In the present scenario of lockdown and social distancing, every entrepreneur is looking to sell the goods & services on e-commerce platform offered by various e-commerce operators(ECO) (Amazon, flipkart etc.) i.e. online sale through ECO. In this article, we would highlight the important aspects under the Goods & Service Tax Act, 2017 (GST Legislation) and Income Tax Act, 1961, in connection with online sale through ECO.
GST legislation
a) ECO can be broadly divided into 2 categories
i) Where Consideration for the online sale through ECO, is collected by ECO.
ii) Where Consideration for the online sale through ECO is NOT collected by ECO but collected by Supplier Directly
b) The GST compliance for supply made by Supplier through ECO is summarized as under:-
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S.No. |
Particulars |
Nature of Supply through ECO |
Consideration is collected by ECO |
Consideration is NOT collected by ECO |
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1. |
GST Registration |
Transportation of passengers by a radio-taxi, motor-cab, maxi-cab and motor cycle |
Supplier is required to obtain registration upon his turnover crossing threshold limit in a financial year. Till that limit, the supplier can make supply (Inter-state or Intra-sate) through ECO without obtaining GST registration. |
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Providing accommodation in hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes |
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Services by way of house-keeping, such as plumbing, carpentering etc. |
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Supply of Goods |
Supplier is to obtain registration as soon as it makes supply through ECO, irrespective of his turnover (Section 24(ix) of CGST Act |
Supplier is required to obtain registration in either of following cases i) Upon his turnover crossing threshold limits in Financial year or ii) Meeting the any of requirement of Mandatory registration as per section 24 of CGST Act e.g. inter-state supply |
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Supply of services, other than those specified above |
Supplier is to obtain mandatory registration only when his turnover crosses Rs. 20 lacs in a financial year. (Rs. 10 lacs in special category states). Till that, it can make supply through ECO without GST registration. (N/N-65/2017 dt. 15-11-2017) |
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Threshold limit means turnover of 10 lacs/20 lacs/40 lacs depending upon whether supplier is engaged in supply of goods or services or both and is also dependent from the state from where he is making supply. |
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2. |
Collection & Payment of GST |
Transportation of passengers by a radio-taxi, motor-cab, maxi-cab and motor cycle |
ECO will collect and paid GST on such supply, irrespective whether supplier is registered or not. |
Supplier will collect and paid GST, if he is registered |
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Providing accommodation in hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes |
Supplier is registered - Supplier will collect and paid GST Supplier is Notregistered- ECO will collect and paid GST |
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Services by way of house-keeping, such as plumbing, carpentering etc. |
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Supply of Goods |
Supplier will collect and paid GST |
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Supply of services other than those specified above |
Till registration requirement arises, no GST will be collected and paid and post that Supplier will collect and paid GST |
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3. |
Tax Collection at Source (TCS) by ECO u/s 52 of CGST Act, 2017 |
Transportation of passengers by a radio-taxi, motor-cab, maxi-cab and motor cycle |
No TCS will be deducted by ECO on the amount payable to Supplier |
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Providing accommodation in hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes |
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Services by way of house-keeping, such as plumbing, carpentering etc. |
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Supply of Goods |
TCS @ 1% on net value of taxable supplies will be calculated by ECO on monthly basis and will be deducted from amount payable to supplier. No TCS will be deducted on Exempt Supplies. |
No TCS will be deducted by ECO on the amount payable to Supplier |
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Supply of services other than those specified above |
If supplier is Registered – TCS will be deducted by ECO If supplier is not registered – TCS will not be deducted by ECO |
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Note: TCS as deducted and deposited will by ECO will be treated as advance payment of GST. The TCS so deducted by ECO will be reflected in FORM GSTR-2A of supplier and credit of shall be available, if supplies as per GSTR-2A matches with Supplies declared in GSTR-1 by supplier |
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Note:
a) The Net value of Supplies = Aggregate value of taxable supplies of goods or services or both less aggregate value of taxable supplies returned to such supplier during the said month
b) If in particular month, Return of goods is more than Supplies, then ECO will ignore such negative supplies and will not adjust the same against subsequent positive supplies
Income Tax
Finance Act 2020 has inserted a new section 194-O, effective from 1-10-2020. It provides as under:-
Tax deduction at Source-
a) Ecommerce operator (ECO) is required to deduct TDS @ 1% on Gross amount of sale of goods or services facilitated by ECO. It is further provided that even if consideration for sale of goods or services, facilitated by ECO, is directly collected by supplier, ECO is still required to deduct TDS.
b) ECO will not deduct TDS, in the following circumstances
i) Supplier is either Individual or HUF and
ii) Gross amount of sale of gods or services, facilitated by ECO, does not exceed Rs. 5 lacs in a financial year and
iii) Supplier has submitted their PAN to ECO.
Conclusion
a) From legal perspective, business opting to supply goods & services through ECO, it has to take GST registration as stated above and then do compliance as regards filing of GST returns on periodical basis.
b) The more tedious task will be reconciliation of supplies between the Supplies Reported by ECO and Actual supply by Business. The difference will arise on account of Return of goods, which is very frequent in online sale mode.
c) There will be 2% blockage of working capital on account of TCS collection under GST and TDS deduction under Income Tax.
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