E-commerce and TCS in GST – An overview

BACKGROUND:

In the recent past globally the usage of technology has increased manifold across the world. We still remember around 10 years back in the year 2013, mobile phone and smartphone was in trend and to use apps like Facebook and WhatsApp was in everybody’s mind.  However, it was not possible to do online shopping, book cabs and hotels or mobile banking through smart phones.  However today after 10 years your mobile phone is your office through which online shopping, booking cabs and mobile banking etc. is possible easily. With UPI and other technologies the payment to vendors have become so easy and we are moving towards cash less economy.

In this article we are trying to explain the concept of e-commerce   where through electronic platform, business transaction can be undertaken and what will be its effects along with GST provisions at the time of    supply of goods merchandise or services through e commerce platform.  We also have given illustrations which will demonstrates the practical situation of various e-commerce transactions and provision related TCS.

Lastly we also compiled to give details about statutory filings and the forms to be filed by e-commerce operator on monthly / quarterly   yearly basis.

INTRODUCTION

In the GST context, the use of Internet network for buy and selling of goods and services over internet has been expanding massively.  Post introduction of the concept of e-commerce under GST law, government has introduced the concept of TCS with effect from 1.10.2018.    E-commerce can be of various types like B2B, B2C, B2G etc.  The concept of TDS and TCS is not something new for a business organisation / entity.  In Income Tax these concepts are used  for more than a decade. Under Income Tax laws,  TDS is deducted at the time of payment or  credit whichever is earlier for services are provided by the supplier to the customers.  Similarly, TCS, tax collected at source is also charged by specific persons (notified type of goods)  on the sales made by them to the customers.

Similarly, In the GST law the concept of TDS and TCS is introduced.  However, few fundamental differs from that of Income tax law.

We have given detailed elaboration of the concept of TCS and E-commerce operator under GST in this article.

What is TDS and TCS as per GST Law?

• Briefly As per GST law, when an invoice is given by the supplier to its customer for goods or services which falls within the category of Section 51 of CGST Act 2017, the customer will give the payment to the supplier after deducting the necessary TDS. The said TDS is deposited to the Government which can be used by the Supplier from making the payment of the output liability at the time of filing of its monthly return.  Majorly the TDS is applicable for government contract that is goods and services provided to Government companies and Government Department.

• As far as the provisions of TCS is concerned the same is applicable to an e-commerce operator who will deduct the TCS while making the remittance to the Seller while making the payment for supply of goods or services as per his terms of contract. The payment given by e-commerce operator to the supplier would be net of TCS and its commission and brokerage on the purchase & sales transaction executed on electronic commerce portal.

First of all, Let’s discuss the provisions of TCS as per Section 52 (1) of the CGST Act, 2017

As per Sec 52 (1) of the CGST Act, every e-commerce operator, not being an agent, shall, collect an amount calculated at such rate not exceeding 1% as may be notified by the government on the recommendations of the GST Council, 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 e-commerce operator. The amount so collected is called as the “Tax Collection at Source” (“TCS”)

                                                      TCS    

Apparently, only those e-commerce operators (not being agents) are liable to collect TCS who allows other suppliers to supply their goods or services through its platform and also collects consideration in respect of such supplies.

(In cases where consideration is not collected by E-commerce operator on transactions or done directly by buyer and seller this provision will not be applicable.)

Now let us go through 2 Important Definitions as below:

1. Section 2(44) - Electronic Commerce: “Electronic Commerce” means the supply of goods or services or both, including digital products over digital or electronic network.

2. Section 2(45) – Electronic Commerce Operator: “Electronic commerce operator" means any person who owns, operates or manages digital or electronic facility or platform for electronic commerce;

Now lets discuss Section 9(5) of the CGST Act 2017 in detail:

The Government has specified certain categories of services, the tax on intra-State supplies of which shall be paid by the electronic commerce operator if such services are supplied through it, and all the provisions of this Act shall apply to such electronic commerce operator as if he is the supplier liable for paying the tax in relation to the supply of such services:

Thus, Sec 9 (5) of the CGST Act works as an exception to the concept of TCS and in case of specified services therein, normal GST provisions as regards taxability will be applicable.  Similar provisions are also contained in UTGST Act vide Sec 7 (5) thereof and IGST Act vide Sec 5 (5) ibid.  Also, akin to CGST law, provisions are contained in SGST law of respective states.

