Demystifying GST on E-Commerce: What Every Seller and Operator Must Know

Background

The rapid growth of e-commerce has revolutionized the way goods and services are bought and sold, creating complex challenges for taxation authorities worldwide. In India, the introduction of the Goods and Services Tax (GST) brought uniformity but also introduced new compliance requirements, especially for e-commerce operators (ECOs) and sellers using these platforms. Understanding the GST implications on these transactions is crucial for businesses to ensure proper tax adherence, avoid penalties, and optimize their input tax credits. This article delves into the legal provisions, latest notifications, and practical aspects governing GST on e-commerce transactions, offering a comprehensive guide for sellers and operators alike.

1. Who is an E-Commerce Operator (ECO) under GST Law? Does Quick Commerce Fall Within its Ambit?

(1) Legal Definition:

As per Section 2(45) of the Central Goods and Services Tax Act, 2017,

Electronic Commerce Operator means any person who owns, operates or manages digital or electronic facility or platform for electronic commerce.

Further, Section 2(44) defines electronic commerce as:

the supply of goods or services or both, including digital products over digital or electronic network.

Thus, an ECO includes all digital platforms-whether websites or mobile applications-that facilitate the supply of goods or services, either directly or through third-party vendors.

(2) Inclusion of Quick Commerce Platforms

Quick Commerce platforms such as Blinkit, Zepto, Swiggy Instamart, BigBasket Now, etc., operate through mobile apps or websites and provide delivery of goods (mostly groceries and daily essentials) within minutes. These platforms:

• Facilitate supply of goods through a digital interface;
• Sometimes act as aggregators, and sometimes own inventory;
• Collect payments on behalf of sellers;
• Are involved in logistics, warehousing, and order management.

Therefore, based on the above attributes and judicial interpretation of "electronic commerce", Quick Commerce players clearly fall within the scope of an "E-Commerce Operator" under Section 2(45) of the CGST Act.

Whether the platform is:

• Inventory-based (owning goods), or
• Marketplace-based (connecting third-party sellers),

it qualifies as an ECO if it digitally facilitates any supply of goods or services.

(3) Clarification from CBIC / Government:

Although there is no specific notification naming "Quick Commerce", the definition in Section 2(45) is broad and inclusive, and has been interpreted to include all digital commerce models, including:

• Marketplaces (like Amazon, Flipkart)

• Aggregators (like Zomato, Swiggy)

• Quick commerce and hyperlocal delivery platforms (like Blinkit, Dunzo, Zepto)

Hence, Quick Commerce platforms are liable for GST compliances as ECOs

2. GST Implications for Persons Supplying Goods or Services Through E-Commerce Operators (ECOs)

(1) Mandatory Registration under GST

As per Section 24(ix) of the Central Goods and Services Tax Act, 2017,

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 shall be mandatorily liable to be registered, irrespective of the threshold limit of turnover.

Thus, any person making supplies via an ECO is compulsorily required to obtain GST registration, regardless of whether their aggregate turnover exceeds the exemption limit (₹20 lakh / ₹40 lakh / ₹10 lakh, as applicable).

(2) Nature of Supplies and Scope

Persons supplying through E-Commerce Operators (ECOs) may be engaged in the supply of goods-such as consumer electronics, groceries, and apparel-via platforms like Amazon, Flipkart, Blinkit, or the supply of services-such as home cleaning, beauty treatments, etc.-through platforms like UrbanClap , Housejoy, and others.

However, in cases where the supply falls under the purview of Section 9(5) of the CGST Act (e.g., passenger transport by radio taxi, accommodation through hotel booking platforms), the ECO is deemed to be the supplier, and thus, the individual service providers are not required to obtain GST registration or discharge GST liability on such supplies.

Section 9(5) of the CGST Act 2017

The Government may, on the recommendations of the Council, by notification, specify 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:

Provided that where an electronic commerce operator does not have a physical presence in the taxable territory, any person representing such electronic commerce operator for any purpose in the taxable territory shall be liable to pay tax:

Provided further that where an electronic commerce operator does not have a physical presence in the taxable territory and also he does not have a representative in the said territory, such electronic commerce operator shall appoint a person in the taxable territory for the purpose of paying tax and such person shall be liable to pay tax.

