✓Minimal Documentation ✓Flexible Repayment ✓Collateral Free Loan | Apply for Business Loan Now! Check Eligibility

In India, e-commerce has been growing by leaps and bounds over the last few years. Many domestic players have emerged in the market, while many global companies have also set up operations in India. Additionally, customers have demonstrated a high level of preference for shopping through e-commerce portals over retail outlets owing to the convenience offered by e-commerce, especially in Tier-I cities. 

 

Another recent entrant to the Indian economy has been the Goods and Services Tax (GST), which has quickly expanded in depth and scope. The regulations of GST on e-commerce are nuanced and cover a range of areas, including the supply and delivery of goods. All e-commerce companies, whether Indian or foreign, are required to be registered as per the provisions of the CGST Act, 2017. 

Importance of Place of Supply in E-commerce Sales

GST has been conceived as a tax that is destination-based. This means that goods and services need to be taxed at the point of consumption or usage rather than at the place of origin. As a result, in inter-state travel across India, states where the goods are consumed collect tax on the supply. 

 

For GST collection, the place of supply determines whether the transaction is interstate or intrastate. This important distinction determines whether the CGST, SGST, or IGST will be levied on the goods or services. If the place of supply has been determined incorrectly, it can result in tax collection by the wrong state. 

 

Read below to find a few examples to understand the type of GST that is levied based on different places of supply. 

  • Example 1: Intra-state Sales

    Gayatri from Rajkot, Gujarat, orders a mobile phone from Amazon, whose seller, Alpha Mobiles is based out of Ahmedabad, Gujarat.

    Here, since the buyer and seller are based in the same state, only CSGT and SGST will be charged.

  • Example 2: Inter-state Sales

    Gayatri from Rajkot, Gujarat, orders a mobile phone from Amazon, which is being sold by Mobile Hub in Bangalore, Karnataka.

    Here, since the supplier’s location is in a state different from the buyer’s location, IGST will be charged.

  • Example 3: Supply to a Third Party

    Gayatri from Rajkot, Gujarat, orders a mobile phone from Amazon for her sister Radhika, based in Udaipur, Rajasthan. The seller is Mobile Mart, based out of Mumbai, Maharashtra, who sends the order to Radhika, while Ms. Gayatri is billed by Amazon.

    Here, as per the Goods and Services Tax provisions, it will be assumed that the mobile phone has been delivered to the buyer, Gayatri, even though it was delivered to her sister. Since this constitutes intra-state supply, IGST will be charged. 

What are the Provisions in Section 9(5) of the CGST Act Relating to E-commerce Businesses?

Section 9(5) of the CGST Act empowers the government to specify the service categories for which an e-commerce operator is liable to collect and pay GST as if they are the ones providing the service. This provision applies only to e-commerce operators and not those selling services through them. These categories specified include the following: 

  • Services involving the transportation of passengers through cabs or motorcycles. 

  • Services involving accommodation at hotels and other commercial places meant for residential or lodging purposes. However, if this service is being supplied through an e-commerce portal whose revenue is above the threshold limit, they are required to register. 

  • Services including housekeeping, carpentry and plumbing. 

Who is Liable to Pay GST in E-commerce Businesses?

Ever since the e-commerce GST rates have been out, there has been a fierce debate over who is supposed to collect and pay the GST. Is the e-commerce operator or the e-commerce seller liable? Read on below to learn all the answers about the liability of paying GST on e-commerce business. 

  • For selling goods and services, the seller is liable to collect and pay the GST.

  • For selling services other than those mentioned in Section 9(5), the seller is liable for collecting and paying the GST.

  • For selling services mentioned in Section 9(5), the e-commerce operator is liable to collect and pay GST to the government. 

Sector

E-commerce Operators

Supplier Registration

Who is Liable to Pay GST?

Sale of Goods

Amazon, Flipkart, etc.

GST registration mandatory

Supplier (Puma, Nike, etc.)

Hotel Aggregator

MakeMyTrip, Booking.com

GST registration required if hotel’s turnover is over Rs. 20 Lakhs

Hotel, if registered under GST; operator, if not 

Cab Aggregator

Uber, Ola

GST registration required if car owners’ turnover is more than Rs. 20 Lakhs

Cab aggregator, regardless of whether the car owner is registered under GST

Housekeeping Services Aggregator

UrbanCompany, HouseJoy

GST registration of supplier required if service provider’s turnover is over Rs. 20 Lakhs

Service provider, if registered under GST; operator, if not

What is Tax Collection at Source in E-commerce Sales?

Tax collection at source (TCS) entails the tax payable on goods and services being collected at their point of origin. The TCS payable is usually 1% of the net value of the taxable supplies made through the e-commerce portal. 

 

Under GST for e-commerce regulations, the onus of collecting TCS is on e-commerce operators. Once they have submitted the TCS details, the government will be able to cross-check the amounts with the e-commerce seller’s ledger. However, it has also been clarified that TCS shall only be deducted for sellers liable to pay GST and not those who are not registered under it.

Important Points to Remember for GST on E-commerce

While understanding the provisions of GST for e-commerce sellers, it is imperative to remember a few key points. Read on below to learn more.

  • If tax officers require information relating to supply or stock from e-commerce operators, a notice will be issued to the latter by any officer not below the rank of Deputy Commissioner. The e-commerce operator is required to furnish the details asked for within 15 days of the issue of notice.

  • For suppliers storing their products at warehouses operated by e-commerce operators, the warehouse must be registered as an additional place of business.

  • If a supplier sells tax-exempted goods through an e-commerce portal, the operator need not levy TCS since the product’s net taxable value is nil.

  • TCS is not collected when a supplier sells goods through its own e-commerce portal.

  • TCS also does not apply to the import of goods and services. 

Conclusion

GST on e-commerce has overhauled the taxation system of the industry. It has made the taxation process much more transparent and seamless. Make sure to keep a check on whether you are required to collect and pay GST. If you are, make sure to pay it regularly and keep careful records

GST on E-commerce FAQs

Is GST registration required for e-commerce operators?

Under Section 24(x) of the CGST Act, 2017, every person supplying goods and services online through electronic commerce operators is required to be mandatorily registered for GST. There is no threshold exemption limit on the same.

Will threshold exemption be available to e-commerce operators liable to pay tax on notified services?

No, the threshold exemption limit is not available for e-commerce operators who are required to pay tax on notified services supplied through them.

It is very common that customers of e-commerce companies return goods. How are these returns going to be adjusted?

The e-commerce operator needs to collect tax only on the net value of the taxable supplies, and the value of items returned is adjusted in the aggregate value of taxable supplies.

Is every e-commerce operator required to collect tax on behalf of actual suppliers?

Every e-commerce operator is required to collect tax on behalf of actual suppliers, except for those operators who pay taxes under Section 9(5) of the CGST Act, 2017.

Home
active_tab
Loan Offer
active_tab
Download App
active_tab
CIBIL Score
active_tab