Lets understand the specific services which are falling under specified services u/s 9(5) of CGST Act 2017?

Summary table below shall be helpful to understand the Provision

In this regard, the Government vide notification No.17/2017 – Central Tax (rate), notification no. 17/2017 – Union territory tax (rate) notification No.14/2017 – integrated tax (rate) all dated 28.06.2017 effective from 01.07.2017 has specified following categories of services:

• Services by way of transportation of passengers by a radio-taxi, motorcab, maxicab, motor cycle, omnibus or any other motor vehicle.

Example 4: Suppose Mr. A wants to travel 20 kms from one location of Chandigarh to other location of Chandigarh and he books ola than in this case, the estimated fare of Rs.500 Plus GST Rs.25. GST of Rs. 25 collected by ola shall be  paid to government by Ola  and balance amount Rs.500 (after deducting fees/commission etc) will be credited to the Driver. In this case the Total Turnover of Rs.500 shall be considered as Turnover of Driver, however liability of paying GST is kept on E Commerce Operator  i.e on Ola in this case. E commerce operator shall raise a separate Tax Invoice for its own Fees/Commission/Brokerage charged on the driver.

• Services by way of providing accommodation in 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-commerce operator is liable for registration in GST.

Example 5: Suppose Hotel Shimla located in Shimla is registered with MakeMyTrip website for providing Accommodation service in hotel. Assuming that Turnover of Hotel Shimla does not exceed INR 20,00,000 and accordingly they are not liable to be registered under GST. Suppose Mr B is a person who books hotel Shimla through the website of MakeMyTrip. The total price charged by MakeMyTrip for 1-night stay is Rs.5000 plus GST Rs.600. In this case MakeMyTrip will pay total Rs. 600 GST directly to the government and will pay balance amount Rs. 5000 (after deducting fees/commission etc) to the Hotel Shimla. In this case the Total Turnover of Rs. 5000 shall be considered as Turnover of Hotel Shimla, However liability of paying GST is on E Commerce Operator i.e on MakeMyTrip in this case. E commerce operator shall raise a separate Tax Invoice for its own Fees/Commission/Brokerage charged on the driver.

Example 6: If in the above case, Hotel Shimla turnover exceeded Rs. 20,00,000 and if Hotel Shimla was a Registered person under GST then in such case such services of accommodation would not fall u/s 9(5) of CGST Act 2017 and accordingly regular GST provisions would be applicable to Hotel Shimla and in such case TCS provisions would get applicable to MakeMyTrip when the Hotel Shimla is registered under GST.

• Housekeeping Services: Services by way of house-keeping, such as plumbing, carpentering etc, except where the person supplying such service through electronic commerce operator is liable for registration under sub-section (1) of section 22 of the said Central Goods and Services Tax Act.

Example 7: Suppose Mr C. is a person who books a Plumber for availing his Plumbing services through the website of Urban Clap. The total value of service availed by Mr. C is derived at Rs. 1000 plus GST. Urban Clap will raise a tax Invoice directly to Mr. C Rs. 1000 plus applicable GST suppose Rs. 180 and pay GST Rs. 180 directly to the government and will pay balance amount Rs. 1000 (after deducting fees/commission etc ) to the Plumber. In this case the Total Turnover of Rs. 1000 shall be considered as Turnover of Plumber, However liability of paying GST is on E Commerce Operator i.e on UrbanClap in this case. E commerce operator shall raise a separate Tax Invoice for its own Fees/Commission/Brokerage charged on the Plumber.

Example 8: If in the above case, Plumber’s turnover exceeded Rs. 20,00,000 and if Plumber was a Registered person under GST then in such case such services of Housekeeping service would not fall u/s 9(5) of CGST Act 2017 and accordingly regular GST provisions would be applicable to Plumber and in such case TCS provisions would get applicable to Urban Clap when the Plumber is registered under GST.

