E Commerce under GST

[Abhishek Gupta]

E Commerce

Recent 5 years bang in e-commerce industry has changed the way of doing business in India. According to industry body Internet and Mobile Association of India (IAMAI) and IMRB, e-commerce industry in India is expected to nearly double to ₹ 2, 11, 005 crore by December, 2016. This industry has shown huge potential of growth in domestic markets of India despite the fact that 100% foreign direct investment is allowed only in B2B commerce and none in B2C model.

1. Meaning of E-commerce and E-commerce operator

• Electronic commerce, commonly written as e-commerce, is the trading or facilitation of trading in products or services using computer networks, such as the Internet or online social networks. Electronic commerce draws on technologies such as mobile commerce, electronic funds transfer, supply chain management, Internet marketing, online transaction processing, electronic data interchange (EDI), inventory management systems, and automated data collection systems.
• As per section 2(41) of Model GST ‘electronic commerce’ means supply of goods and/or services including digital products over digital or electronic network.
• Section 2(42) of Model GST ‘electronic commerce operator’ means any person who owns, operates or manages digital or electronic facility or platform for electronic commerce.

1.  Mandatory Registration

• As per section 23 of this act read with paragraph 6 of Schedule V of Model GST Law, e-commerce operator who is liable to deduct TCS under section 56 and operator who is liable under section 8(4) are obliged to register themselves under this act irrespective of threshold limit.
• For registration process, refer Chapter “Registration under GST” of this book.

1.3   Levy and Collection of Tax

• Electronic commerce works as a channel or medium for supply of goods or services from supplier to buyer.  Currently, most e-commerce companies operating in India are acting as a marketplace, providing services such as marketing, technology support, warehousing and logistic support to the sellers.
• Existing Law:

1. Recently, service tax law has introduced the concept of an “aggregator”, whereby the e-commerce company must pay tax on services provided by service providers under the brand name of the e-commerce company. However, the sector strongly opposes the imposition of this levy as they stand on the view that vendor should comply all the provisions related to supply of goods and/or services and that no liability should accrue to e-commerce players.
2. View of judiciary in case of VAT on e-commerce:  In recent landmark case of Flipkart Internet (P.) Ltd. Versus State of Kerala [2015 (11) TMI 159 - KERALA HIGH COURT] , it was held that assessee who was an online service provider is not liable to pay any VAT liability and file returns as department’s view that the situs of the virtual shop can be traced to Kerala is legally flawed. The same view is upheld by Karnataka High Court.

• Proposed GST Law:

1. But under Revised model GST law issue is still not resolved as section 8(4) of Model GST law still held e-commerce players liable for the specified category of services to be notified. Tax shall be paid by the operator for all the services supplied through it like marketing, warehousing, packing, delivery and all the provisions of this law will apply mutatis-mutandis to the operator.
2. As GST era proposed to have separate registration on a state-by-state basis, complying with this requirement of registration for separate states will create problems for this industry. No exception has been made in proposed law for centralized registration.

1.4   E-commerce operators to deduct TCS under GST

• As per section 56 of proposed GST law, E-commerce operators like flipkart, snapdeal will have to deduct TCS at the rate of 1% while making payment to the supplier except in case of those supply of services which are notified under section 8(4) of this act.
• The amount collected by the operator shall be paid to the account of the appropriate government within 10 days from the end of the month in which such collection is made.

1.5   Filing of Return [Section 56(3)] for operators

• E-commerce companies falling under section 56 will also have to file return(called as statement) and contains the following information:

1. Amount of TCS deducted
2. Outward supply of goods or services effected through operator
3. Return of goods or services through operator

• TCS return has to be filed by the operator within 10 days after the end of each month containing above information.
• Details of goods or services supplied in the statement will be cross-verified with the corresponding details of outward supply of supplier. If details provided are not tallied then same issue will be communicated to both the parties.
• If above problem is not rectified , then the unmatched amount will be added to the liability of supplier, if value of outward supply furnished by operator is more than the value of outward supply furnished by the supplier.
• E-commerce operator’s services which are to be notified in section 8(4) of this act will follow the normal provisions of Chapter VIII-Returns of Model GST Law.  Refer Chapter- “Returns under GST” of this book.

1.6   TCS credit to supplier

• The amount shown by the operator in its monthly filed statement will be available as a credit to the supplier who has supplied the goods or services through such operator.
• Credit will be available to the supplier is his electronic cash ledger of the same amount which reflected in the statement filed by operator.

1.7   Power of Joint Commissioner to call for information

• Any officer not below the rank of joint commissioner is empowered by section 56 to service notice at any time which can be before, during or after any proceedings to call for the details regarding:

1. Supply of goods or service effected through such operator, or
2. Stock of goods held by supplier in go downs or warehouses of operator and declared as additional places of business of supplier

• Above information is required to be submitted within 15 working days.
• Penalty-Information not furnished within time, penalty of ₹ 25,000/- is payable.