Introduction: This article discusses in detail about GST on E-commerce including the following:
• E Commerce Business Models
• Understanding on ECO
• Registration of ECO & applicable forms
• Specified services u/s 9(5)
• Tax collected at source
• Reporting Mismatch
• Declaration of warehouse maintained by ECO as additional place of business by multiple supplier - Any problem ?
• Place of supply
• Reporting in GSTR-1 by ECO
E Commerce Business Models
E-Commerce or Electronics Commerce business models can generally categorized in following categories.
• Business - to - Business (B2B)
• Business - to - Consumer (B2C)
• Consumer - to - Consumer (C2C)
• Consumer - to - Business (C2B)
• Business - to - Government (B2G)
• Government - to - Business (G2B)
• Government - to - Citizen (G2C)
Business-to-Business (B2B): Website following B2B business model sells its product to an intermediate buyer who then sells the product to the final customer. As an example, a wholesaler places an order from a company's website and after receiving the consignment, sells the end product to final customer who comes to buy the product at wholesaler's retail outlet.
Business-to-Consumer (B2C): Website following B2C business model sells its product directly to a customer. A customer can view products shown on the website of business organization. The customer can choose a product and order the same. Website will send a notification to the business organization via email and organization will dispatch the product/goods to the customer.
Consumer-to-Consumer (C2C): Website following C2C business model helps consumer to sell their assets like residential property, cars, motorcycles etc. or rent a room by publishing their information on the website. Website may or may not charge the consumer for its services. Another consumer may opt to buy the product of the first customer by viewing the post/advertisement on the website.
Consumer-to-Business (C2B): In this model, a consumer approaches website showing multiple business organizations for a particular service. Consumer places an estimate of amount he/she wants to spend for a particular service. For example, comparison of interest rates of personal loan/ car loan provided by various banks via website. Business organization who fulfills the consumer's requirement within specified budget approaches the customer and provides its services.
Business-to-Government (B2G): B2G model is a variant of B2B model. Such websites are used by government to trade and exchange information with various business organizations. Such websites are accredited by the government and provide a medium to businesses to submit application forms to the government.
Government-to-Business (G2B): Government uses B2G model website to approach business organizations. Such websites support auctions, tenders and application submission functionalities.
Government-to-Citizen (G2C): Government uses G2C model website to approach citizen in general. Such websites support auctions of vehicles, machinery or any other material. Such website also provides services like registration for birth, marriage or death certificates. Main objectives of G2C website are to reduce average time for fulfilling people requests for various government services.
Electronic Commerce has been defined In Sec. 2(44) of the CGST Act, 2017 to mean the supply of goods or services or both including digital products over digital or electronic network.
Electronic Commerce Operator (ECO) has been defined in Sec. 2(45) of the CGST Act, 2017 to mean any person who owns, operates or manages digital or electronic facility or platform for electronic commerce. In common parlance, provision of market place over internet is called e-commerce & the person who owns, operates or manages such market place is called Electronic Commerce Operator (ECO).
Registration of e-commerce operator
Compulsory Registration for ECO
As per sec. 24(x) of the CGST Act, 2017 the benefit of threshold exemption of Rs. 20L or 10L is not available to e-commerce operators and they are liable to be registered irrespective of the value of supply made by them. Compulsory Registration for person supplying through ECO As per Section 24(ix) of the CGST Act, 2017, the threshold exemption is also not available to persons supplying goods or services through e-commerce operator and they would be liable to be registered irrespective of the value of supply made by them where such electronic commerce operator is required to collect tax at source under section 52 of the CGST Act, 2017. Furthermore, as per sec. 10(2)(d), a composition dealer cannot supply goods through an ECO who is required to collect TCS u/s 52. Specified services u/s 9(5) However, a category of service providers as specified through notification u/s 9(5) are exempted from compulsory registration.
Examples are: Housekeeping services such as plumbing, carpentering etc. Radio taxi, Motorcab, Maxicab, Motor cycle, Hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes other those liable for registration u/s 22(1)
Notification No. 17/2017- Central Tax (Rate) dated 28.06.2017
Notification No 14/2017-lntegrated Tax (Rate) dated 28.06.2017
Notification No. 23/2017- Central Tax (Rate) dated 22.08.2017
Notification No 23/2017- lntegrated Tax (Rate) dated 22.08.2017
Such service suppliers are entitled for threshold exemption even if they are providing their service through ECO. In respect of such services, tax shall be paid by the ECO on behalf of the such service suppliers if such services are supplied through it and all the provisions of the Act shall apply to such ECO as if he is the supplier liable to pay tax in relation to the supply of such services. A similar provision for inter-State supply is provided for in Sec. 5(5) of the IGST Act, 2017.