• Further, The GST Council in its 45^th meeting recommended to notify ‘Restaurant Service’ under Sec 9 (5) of the CGST Act. Accordingly, Supply of restaurant service other than the services supplied by restaurant, eating joints etc. located at specified premises.

“Specified premises means premises providing hotel accommodation service having declared tariff of any unit of accommodation above seven thousand five hundred rupees per unit (Rs 7500/- per unit) per day or equivalent.”

In this regard notification no.17/2021- central tax (rate) dated 18.11.2021 has been issued and clarified vide circular No.167/23/2021-GST dated 17.12.2021.

Example 9: Mr D places an Order on Restaurant India Gate through Zomato app. The total Order cost is Rs. 750 plus GST Rs. 38.  Zomato will raise a tax Invoice directly to Mr. D Rs. 788/- along with GST and pay GST directly to the government and will pay balance amount 750 (after deducting fees/commission etc) to the Restaurant India Gate. In this case the Total Turnover of Rs. 750/- shall be considered as Turnover of Restaurant India Gate, However liability of paying GST is on E Commerce Operator (Zomato). E commerce operator i.e Zomato shall raise a separate Tax Invoice for its own Fees/Commission/Brokerage charged on the Restaurant India Gate.

• The invoice for any of the services notified under Sec 9 (5) will be issued by the e-commerce operator themselves.

Specific example pertaining restaurant services provided through e-commerce operator:

Example-10: Hotel Oberoi which provides accommodation services having declared tariff of rooms starting from INR 8,500 per unit per day.  A restaurant unit of Hotel Oberoi is supplying restaurant service through Zomato.  This case is specifically excluded from the provisions of Sec 9 (5) of the CGST Act since the restaurant unit of Hotel Oberoi is specifically excluded from the list of Services notified u/s 9(5) of CGST Act 2017 because the declared tariff of Hotel Oberoi is above Rs. 7500 per day.  In such case, Hotel Oberoi suppose raising an bill of Rs. 2000 on a customer then in such case Hotel Oberoi will charge GST on restaurant services 2000 plus GST 5% i.e Rs. 100 and in this case Zomato will collect TCS @ 1% on Rs. 2000 as per Sec 52 of the CGST Act, and deposit Such TCS of Rs. 20 directly to the government and will pay balance amount of Rs. 2080 (2000+100-20) to Restaurant unit of Hotel Oberoi. The amount of Rs. 2080 will further reduced by commission and Brokerage of Zomato.

Case law: E-Commerce operator providing taxi aggregation service through its IT platform liable to pay tax u/s 9 (5)

The Appellant owns and operates the IT platform for the supply of service of transportation of passengers over the digital network.  On completion of the service Appellant sends an invoice to the customer through the digital network facility which is payable by the consumer to the taxi driver.  Therefore, the appellant is an “electronic commerce operator” as per Sec 2 (45) of the CGST Act engaged in supply of service of transportation of passengers provided ‘through’ digital platform and by virtue of Sec 9(5) ibid, e-commerce operator (the one who manages and operates the digital platform) is liable to pay tax on all intra-state supplies as if he was supplier – AAAR Karnataka in Re : OPTA Cabs (P) Ltd. [2019 (20) G.S.T.L. 161].

Now, let us understand the Provision of valuation under TCS

Tax is to be collected on net taxable value of goods or services supplied by other suppliers through e-commerce operator, to be calculated in the following manner [explanation to sec 52 (1) of the CGST Act]:

Thus, an e-commerce company is require to collect tax only on the net value of taxable supplies made through it i.e. value of the supplies which are returned (supply / sales return) may be adjusted from the aggregate value of taxable supplies made by each supplier.

Summary of applicability and non-applicability of TCS provisions

On the basis of above discussion, following can be summarised as regards the applicability of TCS provisions when supply of goods or services are made through an e-commerce operator:

Recently the CBIC has come up with Circular No. 124/06/2023 – GST dated 17.07.23 with regards to the clarification on TCS liability in case of  multiple e-commerce portal involved in a  single transaction.  So there can be a situation where there are more than one e-commerce operator involved in a single  supply of goods and service between buyer and seller.  In such case the clarification is given by CBIC which is summarised as below:

Issue No. 1: In a situation where multiple ECOs are involved in a single transaction of supply of goods or services or both through ECO platform and where the supplier-side ECO himself is not the supplier in the said supply, who is liable for compliances under section 52 including collection of TCS?

