supplying such services through e.c.o is liable for registration u/s 22(1) of CGST act.
Example – UrbanClap.
Question – whether RCM to be deducted if payment is not collected by the e-commerce operator?
Yes, in case of OPTA cabs pvt. Ltd. [2019 (20) GSTIL 161], appellate authority of advance ruling held that when transportation of passenger service is provided by the taxi drivers by using a software application, the e-commerce operator is liable to pay GST even if payment is not directly received by the e-commerce operator.
Thus, e-commerce operators, engaged in providing services notified under section 9(5) of the CGST act are required to develop their model in such a way that they can discharge the GST liability.
3. TCS Applicability On Electronic Commerce Operators
- Applicability & rate of TCS
An electronic commerce operator (not being an agent) shall collect the TCS at the rate of 1%(0.5% CGST and 0.5% SGST) as per section-52 on the net value of taxable supplies(other than supplies u/s 9(5) made through it by other suppliers and consideration of such supplies is to be collected by E.C.O
Main Points of Consideration Here Are:
- TCS is applicable only when supplies are made through its portal by other suppliers.
- And the consideration for such suppliers is collected by the operator and not directly by suppliers.
So TCS provisions will apply only when these conditions are fulfilled otherwise not.
- Separate TCS Registration for TCS Provisions And Its GST Returns
The operators have to get separate TCS collection number (separate from normal registration) from GST portal for collection of tax. So, there will be 2 registrations for the operators, 1 will be for TCS collection and 1 will be for filing other normal returns such as GSTR-1, 3B etc.
- Payment of TCS
The TCS amount collected shall be paid to govt. On or before 10th of next month.
So payment is on monthly basis.
- Monthly Return Of TCS
Monthly returns shall also be required to be filed in FORM GSTR – 8, containing details of the outward supplies of goods/services/both made including various
Supplies returned through it. Return is to be filed on or before 10th of next month.
- Annual Return of TCS
Every e.c.o who collects the TCS shall furnish the annual return containing details of outward supplies of goods/services made through it in form GSTR –9B,
On or before 31st December of following end of such financial year.
- Rectifications of Errors/Omissions Made In Monthly TCS Return
If any operator discovers any error, omission after filing any monthly return,
He shall rectify such error in monthly return of the month in which such error is noticed along with interest under section 50(1), however, rectification shall not be allowed after monthly return of September month of next financial year or actual date of filing annual return whichever is earlier.
4. Registration Thresholds & Other Relevant Points Regarding Registration
We will discuss registration from point of view of:
- E-commerce operators, and
- Suppliers over electronic platform
For E-Commerce operators
E-commerce operators that are required to collect TCS as per section 52 or charge reverse charge under section 9(5) are compulsorily required to get registration in each state from where it made supplies, irrespective of the amount of turnover. In GST law no relaxation is provided to e.c.o in term of registration threshold limit.
As per the GST law, the e-commerce operators are not allowed to get TCS registration in some states/uts, where they do not have any physical presence, and this became a challenge to few taxpayers.
To overcome this challenge, from 01st April 2020 onwards, the e-commerce operators not having a physical presence in any particular state/UT has been allowed to apply for TCS registration based on their registered head office/premises address.
GST registration form reg-07 has been duly updated for the above amendment.
Other e-commerce operators on which the provisions of TCS or RCM u/s 9(5) not apply, and making intrastate supplies, can use the threshold limit of Rs. 20 lakhs aggregate turnover computed on pan-India basis.
For Suppliers Over Electronic Platform
For supplier of services –
Vide Notification no. 65/2017-C.T., dated 15-11-2017, the central government, has given exemption limit for persons making supplies of services, other than supplies specified under section 9(5) of the said act through an electronic commerce operator, are given the benefit of threshold exemption limit of Rs. 20 lakhs.
And, persons supplying services mentioned in section 9(5) are not liable to be registered under GST even if their turnover is more than the threshold limit, as liability to pay GST is on the e-commerce operator. For example: olla drivers, carpenters etc. As per Notification no. 5/2017- Central Tax Dated 19/06/2017, a person who is engaged in making only supplies of taxable goods/services on which reverse charge applies is exempted from obtaining registration under GST.
It is noted that the exemption has been provided from registration itself, and registration provisions are squarely applicable also to IGST/SGST act, and hence even inter-state supplies are exempt from payment of GST on such supply of service upto threshold limit of exemption.
For supplier of goods –
Suppliers of goods are required to get compulsorily registered under GST even if their turnover is less than the threshold limit.
5. Normal registration and regular returns
Apart from the TCS provisions, the normal provisions of GST also applies on e-commerce operators which are not discussed much. Such as filing of normal GST returns such as GSTR-1 and GSTR-3B for the various supplies made by operators to the supplier of goods and services by providing the huge marketplace for there goods/services and charging commissions for such services to various sellers.
GSTR-1 and 3B
So for such services provided by operators to sellers, operators will file their GSTR-1 giving details of the commissions and GST charged on such commission from various sellers, and pass-on the ITC of such GST charged from the sellers who paid the commission for the sale of their goods.
They will have to get the normal registration number to file these returns.
Operators will file the GSTR-3B to claim the GST credit on the various input goods/services used in providing the online marketplace for various sellers. Such as ITC on website handling charges, telecom charges, laptops etc.
6. Place of Supply In E-Commerce Transactions
i. In Case of Supply of Goods
As per section 10(1) of IGST act, place of supply in case of goods shall be the place at which the movement of goods terminates for delivery to the recipient
Where goods are delivered to recipient on direction of third person, place of supply shall be the location of the third person.
So, there will be two possible scenarios in a typical e-commerce transaction of goods
- When shipping address will be same as billing address, in that case place of supply will be the place where goods are delivered.
- Where shipping address is different from that of billing address- in this case the location of the buyer will be considered as the place of supply and point of taxation as well. (billing address)
IP address of the buyer’s device will not be important.
Example 1: Intra-State Sales
- Hari of Mumbai, Orders A Mobile from Amazon. The Seller Happy Mobiles Is Registered In Nagpur, Maharashtra.
The place of supply is Mumbai in Maharashtra. The location of the supplier is Mumbai. Since place of supply is in the same state as that of the location of supplier, CGST & SGST will be charged.
Example 2: Intra-State Sales
- Radhe of Mumbai, Maharashtra Orders A Mobile Online. The Seller Party Is Registered in Ludhiana, Punjab.
The place of supply here is Mumbai, Maharashtra. Since the location of supplier (i.e. Punjab) is in different state when compared with the place of supply (i.e. Mumbai) IGST will be charged.
ii . In case of supply of services
As per section 12(1) place of supply of services shall be location of recipient if provided to registered person, if address of recipient is available on record, if both are not available then it will be location of supplier.