Levy and collection Every e-commerce transaction involves below 3 parties:
And it involves below 2 types of transaction:
1. Between Seller & Buyer - Sale of Goods ;
2. Between Seller & ECO - Provision of market place service.
GST shall be levied on both transactions:
Between seller & buyer = GST on entire value of goods / services supplied (GST shall be paid by the supplier except in case of Sec 9(5) services)
Seller & ECO = GST on commission value / other charges earned by ECO for providing market platform to seller. (GST shall be paid by the ECO)
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. 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.
Tax Collection at source u/s 52 Every ECO [other than an ECO who is required to pay tax under section 9(5)] is required to collect TCS @2% (1% CGST + 1% SGST) of the net value of taxable supplies made through it by other supplier where consideration with respect to a taxable supply is to be collected by such ECO. ECO should make the tax collection during the month in which the consideration amount is collected from the recipient. The amount of TCS collected by the ECO is to be deposited to the Government within 10 days after the end of the month in which amount was so collected. Reporting Every ECO is required to furnish, a statement in FORM GSTR-8, electronically within 10 days after the end of such month, containing the details of outward supplies of goods or services effected through it, including the supplies of goods or services returned through it, and the amount collected by it as TCS during a month.
The amount of TCS paid by the ECO to the government will be reflected in the GSTR-2 of the actual registered supplier (on whose account such collection has been made) on the basis of the GSTR-8 filed by the e-commerce operator. This TCS can be used at the time of discharge of tax liability in respect of the supplies made by the actual supplier. The operator is also required to file an annual statement in Form GSTR-9B by 31st day of December following the end of the financial year in which the tax was collected.
Q. How to report in taxable outward supplies done through ECO in monthly GSTR-1?
1. Taxable outward supplies made to registered persons through ECO is to be reported in point no. 4C of GSTR-1 for every ECO & rate wise showing below details:
a) GSTIN of ECO b) GSTIN / UIN of every buyer c) Invoice details d) Tax rate e) Taxable value f) Tax amount g) Place of supply
2. Taxable outward inter-state supplies made to unregistered persons (where the invoice value is more than Rs. 2.5 Lakhs) through ECO is to be reported in point no. 5B of GSTR-1 for every ECO & rate wise showing below details:
a) GSTIN of ECO b) Invoice details c) Tax rate d) Taxable value e) Tax amount f) Place of supply
3. Taxable outward inter-state supplies made to unregistered persons (where the invoice value is upto Rs. 2.5 Lakhs) through ECO is to be reported in point no. 7B of GSTR-1 for every ECO & rate wise showing below details:
a) GSTIN of ECO b) Consolidated rate wise outward supply c) Tax rate d) Taxable value e) Tax amount f) Place of supply
4. Taxable outward intra-state supplies made to unregistered persons through ECO is to be reported in point no. 7A(2) of GSTR-1 for every ECO & rate wise showing below details:
a) GSTIN of ECO b) Consolidated rate wise outward supply c) Tax rate d) Taxable value e) Tax amount Reporting Mismatch
The details of supplies furnished by every ECO in his month GSTR-08 will be matched with the corresponding details of outward supplies furnished by the concerned supplier in his monthly or any preceding month GSTR-01.
Where the details of outward supplies declared by the ECO in his monthly GSTR-08 do not match with the corresponding details declared by the actual supplier in his monthly GSTR-01, the discrepancy shall be communicated to both persons.
The amount in respect of which any discrepancy is communicated and which is not rectified by the supplier in his GSTR-01 or by the ECO in his GSTR-08 for the month in which discrepancy is communicated shall be added to the output liability of the said supplier in his return for the next month succeeding the month in which the discrepancy is communicated. The concerned supplier in whose output tax liability any amount has been added, shall be liable to pay the tax payable in respect of such supply along with interest on the amount so added from the date such tax was due till the date of its payment. Notice to ECO u/s 52(12) Any officer not below the-rank of Deputy Commissioner may issue a notice to the ECO to furnish such details in respect of below items within a period of 15 working days from the date of service of such notice:-
i. Supplies of goods or services effected through such ECO;
ii. Stock of goods belonging to suppliers held in the godowns or warehouse managed by such ECO and declared as additional palace of business by such suppliers. Penalty for failure to comply with above notice u/s 52(13): up to Rs. 25,000/- u/s 122 Additional Place of Business Many sellers supplying goods through ECO may have common places of business, especially if their goods are stored in a shared facility operated by the ECO.
This will result the same additional place of business being registered by multiple suppliers. Under GST, there is no restriction about use of a premise by multiple persons provided if he has requisite documents for use of the premises as his place of business (like ownership document, agreement with the owner etc.) and the registered person shall have to comply with the requirements of maintaining records as per section 35 of the CGS T Act, 2017 and Rules 56 to 58 of the CGST Rules, 2017.