Ans: In this case, supplier-side ECO who finally releases the payment to the supplier for a particular supply made by the said supplier through him is required to collect TCS and deposit the same to the government and  will be required to make other compliances in accordance with section 52 of CGST Act with respect to this particular supply.

Example 11: Mr. X is a buyer of goods who wants to buy clothing merchandise through e-commerce operator named Myntra. Mr. Y is supplier of goods i.e. Clothing merchandise who is registered on e-commerce portal name Nykaa.  Both e-commerce operator i.e. Myntra and Nykaa are inter link to each other for supply of clothing merchandise and fashion accessories.  In this case when goods are supplied from Mr. Y to Mr. X through the e-commerce operators i.e. Myntra and Nykaa,  as per the clarification given by the CBIC in circular No.124/06/2023 the liability to collect TCS and deposit to the Government is on Nykaa who is the ECO of supplier Mr. Y.

Issue No. 2: In a situation where multiple ECOs are involved in a single transaction of supply of goods or services or both through ECO platform and the Supplier-side ECO is himself the supplier of the said supply, who is liable for compliances under section 52 including collection of TCS?

Ans: In such a situation, TCS is to be collected by the Buyer-side ECO while making payment to the supplier for the particular supply being made through it and deposit the same to the government and  will be required to make other compliances in accordance with section 52 of CGST Act with respect to this particular supply.

Example 12: Mr. X is the customer who wants to buy goods i.e. clothing merchandise through e-commerce operator.  He goes to the website of Myntra for buying the same (Myntra is a electronic commerce operator).  In this case the supplier of goods itself is Nykaa who otherwise in general parlance is also an e-commerce operator.  Hence in such situations where the ECO itself is the supplier of goods then the liability for collecting and depositing TCS to the Government will be on buyer side ECO i.e. on Myntra.

For more details regarding clarification regarding multiple e-commerce operator in a single supply kindly refer Circular No. 124/06/2023 – GST dated 17.07.23

Time limit for Payment

As per Sec 52 (3) of the CGST Act, the amount collected as TCS shall be paid to the credit of the appropriate government by the e-commerce operator within 10 days after the end of the month in which such collection is made.

Note: It is imperative here to note that payment of TCS is not allowed through input tax credit of e-commerce operator.

Monthly Statements

In terms of Sec 52(4) of the CGST Act read with rule 67(1) of the CGST Rules, every e-commerce operator who collects TCS, shall, furnish a monthly statement, electronically in Form GSTR-8, containing details of all amounts collected, towards outward supplies of goods or service or both effected through it, including the supplies of goods or services or both returned through it and the amount of TCS.

The details in Form GSTR-8 should be furnished within 10 days after the end of the month in which such collection is made.

Further, it is pertinent to note that Sec 52 (15) of the CGST has been inserted vide the  Finance Act, 2023 (w.e.f. the date yet to be notified), as to provide a maximum time limit of 3 years up to which an e-commerce operator can file its Form GSTR-8,  from the relevant due date of filing such return.  Furthermore, it has also provided an enabling provision for extension of such time limit of 3 years, subject to certain conditions and restriction for an e-commerce operator or a class of e-commerce operators.

Annual Statement       

In addition to the monthly statement, an e-commerce operator who collects TCS, shall also furnish an annual statement in Form GSTR-9B, electronically, containing following details [see 52 (5) of the CGST Act read with rule 80 (2) of the CGST Rules]-

• Outward supplies of goods or services or both effected through it,
• Supplies of goods or services or both returned through it,
• Tax collected at source as per sec 52 (1) during the financial year.

Details in Form GSTR-9B should be furnished before 31^st day of December following the end of such financial year.

However, for financial year 2017-18 annual return in Form GSTR-9B shall not be required to be filed as, provision of collection of TCS has been made effective only from 01.10.2018.

Further, it is to be noted that the provisions related to filing of GSTR-9B has not been notified as yet.

Summary of filing Statements by E commerce Operator