Assessee would be considered as electronic commerce operator when digital gold is sold through the platform and sale amount is directly paid through escrow account for which commission is charged

The Karnataka AAR has ruled that a company facilitating the sale of digital gold through its online platform, even if sales proceeds go directly to the seller via an escrow account, is considered an electronic commerce operator. As such, the company is required to collect tax at source (TCS) under Section 52 of the CGST Act and must obtain compulsory registration as an e-commerce operator.

The Karnataka, AAR in the case of In Re. M/s. Changejar Technologies Private Limited [Advance Ruling No. KAR ADRG 08/2024 dated February 28, 2024] ruled that the Applicant would be considered as electronic commerce operator and is required to collect tax at source in case where the digital gold is sold through the platform and sale amount is directly paid through escrow account for which commission is charged.

Facts

M/s. Changejar Technologies Private Limited ("the Applicant") is a company engaged in the business of providing online micro saving and investment platform by way of application name Jar for which the Applicant entered into a distribution agreement with the Digital Gold India Private Limited ("the Seller") for offering sale of seller gold on its platform.

The Applicant has filed an application for advance ruling as to whether the Applicant would be considered as Agent who only collects a commission as a percentage of the value of digital gold sold through the platform and entire sale proceeds which are paid directly to the seller through escrow account and hence, would not fall within the purview of Notification No. 52/2018-Central Tax dated September 20, 2018("the Notification") read with Section 52 of the Central Goods and Services Tax Act, 2017 ("the CGST Act"). Also, the query was raised as to whether the Applicant is required to obtain registration as an E-Commerce Operator as per Rule 12 of the CGST Rules.

Issue

Whether the Applicant would be considered as agent or electronic commerce operator and required to collect tax at source in case where the digital gold is sold through the platform and sale amount is directly paid through escrow account for which commission is charged?

Held

The Karnataka, AAR in the case of Advance Ruling No. KAR ADRG 08/2024 held as under:

• Observed that, Electronic Commerce Operator means any person who owns, operates or manages digital or electronic facility or platform for electronic commerce i.e. supply of goods or services or both, including digital products over digital or electronic network.
• Noted that, the Applicant owns digital platform for offering sale of seller digital gold. Further, the agreement entered by the Applicant with the Seller is for distribution and termed as Distribution Agreement.
• Opined that, neither the Applicant nor the Seller are the agent to each other and as the sale of seller products are through the Applicant online platform, the Applicant would fall within the purview of Electronic Commerce Operator.
• Ruled that, the Applicant would qualify as an electronic commerce operator and would fall within the purview of the Notification read with Section 52 of the CGST Act.
• Further Ruled that, the Applicant being an electronic commerce operator, is required to collect the tax at source under Section 52 of the CGST Act, and is required to obtain compulsory registration.

Official copy of the judgment has been enclosed below