Understanding E-commerce Operators under GST

Understanding E-commerce Operators under GST

In the rapidly evolving world of online commerce, electronic marketplaces have become instrumental in facilitating seamless transactions between buyers and sellers. With the advent of E-commerce, governments worldwide have been adapting their tax systems to keep pace with the digital economy. In India, the GST was introduced on July 1, 2017, and it brought about significant changes for E-commerce operators. 

What is an E-commerce Operator?

An E-commerce operator refers to any person or entity that owns, operates, or manages a digital platform that facilitates the supply of goods or services between suppliers and customers. Popular E-commerce platforms like MDND, Amazon, Flipkart, and eBay are classic examples of E-commerce operators. These operators act as intermediaries, bringing sellers and buyers together and facilitating transactions.

GST Registration of E-commerce Operator

E-commerce operators are required to register under GST, regardless of their turnover. They must obtain a unique Goods and Services Tax Identification Number (GSTIN) for each state where they operate. E-commerce operators must electronically apply for registration, duly signed, or verified through Electronic Verification Code (EVC), using the form GST REG-07. This is to be done either directly on the GST portal or from a facilitation center notified by the Commissioner.

When is the E-Commerce Operator liable to pay GST?

 The liability of an E-commerce operator to pay GST arises under the following circumstances:

1.Tax Collection at Source (TCS):

Under Section 52 of the Central Goods and Services Tax (CGST) Act, 2017, E-commerce operators are required to collect Tax Collection at Source (TCS) 0.5% CGST, 0.5% SGST from the consideration received by sellers from customers. This TCS is collected by the operator on behalf of the government.

The collected TCS is reflected in the electronic cash ledger of the supplier, and they can utilize it for discharging their GST liability when they file their GST returns.

2. Commission charged by E-Commerce operator:

An E-Commerce transaction is undertaken between three parties, i.e., the supplier, the buyer, and the E-Commerce operator.

Supply of goods and services happen between supplier and buyer using an E-commerce platform. For this, the e-commerce operator charges commission on which GST is applicable SAC 9962.

3.GST Payable under section 9(5) of the CGST Act 2017:

Section 9 (5) of the CGST Act is a special case where liability of tax falls on the e-commerce operator and he is treated as if he is the supplier of those services. This includes passenger transport services, housekeeping services, restaurant services (includes cloud kitchens) and accommodation services.

The e-commerce operators will be required to pay tax under the reverse charge method, regardless of whether the supplier is registered under GST. The actual supplier of those services under this section is entitled to a threshold exemption.

As the e-commerce operator himself is liable for collection and deposit of GST, there is no question of TCS U/s 52.

Returns to be submitted by E-Commerce Operator

1.GSTR-8:

GSTR-8 is a return to be filed by the e-commerce operators who are required to deduct TCS (Tax collected at source) under GST. GSTR-8 contains the details of supplies effected through e-commerce platform and amount of TCS collected on such supplies.

GSTR-8 filing for a month is due on 10th of the following month. For instance, the due date for GSTR-8 for June is on the 10th of July.

2.GSTR-9B:

Every electronic commerce operator required to collect TCS under section 52 shall furnish Annual Statement in Form GSTR – 9B.

3. GSTR-1 and GSTR-3B:

ECOs shall also be required to furnish their regular returns for commission income, fees or other charges as the case may be. This return is to be filed in Form GSTR-1 and GSTR-3B.

4. GSTR-9 and GSTR-9C:

An ECO whose aggregate turnover during a financial year exceeds five crore rupees shall also be liable to furnish an Annual Return (GSTR-9) along with a self-certified Reconciliation Statement (GSTR-9C).

If it exceeds two crore rupees but up to five crore rupees then he shall be liable to furnish GSTR-9 only and if it is up to two crore rupees then both GSTR-9 and GSTR-9C are not mandatory.

Impact of GST on E-commerce Operators

1.Improved Compliance:

GST has ushered in a unified tax system that simplifies compliance for E-commerce operators. By providing a centralized registration and tax collection mechanism, it has reduced the complexity associated with dealing with multiple state taxes.

2. Level Playing Field:

With GST, the distinction between online and offline businesses has reduced, creating a more level playing field for all market players. This has encouraged healthy competition and fostered the growth of the e-commerce sector.

3. Increased Tax Revenue:

The implementation of GST has widened the tax base and increased tax revenues for the government. This additional revenue can be channelled into development projects and public welfare initiatives.

Notification No. 34/2023- Central Tax dt 31st July,2023: - CBIC notifies waiving of the mandatory GST Registration Requirement for persons supplying goods through Electronic Commerce Operator

Under this notification, persons making supplies of goods through ECOs, who have an aggregate turnover within the specified limit, are exempted from GST registration. To avail such exemption, certain conditions are required to be fulfilled. 

1. such persons shall not make any inter-State supply of goods. 

2. such persons shall not make supply of goods through electronic commerce operator in more than one State or Union territory. 

3. such persons shall be required to have a Permanent Account Number issued under the Income Tax Act, 1961 (43 of 1961). 

4. such persons shall, before making any supply of goods through electronic commerce operator, declare on the common portal their Permanent Account Number issued under the Income Tax Act, 1961 (43 of 1961), address of their place of business and the State or Union territory in which such persons seek to make such supply, which shall be subjected to validation on the common portal.

5. such persons have been granted an enrolment number on the common portal on successful validation of the Permanent Account Number declared as per clause (iv). 

6. such persons shall not be granted more than one enrolment number in a State or Union territory. 

7. no supply of goods shall be made by such persons through electronic commerce operator unless such persons have been granted an enrolment number on the common portal; and 

8. where such persons are subsequently granted registration under section 25 of the said Act, the enrolment number shall cease to be valid from the effective date of registration.

Notification No. 37/2023- Central Tax, Dt 04th August, 2023: – Special procedure to be followed by the electronic commerce operators in respect of supplies of goods through them by unregistered persons

As per this notification, Electronic Commerce Operators shall: 

1. allow the supply of goods through it by the said person only if enrolment number has been allotted on the common portal to the said person. 

2. not allow any inter-State supply of goods through it by the said person.

3. not collect tax at source under sub-section (1) of section 52 in respect of supply of goods made through it by the said person; and 

4. Furnish the details of supplies of goods made through it by the said person in the statement in FORM GSTR-8 electronically on the common portal. Where multiple electronic commerce operators are involved in a single supply of goods through electronic commerce operator platform, “the electronic commerce operator” shall mean the electronic commerce operator who finally releases the payment to the said person for the said supply made by the said person through him.

Notification No. 36/2023- Central Tax dt 04th August, 2023: - Special procedure to be followed by the electronic commerce operators in respect of supplies of goods through them by composition taxpayers As per this notification, Electronic Commerce Operators shall: 

1. not allow any inter-State supply of goods through it by the said person. 

2. collect tax at source under sub-section (1) of section 52 of the said Act in respect of supply of goods made through it by the said person and pay to the Government as per provisions of sub-section (3) of section 52 of the said Act; and 

3. furnish the details of supplies of goods made through it by the said person in the statement in FORM GSTR-8 electronically on the common portal.