E Commerce Business- -GST Compliances
A major offshoot of the technological advancement is online business, thereby establishing E- Commerce as a dynamic and powerful tool of modern business landscape. With its growing significance it becomes imperative to understand the GST compliance requirements for this sector.
What is E Commerce ?
“ Electronic Commerce” or E-Commerce “ means the supply of goods or services or both, including digital products over digital or electronic network[1].” These services are provided by “ Electronic Commerce Operator” [here-in-after referred to as “ECO”] means “ any person who owns, operates or manages digital or electronic facility or platform for electronic commerce;” [2]
Models of E-Commerce Business
The E-Commerce Business can be conducted under several models of which the most common are as under :-
- Market Place Model-In this model the e-commerce platform acts as a market where multiple sellers offer their products/services to consumers, facilitating transaction. In this model no inventory is owned by the e-commerce platform. The platform merely routes the goods/services from the seller to buyer. The payment is routed through the ECO who pays the supplier after deducting their commission. Amazon, Flipkart, etc work on this model.
- Aggregator Model-This is more like a network model which organises various unorganised goods/service providers and the same are sold under one brand like Ola, Uber, etc
- Inventory Model-In both the above models the ECO does not own inventory leading to a third model of E-Commerce Business where the inventory is owned by the ECO platform. This is called the “inventory model” of E-Commerce Business.
GST Registration requirements for E-Commerce Business
GST requires mandatory registration of the following categories of persons engaged in E-Commerce:-
- Persons supplying goods or services or both through ECO who is required to collect TCS [other than supplies specified in Sec.9(5) of the Act]. The threshold limit relaxation applies only in relation to persons supplying services and not goods through ECO.
- Every ECO irrespective of turnover.
GST Compliance requirements for ECO
Attention is now sought to Sec. 52 of the Act [3] which mandates collection of Tax at Source [TCS] by ECO @ 0.5% on the net value of taxable supplies made through it by other suppliers provided the consideration with respect to such supplies is to be collected by the ECO. This provision does not apply to services notified u/s 9(5) of the Act.
Return compliance for ECO:-
- TCS collected on behalf of suppliers needs to be deposited by the ECO through its electronic cash ledger and a statement in GSTR 8 [containing details of each supplier] is to be furnished within 10 days of the end of the month
The suppliers can use the TCS so collected for discharge of their tax liabilities.
In relation to such services notified under Sec. 9(5) GST will be paid by the ECO on behalf of the service suppliers for services supplied through it as if the ECO is the supplier and all the provisions of the ACT would apply to the ECO as if it were the supplier. In other words in relation to notified services tax is to be paid by the ECO under Reverse Charge Mechanism. Such services notified under Sec 9(5) of the Act are - passenger transport services[4] accommodation services[5], restaurant services[6] and housekeeping services [7]
In relation to services notified u/s 9(5) for which tax is paid by the ECO, the supplier cannot claim ITC since the tax is paid by the ECO as a deemed supplier. However ECO can claim ITC subject to availability.
[1] Sec. 2(44) of CGST Act, 2017
[2] Sec. 2(45) of CGST Act, 2017
[4] provided by radio taxi, motor cabs and other forms of passenger transport
[5] provided by hotels, inns, guest houses, etc
[6] provided by restaurants excluding those located in specified premises
[7] Services by way of house keeping such as plumbing, carpentering, etc
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