Online Travel agents as ECO Online travel agents providing services through digital or electronic platform will fall under the category of ECOs liable to deduct TCS under Section 52 of the CGST Act, 2017. In cases of transaction involving 2 or more e-commerce operators, each transaction needs to be treated separately and examined according to the provisions of Section 52 of the CGST Act, 2017 & TCS will be deducted accordingly.
Query 1: Many a times it happens that ECO does not provide invoicing solution to the Seller. In such cases, invoice is generated by the seller and received by the buyer without ECO getting to know about it. The payment flows through the ECO.
Ans TCS is to be collected on the net taxable value of such supplies in respect of which the ECO collects the consideration. The amount collected should be duly reported in GSTR-8 and remitted to the Government. Any such amount collected will be available to the concerned supplier as credit in his electronic cash ledger.
Query 2: Whether TCS is to be collected on exempted or zero-tax goods like books through e-commerce operators.
Ans: TCS is to be collected on "the net value of taxable suppliesmade through an e-commerce operators. When the supply itself is not taxable, the question of TCS does not arise.
Query 3: If someone is selling his own products through a web site hosted by himself, then he shall come under the definition of an "electronic commerce operator" as per section 2 (44) and 2(45) of the CGST Act, 2017. Is TCS u/s 52 applicable to him?
Ans: According to Section 52 of the Act, TCS is required to be collected on the' net value of taxable supplies made through it by other suppliers where the consideration is to be collected by the e-commerce operator. In such cases where someone is selling their own products through his own website, there is no requirement to collect tax at source as per the provisions of this Section. These transactions will be liable to GST at the prevailing rates.
Query 4: What is the impact of GST on goods returned after Sale?
Ans: An e-commerce company is required to collect tax only on the net value of taxable supplies. In other words, the values of supplies which are returned are adjusted in the aggregate value of taxable supplies. As per explanation to sec. 52(1) : 'Net value of taxable supplies= Aggregate value of taxable supplies through the operator Less: Supplies returned Less: Supplies under Section 9(5) Place of supply in respect of Goods sold through E-commerce operator under GST
Q1. Whether E-commerce operator (ECO) like FILPKART, AMAZON, SNAPDEAL is to be considered as agent or dealer of the manufacture / trader & provisions of section 10(1)(b) of IGST Act, 2017 as applicable to Bill to Ship to transactions shall apply?
Ans. Sec. 2(45) of CGST Act, defines the term 'electronic commerce operator as any person who owns, operates or manages digital or electronic facility or platform for electronic commerce; Sec. 2(45) of CGST Act, defines the term 'Electronic commerce as means the supply of goods or services or both, including digital products over digital or electronic network. So, an ECO cannot be considered to acting as agent or otherwise as required by section 10(1)(b) of IGST Act, 2017.
Further to clarify this point, attention is invited to the opening lines of section 52(1) of CGST Act, which provides that: 'Notwithstanding anything to the contrary contained in this Act, every electronic commerce operator (hereafter in this section referred to as the 'operator'), not being an agent, shall collect an amount calculated at such rate not exceeding one per cent., as may be notified by the Government on the recommendations of the Council, of 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 operator. From the above, it may construed that the ECO shall not be agent for the purpose GST. ECO is an independent service provider and earning commission for the services rendered by it and its primary responsibility is collect TCS @ 2% 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 operator.
From the above discussion, it is amply clear that the ECO is not working in the capacity of agent or otherwise. It is only providing the online market place services and earning subscription fees or commission on the sale value from the listed sellers. So the provisions of section 10(1)(b) of IGST Act, i.e. bill to ship to provisions are not applicable to ECO.
Q2. In above situation, how to determine place of supply in goods are sold by a manufacture / trader through E-commerce operator (ECO) & how to report these supply in monthly GSTR-1?
Ans. In continuation with answer to Q1, the subject transaction involves below 3 parties:
And it involves below 2 types of transaction:
1. Between Seller & Buyer Sale of Goods ;
2. Between Seller & ECO - Provision of market place service.
For answering subject question, we shall be concentrating only on 1st type transaction i.e. transaction between seller & buyer sale of goods The seller shall discharge his GST liability on full value of sales made to the buyer as is being done in normal sale. The place of supply of goods shall be as per section 10 & 11 of IGST Act, 2017 except section 10(1)(b) as bill to ship to provisions are not applicable in the given case.
The author is a practicing CA based in Delhi and is registered Insolvency Professional. He can also be reached at firstname.lastname@example.org
Disclaimer: The views expressed in this article are strictly personal. The content of this document are solely for informational purpose. It doesn't constitute professional advice or recommendation. The Author does not accept any liabilities for any loss or damage of any kind arising out of information in this article and for any actions taken in reliance thereon.