GST on E-Commerce Transaction, Implications of GST on E-Commerce

GST on E-Commerce Transaction, Implications of GST on E-Commerce. It is highly creditable that India is now one step closer to the roll-out of GST from 1st July 2017. Being a revolutionary and the most historic tax reform, GST (Goods and Services Tax) today represents One Nation One Aspiration One Determination. It is now around the corner with the receipt of Presidential assent to the four GST Acts,viz. Central Goods & Services Tax Act, Union Territory Goods & Services Tax Act, Integrated Goods & Services Tax Act, and the GST (Compensation to States) Act, 2017. With the implementation of GST, all the states and the union territories of India will transform into one market with one tax….

GST on E-Commerce Transaction

GST on E-Commerce Transaction

Implications of GST on E-Commerce

  • Concepts governing taxation of E-commerce under the present tax laws
  • Definition of Electronic Commerce and Electronic commerce operator. Aggregator definition removed.
  • Chapter XIV – Sec 52 deals with Collection of Tax at Source for E-commerce operators.
  • Separate Registration provisions.

Appropriate State

  • which state to levy & collect tax

Taxable Even

  • Sale of goods Act
  • Transfer of property in goods. •

Sale of right to use

  • SC – 20th Century Leasing •

Situs of sale

  • Seat of sale transaction

Some litigation –VAT /CST

  • VAT/CST
  • Kerala VAT Dept. –VAT on goods hosted on web-portals
    • Demand quashed by Kerala HC [Filpkart Internet (P) Ltd. v/s State of Kerala W P 5348 & 6916 of 2015 dt.31.10.2015]
  • Karnataka VAT Dept. –VAT on goods sold from godowns of e-trailers

E-Commerce – present Service Tax laws

  • Rendition of services
  • Place of Provision of Services Rules, 2012
  • Point of taxation Rules, 2011
  • Valuation Rules- Service Tax (Determination of Value) Rules, 2006
  • Cenvat Credit Rules

Some provisions under Service tax

Rendition of service – from one to other person for consideration – taxable – unless covered by

  • Negative list u/s 66D
  • Mega Exemption Notification no. 25/2012 dt.20.6.12

Service tax is also applicable on

  • Access of online information
  • Database access & retrieval services
  • Development & supply of digital content and software.
  • E-commerce transaction on aggregator model w.e.f. 1.3.2015

Cases of Dual taxation VAT/CST & service tax

Some other levies

Entry tax

  • Some states like WB, Orissa charge E-commerce companies additional taxes for delivering product to customers in their states.

Equalization levy

  • On income they earn on a/c of soliciting advertisements and from Indian advertisers

Definitions

Sec 2(44) – electronic commerce

  • means supply of goods and/or services or both
  • including digital products
  • over digital or electronic network

Sec 2(45) – electronic commerce operator

  • means any person who owns, operates or manages
  • digital or electronic facility or platform
  • for electronic commerce

Issue – Does Tele-shopping fall under the term electronic network?

E Commerce operator- Liable to tax [Section 9(5)]

  • Central State Govt on council’s recommendation, notify and specify categories of services – tax to be paid by E-commerce operator
  • Provided – if operator does not have physical presence in taxable territory -Any person representing the Operator is liable to pay GST
  • Provided further – where operator does not have a representative in such a territory – operator shall appoint a taxable person in the taxable territory for the purposes of paying tax

TCS by Electronic Commerce Operator

Every electronic commerce operator shall, collect the tax at the time of credit of any amount to the account of the supplier of goods and / or services or at the time of payment of any amount towards the supply of goods and / or services made through it.
Tax will be collected @ 1% of net value of taxable supplies – aggregate value of taxable supplies of goods or services, other than services notified under sub-section (4) of section 8, made during any month by all registered taxable persons through the operator reduced by the aggregate value of taxable supplies returned to the suppliers during the said monthThe amount collected shall be paid to the credit of the appropriate Government by the operator within ten days after the end of the month in which such collection is madeSupplier shall claim credit in his electronic cash ledger

TCS @ 1% -Section 52

  • Of the net value of taxable supplies -net of returns and other than Sec 8(4)
  • where the consideration collected by the operator.

Exemption from TCS –Sec 52(1)

  • Services provided – as notified u/s 8(4) by which operator is liable to pay tax
  • If the operator is acting as an ‘Agent’ (logistic provider)
  • (COD) transactions – where consideration is paid directly by the recipient to the supplier

Will under CGST/UTGST act also 1% TCS applicable? Refer Sec 21(xi) of UTGST Act

  • Act and rules ….relating to tax deducted at source

Procedural provisions

E-commerce operator

  • If collects TCS
  • needs to get himself compulsorily registered

Pay to Govt within 10 days of end of the month

Separate TCS Return in Form GSTR-8 along with normal return

  • Mis match – query on both. Not rectified by supplier – deemed as supply & added to his outward supply where short reported
  • May rectify by the due date of filing Sept next of the FY. i.e. by 20h Oct.