(3) GST Return Filing Requirements

Suppliers who sell goods or services through Electronic Commerce Operators (ECOs), except those providing services notified under Section 9(5) of the CGST Act, are mandatorily required to obtain regular GST registration, regardless of their turnover threshold. These registered suppliers must file GSTR-1 and GSTR-3B either monthly or quarterly under the QRMP scheme, as applicable. Additionally, they must reconcile their outward supplies with the details of tax collected at source (TCS) reported by the ECO in Form GSTR-8, to ensure accurate reporting and compliance with GST regulations.

(4) Availability of Input Tax Credit (ITC)

Registered suppliers selling through Electronic Commerce Operators (ECOs) are eligible to claim Input Tax Credit (ITC) on inputs, input services, and capital goods used in the course or furtherance of their business. However, the availability of ITC is subject to the fulfilment of the prescribed conditions under Section 16 of the CGST Act, 2017, which include:

(i) possession of a valid tax invoice or debit note issued by a registered supplier;

(ii) actual receipt of the goods or services; and

(iii) the corresponding tax must have been paid to the government by the ECO and reflected in the recipient's GSTR-2B.

Additionally, the supplier must ensure that the ITC is not restricted under Rule 36(4) and is not blocked under Section 17(5) of the Act.

(5) Restrictions on Composition Scheme

As per Section 10(2)(d) of the CGST Act, a person:

"engaged in making any supply of goods through an electronic commerce operator who is required to collect tax at source under Section 52 shall not be eligible for the composition scheme."

In exercise of the powers conferred by section 148 of the Central Goods and Services Tax Act, 2017 (12 of 2017) (hereinafter referred to as the said Act), the Central Government, on the recommendations of the Council, hereby notifies the electronic commerce operator who is required to collect tax at source under section 52 as the class of persons who shall follow the following special procedure in respect of supply of goods made through it by the persons paying tax under section 10 of the said Act (hereinafter referred to as the said person), namely: -

(i) the electronic commerce operator shall not allow any inter-State supply of goods through it by the said person;

(ii) the electronic commerce operator shall 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 subsection (3) of section 52 of the said Act; and

(iii) the electronic commerce operator shall 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.

Note : This notification shall come into force with effect from the 1st day of October, 2023.

(6) Compliance With TCS Provisions

Even though the responsibility to collect and deposit Tax Collected at Source (TCS) under Section 52 of the CGST Act, 2017 lies with the Electronic Commerce Operator (ECO), the sellers supplying through such platforms have certain compliance obligations. Sellers must ensure that the TCS credit is correctly reflected in their GSTR-2A/2B, claim the corresponding credit of TCS in their GSTR-3B under the appropriate table, and reconcile their outward supplies and tax collected with the details furnished by the ECO in Form GSTR-8. This reconciliation is essential to avoid mismatches and to ensure that the TCS credit is duly accounted for in the seller's electronic cash ledger, as per Rule 87(10) of the CGST Rules, 2017.

3. Place of Supply under GST for Sellers on E-Commerce Platforms

Under the Goods and Services Tax (GST) regime, the "place of supply" is a pivotal factor that determines whether a transaction is to be categorized as intra-State (leviable to CGST + SGST/UTGST) or inter-State (leviable to IGST). Erroneous determination of the place of supply can lead to the incorrect state collecting tax, with the only rectification mechanism being the payment of the correct tax (IGST) and seeking refund of the wrongly paid CGST and SGST.

As GST follows a destination-based consumption tax model, tax is levied in the state where the goods or services are actually consumed, regardless of the origin of the supply. Thus, in determining tax liability, the place where goods are delivered or services consumed becomes the decisive factor, and not the supplier's location.

This principle is equally applicable to e-commerce operators (ECOs) and sellers who supply goods or services via these platforms.

(1) Provisions for Place of Supply of Goods (Physical Goods)

Illustrative Examples

Example 1: Intra-State SaleMr. Raj, residing in Mumbai, Maharashtra, orders a mobile phone from Amazon. The seller, Happy Mobiles, is registered in Nagpur, Maharashtra.

