Goods and Services Tax on E-Commerce Transactions

Even though GST levied on e-commerce operators is essentially similar to any other mode of supply, there are a few specific provisions applicable to e-commerce operators and suppliers of goods or services utilising e-commerce portals.

There can be two models of e-commerce viz. one where the supplier of the goods independently sells products online or another where the supplier uses an aggregator website like Amazon to sell goods or Dunzo or Urban Company to sell services. In the second model of eCommerce, there are two distinct transactions happening. One is where a supplier is selling products and services to the consumer and another is where the platform is supplying an online space for the first supplier to sell their products and services. The supply of online space or online real estate is also considered a supply under the Goods and Services Tax. As such payment of tax is liable.

However, Section 9(5) of the CGST Act states that the Centre may specify categories of services of the tax on intra-State supplies of which shall be paid by the electronic commerce operator if such services are supplied through it. Three services, namely (i) Motor Cab (ii) Hotels and accommodation and (iii) Housekeeping services have been notified under Section 9(5) of the CGST Act. Taxpayers supplying goods and services through an aggregator website or mobile application are responsible for discharging their own GST liability. This stands for all taxpayers involved in the supply of services barring the ones notified under Section 9(5) of the CGST Act.

Now, because there is no threshold limit, any business operating through eCommerce is required to register under GST. But Vide Notification No. 65/2017-C.T., dated 15-11-2017 allows the Centre to exempt certain categories of taxpayers operating through eCommerce. This means persons supplying services other than those mentioned in Section 9(5) of the CGST Act are required to register and collect GST only if their turnover is more than the threshold limit viz. 20 lakhs annually.

Obviously if an aggregator website or mobile application is going to allow you online real estate to display and supply your product or services, they will charge you a commission on the sale. This commission attracts a GST at the rate of 18%.

eCommerce operators are also required to collect tax under Section 52 of the CGST Act, called TCS or Tax Collected at Source. The provision essentially imposes a duty on e-commerce operators to collect tax, from the amount payable to the supplier. Such TCS deducted is reflected in the electronic cash ledger of the supplier. However, the Government has clarified that TCS shall be deducted only when the supplier is liable to pay GST.

What if an eCommerce establishment is operating outside Indian tax jurisdiction?

The general rules state that if an establishment is not operating in India, they are not liable to pay the Goods and Services Tax even if they are supplying to a company in India. However, when a supplier of services supplies certain services to an Indian resident, the liability to pay GST on such supply is on the person receiving the services under reverse charge mechanism. This mechanism however, does not apply to the Online Information and Database Access and Retrieval Service. Because so many transactions occur at once, there could be certain confusions on GST on eCommerce operations, but the provisions made by the Centre can help taxpayers navigate through the tax framework.