File Annual statement of outward supplies through it , returned ,amount of tax collection by 31st Dec for the FY

Supplier to claim credit of the TCS in electronic cash ledger

  • Will get auto populated from statement filed by E operator

DC or above ranking officer may require E Operator to furnish in 15 days

  • Supplies of goods/services or both
  • Stock of goods held by suppliers in G/Ds managed by E Operator and declared a POB by such suppliers

Registration

Chapter VI – Sections 23 & 24

THRESHOLD LIMIT: NIL i.e. Compulsory Registration for

  • Electronic Commerce Operator – Sec 24(iv) – for notified services u/s 9(5)
  • Electronic Commerce Operator – Sec 24(x)
    • Person collecting TCS –earlier reference removed
  • Every Person who supplies goods and/or service through electronic commerce operator – Sec 24(ix)
  • Every person supplying online information and database access or retrieval services from a place outside India to a person in India, other than registered taxable person- Sec 24(xi)

Issues

  • Will even artisans/one time dealer need to get themselves registered?
  • What about person selling personal effects on OLX, Quikr? He is not taxable person but registration compulsory

Place of Supply

Services Provided by E-comm Operator to supplier

  • Place of Supply of Service –Gen Rule will apply –Always location of Service receiver – since compulsory registration.

Services Provided by E-comm Operator to supplier for transportation of goods

  • Place of Supply of Service – Sec 12(9) of IGST Act
  • location of Service receiver(if registered) or
  • location at which such goods are handed over for their transportation
  • Is this supply of services in respect of transportation – a composite supply?

Supply of goods/Provision of Service by supplier to customer

  • For Goods: Place of Supply -Where movement of goods terminates for delivery
  • For Services: to registered person(B2B) : Registered address of recipient : to unregistered person(B2C): Address on record of person

Branch Transfer by E-Commerce Operator

  • Branch Transfer is Supply as per Sch 1(2)
  • Branch Trf by E-comm from one depot/warehouse to other –Taxable
  • ITC Available on such transactions – leads to cash flow issues- blockage of funds- enhanced compliance cost

Logistics/Warehousing by E-comm Operator & Auction

Logistics/Warehousing Services offered by E-Comm operators to vendors –

  • Reference to ‘incidental service’ in E-comm operator definition – ‘ for electronic commerce’
  • Taxable under GST? Liable to deduct TCS?

Auction by Sites like ebay: ebay facilitates supply of goods – comes under definition of E-commerce operator

Income streams – E-Commerce platform

  • Convenience fees
  • Internet handling charges
  • Recovery of advertising / promotions cost
  • Cost sharing arrangement
  • Listing fees
  • Refund process fees
  • Payment handling fee
  • Gift wrap fees
  • Storage fees
  • Weight handling fees

Issues to ponder

Loss borne by E-commerce platform

  • Cost of product Rs.100/-
  • Customer buys / pays only Rs.80/-
  • Loss – Debit note raised by supplier for Rs.20/- on Electronic Platform
  • What is taxable? How much is taxable?

Cash back by credit card company

Loyalty Points, Cash Backs & Exchanges

Loyalty Points

  • Loyalty points received on purchases of goods from one franchisee shop ; redeemed at other franchisee shop
  • Discount reimbursed by the company
  • Loyalty points entitles discount/ encashment

from sites like MakeMyTrip/Yatra on certain transactions or cash backs

Online data / information retrieval e.g. Just Dial, TIOL, VAT online

  • Subscription
  • Commission
  • Advt

Online money / wallets

  • Advt
  • Subscription
  • AMC from vendor registered
  • commission

WHO IS REQUIRED TO TAKE REGISTRATION

As per Sec.22 :-

  • Every supplier shall be liable to be registered under this Act in the State or Union territory, other than special category States, from where he makes a taxable supply of goods or services or both, if his aggregate turnover (pan India basis) in a financial year exceeds twenty lakh rupees (Rs 20,00,000)
  • If the supplier is providing supply from any of the special category states, he will be required to take registration if his aggregate turnover exceeds Ten lakh rupees. (Rs 10,00,000)

States in the Special Category States.

Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh, Uttarakhand.

  • On account of transfer of a business, the successor is required to take registration
  • In the situation of amalgamation or demerger of business in accordance to an order of the High Court or Tribunal, the transferee is liable to take registration.

As per Sec 24:-

  • persons making any inter-State taxable supply;
  • casual taxable persons making taxable supply;
  • persons who are required to pay tax under reverse charge; ‰ non-resident taxable persons making taxable supply;
  • persons who make taxable supply of goods or services or both on behalf of other taxable persons whether as an agent or otherwise;
  • Input Service Distributor, whether or not separately registered under this Act;
  • every electronic commerce operator ‰ Every person supplies goods/services on a through an E commerce operator;
  • every person supplying online information and data base access or retrieval services from a place outside India to a person in India, other than a registered person;
  •  person who are required to pay tax under sub-section (5) of section 9
    • Tax payable by the electronic service operator.
  • persons who are required to deduct tax under section 51
    • Department of Central or State Government, local authority, Government agencies requiring to deduct 1% from the payment made or credited to the supplier.

WHO IS NOT REQUIRED TO TAKE REGISTRATION

Person engaged exclusively in the supply of goods or services or both that are not liable to tax or wholly exempt from tax.

an agriculturist, to the extent of supply of produce out of cultivation of land.

*There is no restriction on voluntary Registration

WHEN TO REGISTER

  • Every person who is liable to be registered as per Sec 22 or 24 shall apply for registration within 30 days from the date on which he becomes liable for registration.
  • Application for registration shall be made in all such states from which he makes taxable supply.

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