• Place of supply: Mumbai, Maharashtra
• Supplier's location: Nagpur, Maharashtra
• Tax implication: As both are in the same state, CGST + SGST are applicable.

Example 2: Inter-State SaleMr. Raj of Mumbai, Maharashtra places an order on Amazon, and the seller Mobile Junction, is located in Bangalore, Karnataka.

• Place of supply: Mumbai, Maharashtra
• Supplier's location: Bangalore, Karnataka
• Tax implication: Since it is an inter-state transaction, IGST is applicable.

Example 3: Third-Party Delivery (Gift Delivery)Mr. Raj of Mumbai, Maharashtra orders a mobile phone on Amazon to be delivered to his mother in Lucknow, Uttar Pradesh. The seller, All Mobiles, is registered in Gujarat.

• Billing party: Mr. Raj (Maharashtra)
• Delivery party: Raj's mother (U.P.)
• Supplier's location: Gujarat
• Place of supply: Maharashtra (billing address of the recipient)
• Tax implication: Inter-State supply, IGST to be charged.

(2) Place of Supply of Digital Goods (e.g., eBooks)

The supply of digital goods such as eBooks is treated as a supply of services under GST. Accordingly, the place of supply rules under services apply.

Illustrative Examples

Example 4: B2B Sale of eBookM/s Sharma & Co., Chartered Accountants based in Mumbai, Maharashtra, purchases a finance eBook from All Books Ltd., a seller registered in Gujarat.

• Place of supply: Mumbai, Maharashtra
• Supplier's location: Gujarat
• Tax implication: Inter-State service supply, IGST applicable.

Example 5: B2C Sale of eBookMr. Raj from Bangalore, Karnataka, purchases a bestselling eBook from All Books Ltd. (registered in Gujarat).

• Place of supply: Bangalore, Karnataka
• Supplier's location: Gujarat
• Tax implication: Inter-State service supply, IGST applicable.

4. Value of Supply in Case of Electronic Commerce Operators (ECOs)

As per Section 15 of the CGST Act, 2017, the value of a taxable supply, including those facilitated through Electronic Commerce Operators (ECOs), shall be the transaction value, i.e., the price actually paid or payable for the supply of goods or services, provided the supplier and the recipient are not related, and the price is the sole consideration.

A. Supply by Registered Sellers through ECOs (Section 9(1) cases)

When a registered seller supplies goods or services through ECOs like Amazon or Flipkart, and where the liability to pay tax is on the seller (not ECO), the invoice is issued by the seller, and the value of supply is the amount charged to the customer, including any:

• Incidental expenses such as packing, shipping, delivery, or commission charges (if charged to customer),
• Charges for additional services before or at the time of delivery.

Example - Amazon or Flipkart Seller:

A seller registered in Delhi supplies a laptop through Amazon to a customer in Mumbai for ₹50,000 plus shipping charges of ₹500. The total value of supply will be ₹50,500 (₹50,000 + ₹500). GST will be charged on the full value.

Here, the supplier discharges the GST liability, and Amazon merely acts as a facilitator and collects TCS under Section 52.

B. ECO Deemed as Supplier (Section 9(5) Cases)

In certain notified categories of services, the ECO is treated as the deemed supplier, and is liable to discharge GST on the full transaction value under Section 9(5) of the CGST Act, 2017.

Such services include:

• Passenger transport services (e.g., Ola, Uber),
• Accommodation services through platforms (e.g., Oyo, Airbnb),
• Housekeeping services (e.g., Urban Company),
• Restaurant services provided through e-commerce (e.g., Zomato, Swiggy).

In these cases, the value of supply is the full consideration collected by the ECO from the customer, and the ECO discharges GST, not the actual service provider.

Example - Zomato or Swiggy:

A restaurant in Pune sells food worth ₹800 via Zomato. Zomato collects ₹80 as delivery charges and collects ₹880 from the customer.

