As per the Act, any person who owns, operates or manages a platform for the supply of goods or services over electronic network shall be an electronic commerce operator. Thus, companies like Flipkart, Amazon, Uber, Paytm, etc should fall under the definition of e commerce operator.
It is pertinent to note here that online retailers who are engaged in the supply of goods and services through their own platforms shall not be covered under the definition of an e commerce operator.
At present, e-commerce companies discharge their output through centralized registration. However, under GST, a person shall be liable to get registered in all the States from where he makes a taxable supply of goods and services. The location of the supplier shall determine the place from where the taxable supply of goods and services is made.
Person liable to pay tax
Under the current indirect taxes regime, VAT is payable by the supplier on the sale of goods and service tax is payable on the commission earned by the e commerce operator. Further, under the service tax laws, there is a concept of an aggregator under which service tax has to be paid by the aggregator, notwithstanding the fact that an aggregator is neither the provider nor the supplier of service. An aggregator is a person who owns and manages a web based application and enables a potential customer to connect with persons providing services of a particular kind under the brand name of the aggregator. Thus, for an e commerce company to qualify as an aggregator the services that providers of service provide though it should be under the brand name of e commerce company.
For example - Cab Aggregators like Ola and Uber enable customers to book cabs through their applications and these services are provided under the brand name of the Ola and Uber and not of individual cab drivers. Therefore, Ola and Uber are aggregators under the service tax laws and service tax on such services of renting of motor vehicle shall be payable by Uber and Ola.
Further, apart from the services notified for payment of tax by the e commerce operator, any other supply of goods and services shall be subject to tax collection at source.
Mechanism of Tax Collection at source
As per the Act, every e commerce operator shall collect an amount not exceeding 1% on the net value of taxable supplies made through it, where the consideration is collected by the e commerce operator. The net value of taxable supplies shall be computed by deducting the sales returns made and the supply of services in respect of which tax is payable by an e commerce operator under reverse charge.
It is pertinent to note that on such supplies, the supplier of goods and services must have charged CGST and SGST or IGST depending upon the nature of supply. Hence, the amount of tax collected by the e commerce operator has to be bifurcated into CGST, SGST and IGST. Where the supplier has charged
Returns to be filed by E-Commerce Operators
E-Commerce Operators are required to file the following Returns/Statements:
|Return Form||What to file||By When|
|GSTR-1||Details of outward supplies of taxable goods and/or services effected||10th of the next month|
|GSTR-2||Details of inward supplies of taxable goods and/or services effected claiming input tax credit||15th of the next month|
|GSTR-3||Monthly return on the basis of finalization
of details of outward supplies and inward supplies
along with the payment of amount of tax.
|20th of the next month|
|GSTR-8||Details of supplies effected through e-commerce operator and the amount of tax collected||10th of the next month|
|GSTR-9||Annual Return||31st December of next financial year|
GST Impact on various parties involved in this model:
|Party||Current regime||GST regime||Impact under GST|
|Seller||Charges VAT/CST to customer depending on movement of goods. The service tax charged by online marketplace (listing fee, facilitation fee, etc.) becomes a cost as the same cannot be utilised||Seller would charge CGST + SGST or IGST + additional tax, depending on the nature of transaction. All input taxes (including GST charged by online marketplace) would now be available as credit, leading to efficiency in costs||• Possible higher tax rate on output
• Seller can claim credit of all taxes on input side except additional tax (currently, excise duty, CST and service tax on procurements become a cost).
• Impact on pricing to be analyzed keeping in mind interplay between tax rate and credits
|Online marketplace||The online marketplace charges service tax to the vendor for providing facilitation services. The online marketplace can avail of service tax credit of input services. However, any VAT credit on purchase of goods becomes a cost.||The online marketplace would charge CGST + SGST or IGST depending on the nature of transaction. Such taxes would be now available as credit to the vendor. Further, the marketplace can now also avail of full credit of all inputs and input services.||The online marketplace charges service tax to the vendor for providing facilitation services. The online marketplace can avail of service tax credit of input services. However, any VAT credit on purchase of goods becomes a cost.|
While 'legal recognition' to e-commerce model in India as per GST Act is a welcome move, more needs to be done to address the complexities in execution of the same. The sooner they are settled, smoother will be the rollout of GST.