GST hit Amazon, Flip kart and likewise with: TCS and Other Compliance

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

Under Model of  GST ‘electronic commerce’ means supply of goods and/or services including digital products over digital or electronic network.

Under Model of GST ‘electronic commerce operator’ means any person who owns, operates or manages digital or electronic facility or platform for electronic commerce.

     2.   Who are liable to Register in case of E-commerce?

Categories of person are as follows:

a) E-commerce operator who are required to collect tax (TCS) on the net invoice value after deducting commission and GST.

b) person who supply goods and/or services

c) every electronic commerce operator like Amazon,Flip kart,Snapdeal, irrespective of threshold limit

d) every person who supply online information and database access or retrieval services from a place outside India to a person in India.

     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 like amazon , flip kart operating in India are acting as a marketplace, providing services such as marketing, technology support, warehousing and logistic support to the sellers

Existing Law:

 The concept of an “aggregator”, says 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.

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 assesses 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:

But under Revised model GST law issue is still not resolved as  levy of tax on e-commerce players is still 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

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.

4.   TCS compliance for e-commerce sector:

E-commerce aggregators are made responsible under the GST law for deducting and depositing tax at the rate of 1% from each of the transaction. Any dealers/traders selling goods/services online would get the payment after deduction of 1% tax.

It is a significant change which would increase a lot of compliance and administration cost for online aggregators like Flipkart, snapdeal, amazon etc.

The TCS 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.

For Example: Mr. Akash a is a trader who sells Electronic products online. He receives an order for Rs 10, 000 inclusive of tax and commission. Amazon charges a commission of Rs 200. Amazon would therefore need to deduct 1% tax (TCS) on the amount, excluding the money paid as commission (Rs. 200) and GST ( Rs. 1200 when GST @12%). Amazon would thus be deducting tax for Rs 86 (1% of Rs. 8600).

5. Filing of Return (GSTR-8) for operators:

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

a) Amount of TCS deducted

b) Outward supply of goods or services effected through operator

c) 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.

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 in his electronic cash ledger of the same amount which reflected in the statement filed by operator.

References:

section 24 : Person liable to be register under GST

Section 2(45) : Definition of Electronic Commerce Operator

Section 2(44) : Definition of Electronic Commerce

clause X of Schedule V of Model GST Law :List of persons require registration

TCS under section 52 :TCS compliance

Section 52(4) : Filing of return

Written by:

Poonam Kanwar

(GST Associate)

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