• Value of supply = ₹880 (full amount charged to customer),
• GST liability is on Zomato (not the restaurant) under Section 9(5),
• Zomato issues the invoice in its own name.

Example - Urban Company:

A customer books a home cleaning service worth ₹2,000 through Urban Company. The individual service provider is unregistered. Urban Company collects ₹2,000 and pays the service provider ₹1,600 after commission.

• Value of supply = ₹2,000,
• GST is to be paid by Urban Company on the full value (₹2,000),
• The service provider does not issue an invoice.

C. Other Considerations Under Section 15

Inclusions under Section 15(2):

• Any platform fees, incidental charges, or additional services charged before or at the time of supply;
• Interest/penalty for late payment by the recipient;
• Price-linked subsidies (excluding Govt subsidies).

Exclusions under Section 15(3):

• Discounts shown on invoice at the time of supply;
• Post-supply discounts as per pre-agreed contracts and linked to specific invoices, with proportionate ITC reversal.

Summary Table

5. HSN Classification and GST Rate Applicability for E-Commerce Transactions

In the context of transactions facilitated through Electronic Commerce Operators (ECOs), both suppliers and ECOs are obligated to determine the correct classification of goods and services under the Harmonised System of Nomenclature (HSN) and apply the corresponding Goods and Services Tax (GST) rates in accordance with the law.

A. Supply of Goods by Sellers through ECOs

Sellers registered on e-commerce platforms are required to discharge GST liability at rates applicable to the goods supplied, as notified under the GST Tariff Schedule. The classification must be based on the relevant HSN code applicable to the product.

• The consideration received from the buyer is generally inclusive of GST.
• The tax invoice issued by the supplier must reflect the applicable HSN code, GST rate, and tax amount in accordance with Rule 46 of the CGST Rules, 2017.
• Correct classification is essential to ensure proper credit flow and avoid disputes during assessments or audits.

Illustration: A seller supplies mobile phones via Flipkart. Mobile phones are classified under HSN code 8517, attracting 12% GST. Accordingly, the seller must charge and disclose 12% GST in the tax invoice issued to the customer.

B. Commission and Platform Fees Charged by ECOs

The consideration charged by ECOs to suppliers in the form of commission, listing fees, marketing fees, or service charges constitutes a supply of services under GST. Such services are classified under HSN Code 9985 (Support Services), as per Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 (as amended).

• These services attract GST at the rate of 18% (CGST 9% + SGST 9% or IGST 18%, depending on place of supply).
• ECOs are required to issue tax invoices for such charges in compliance with the invoicing provisions under Section 31 of the CGST Act, 2017.

Illustration: If Amazon charges a seller ₹1,000 as platform commission, it must raise a tax invoice with 18% GST, amounting to ₹180. The total fee payable becomes ₹1,180. The seller may claim Input Tax Credit (ITC) of ₹180, subject to conditions under Section 16 of the CGST Act.

6. Return Filing, TCS Reporting & Reconciliation under Section 52 of CGST Act for ECOs and Sellers

Under the GST framework, Electronic Commerce Operators (ECOs) are subject to specific compliance obligations under Section 52 of the CGST Act, 2017, relating to Tax Collected at Source (TCS). Sellers transacting through ECOs must also align their return filing and Input Tax Credit (ITC) claims with the disclosures made by the ECO.

A. Responsibility of ECOs under Section 52

As per Section 52, ECOs are mandatorily required to collect tax at source at the rate of 1% (0.5% CGST + 0.5% SGST or 1% IGST) on the net value of taxable supplies made through their platforms by other suppliers (i.e., sellers), where consideration is collected by the ECO on behalf of the seller.

Net value of taxable supplies = Aggregate value of taxable supplies of goods or services or both made by all registered suppliers through the ECO minus the value of supplies returned to them.

B. Return Filing Obligations of ECO

ECOs are required to comply with the following filing obligations:

• Form GSTR-8: Monthly return to be filed by the 10th of the succeeding month disclosing the TCS collected.
• Deposit of TCS: The TCS collected must be deposited with the government by the 10th of the following month.
• Annual Statement: ECOs may be required to file an annual statement under Rule 67(4) if notified.

C. Reporting and ITC Claim by Sellers

Though the obligation to collect and deposit TCS lies with the ECO, suppliers (sellers) must undertake the following compliance measures:

Auto-Populated TCS Credit:

• The TCS collected by ECO and reported in GSTR-8 is auto-populated in the seller's GSTR-2A and GSTR-2B under the TCS section.

Claim of TCS Credit:

• The seller is eligible to claim this TCS amount as electronic cash ledger credit (not ITC) under Section 52(7).
• This credit can be used to discharge output tax liability.

Reconciliation:

• It is imperative for the sellers to reconcile the data reported in their GSTR-1 and GSTR-3B with the details reflected in GSTR-8 filed by the ECO.
• Discrepancies may lead to notices, delays in credit utilisation, or mismatches during departmental scrutiny.

Example: If Flipkart collects ₹1,000 as TCS from seller M/s ABC Enterprises for the month of April, the same will appear in M/s ABC's GSTR-2A/2B. M/s ABC can utilize this ₹1,000 from the electronic cash ledger while filing GSTR-3B for April.

D. Consequences of Non-Compliance

• Non-collection or short collection of TCS by the ECO may attract penalties under Section 122.
• Mismatch in data between ECO's GSTR-8 and seller's returns may result in departmental inquiries or denial of credit.
• Sellers must ensure timely reconciliation and accurate reporting to avoid such issues.

7. Payment of GST on Commission or Platform Fees by Electronic Commerce Operators (ECOs)

Under the Goods and Services Tax (GST) framework, Electronic Commerce Operators (ECOs) such as Amazon, Flipkart, Swiggy, Zomato, and others charge platform usage fees, commissions, or service charges from registered sellers operating through their platforms. These services are categorized as taxable supplies under GST and attract a standard GST rate under specified HSN codes.

The services provided by ECOs for facilitating the sale of goods or services fall under the category of "intermediary services" or "support services," classified under HSN Code 9985. The commission or platform service fee charged by ECOs is subject to GST at the rate of 18% (i.e., 9% CGST and 9% SGST for intra-state supplies or 18% IGST for inter-state supplies). This tax is payable on a forward charge basis, meaning the liability to pay GST rests with the ECO providing the taxable service.

The ECO is required to issue a valid tax invoice to the supplier/vendor for the commission or platform fee charged. This invoice must disclose key details including the value of the service, the applicable GST rate, the GSTINs of both parties, and the relevant HSN Code. The GST charged on such services must be reported by the ECO in their respective GST returns (GSTR-1 and GSTR-3B).

From the seller's perspective, such GST paid on ECO commissions is eligible for Input Tax Credit (ITC), provided the conditions prescribed under the CGST Act, 2017 are fulfilled. These include possession of a valid tax invoice, actual receipt of the service, matching of invoice details in GSTR-2B, and that the tax charged has been paid to the government by the ECO. Further, the ITC must not be blocked under Section 17(5) of the CGST Act.

For the purpose of determining the place of supply, if the recipient of the service (i.e., the seller) is a registered person, the place of supply shall be the location of the recipient. In case of an unregistered recipient, the place of supply shall be the location of the ECO. Accurate determination of the place of supply is essential to ensure the correct application of IGST or CGST/SGST, thereby avoiding tax mismatches.

In conclusion, while ECOs are responsible for discharging the GST liability on commissions charged to sellers, the sellers are entitled to claim the corresponding ITC, provided the procedural and documentary conditions are met. This ensures seamless credit flow and avoids cascading of taxes in e-commerce transactions.

Declaration

This article is prepared solely for the purpose of sharing knowledge and providing a professional understanding of the Goods and Services Tax (GST) framework related to E-Commerce Operators and sellers operating through them. The information presented herein is based on current laws, notifications, circulars, and official sources as available at the time of writing.

While every effort has been made to ensure accuracy, this article does not constitute legal or professional advice and readers are advised to consult appropriate experts or authorities before acting upon the information.

The author assumes no responsibility for any errors or omissions or for any outcomes resulting from the use of this knowledge.