Taxability Under GST for E-Commerce Sale of Services

Taxability Under GST for E-Commerce Sale of Services

Definition & Models of E-Commerce

• Electronic Commerce (Section 2(44)): Supply of goods/services over digital networks.
• E-Commerce Operator (Section 2(45)): Any person managing a digital platform for e-commerce.
• Business Models:
  • Marketplace Model: Amazon, Flipkart.
  • Inventory Model: Tata Cliq, Pantaloons.
  • Aggregator Model: Uber, Swiggy, Urban Company.

GST Registration Requirements- Compulsory Registration for E-Commerce Operator’s

• Section 24(ix): Mandatory registration for suppliers through ECOs collecting TCS under Section 52, regardless of turnover. As per Section 24 of CGST Act, every E-Commerce Operator must register under GST, irrespective of turnover. Suppliers supplying through E-Commerce Operator’s also require registration except in certain notified services U/s  9(5).
• Relaxation via Notification 65/2017: Service suppliers through ECOs exempt if turnover < INR 20 lakhs (INR 10 lakhs for special category states).
• Notification 34/2023: Goods suppliers through ECOs liable for registration only if turnover exceeds INR 40 lakhs (INR 20 lakhs for special category states). For notified services (like taxi, restaurant, accommodation, housekeeping): ECO pays GST, suppliers enjoy threshold exemption.
• For other services:
  • E-Commerce Operator has compulsory registration & collects Tax Collected at Source.
  • Suppliers can claim TCS credit while paying GST.

Section 9(5) – E-Commerce Operator Liable to Pay GST (Notified Services) : ECO as Deemed Supplier

In these cases, E-Commerce Operator pays GST as if they were the supplier:

1. Passenger transport by radio-taxi, motor cab, maxi cab, motorbike (and from Jan 2022, omnibus & other motor vehicles).
2. Hotel/Accommodation services (inns, guest houses, clubs, campsites, etc.) unless supplier is liable for registration.
3. Housekeeping services (plumbing, carpentry, etc.) unless supplier is liable for registration.
4. Restaurant services (except those in hotels with tariff > INR 7,500 per unit/day). Here, actual suppliers may not need GST registration if below threshold.
5. Threshold Exemption (INR 20L/INR 10L) applies to service suppliers (except when mandatory registration is triggered).
6. Section 9(5) – Notified Services → ECO pays GST, suppliers may be exempt if below threshold, no TCS. Passenger transport, hotel accommodation, housekeeping, restaurant/cloud kitchen.
7. ECOs are liable to pay GST on certain services supplied through them:

Service	Supplier	GST Liability
Radio taxi, motor cab, bike	Any person	ECO
Hotel accommodation	Registered supplier	Supplier
Hotel accommodation	Unregistered supplier	ECO
Housekeeping (plumbing, carpentry)	Unregistered	ECO
Restaurant services (excluding INR 7500+ hotel premises)	Any person	ECO

Food Delivery Apps (Zomato, Swiggy)

• From Jan 1, 2022, ECOs collect 5% GST directly from customers. Circular 167/2021: ECOs issue invoices and are not required to file GSTR-8 for restaurant services.

Section 52 –Tax Collected at Source applicability on E-Commerce Operator

• ECOs must collect up to 1% TCS on net taxable supplies. Recent Update (Notification 15/2024): TCS rate revised to 0.5% IGST from July 10, 2024.

Net Value = Total taxable supplies – Returns.

• E-Commerce Operator must collect Tax Collected at Source @ 1% (0.5% CGST + 0.5% SGST) on net taxable supplies made through it by other suppliers.
• TCS: For all other supplies via ECO, supplier pays GST but ECO collects TCS (0.5% CGST + 0.5% SGST) on net value. Food Delivery Apps (Swiggy, Zomato) since 1 Jan 2022: ECO collects 5% GST from customer, restaurants still need registration.
• TCS deposited by 10th of the following month.
• E-Commerce Operator files GSTR-8 monthly.
• Supplier can claim Tax Collected at Source credit in electronic cash ledger via GSTR-2A.
• TCS is not applicable on exempt/zero-rated supplies,
• Selling own products via own website ≠ TCS liability,
• ECO collecting payment = liable for TCS.
• Multiple ECOs: the one making payment to supplier deducts TCS.

Special Cases

• From Jan 2022, food delivery apps (Zomato, Swiggy) directly collect and pay 5% GST on restaurant services.
• Suppliers of exempt or zero-rated goods/services (e.g., books) → No Tax Collected at Source .
• If supplier sells own goods via own website → Not required to collect TCS (but must pay GST on sales).

E-Commerce Operator GST Return Filing & Compliance – GSTR-1, GSTR-3B

• GSTR Filing:
  • ECO: GSTR-8 (TCS) + report 9(5) supplies in Table 15 of GSTR-1.
  • Supplier: Report in Table 14 of GSTR-1 for TCS-covered services.
• GSTR-3B Table 3.1.1:
  • ECO reports and pays GST in cash (no ITC allowed).
  • Registered suppliers report in 3.1.1(ii) (no tax liability).
• Table 14: Supplier reports supplies through ECO under Section 52 (TCS).
• Table 15: ECO reports supplies under Section 9(5).

Taxability Under GST for E-Commerce Sale of Services

Step 1: Are You Supplying Goods/Services Through E-Commerce Operator ?

Examples: Zomato Dining, Dineout, OYO Rooms, MakeMyTrip, Yatra, Goibibo, Policybazaar, UrbanClap, etc.

If YES, move to Step 2.

Step 2: Are You an E-Commerce Operator (ECO)?

• Yes → E-Commerce Operator liable in certain cases.
• No → Supplier liable, but rules differ for notified vs. non-notified services.

Step 3: Nature of Service Supplied

Supply of Notified Services

• Transportation of passengers by radio-taxi, motorcab, maxicab, motorcycle (except omnibus).
• Restaurant services (other than those in specified premises).
• Accommodation services (hotels, guest houses, inns, clubs, etc.).
• Housekeeping services (plumbing, carpentry, etc.).

Tax Liability:

• E-Commerce Operator is liable to pay tax in most cases.
• Supplier enjoys threshold exemption (INR 20 lakh / INR 10 lakh).

Supply of Other than Notified Services

• If E-Commerce Operator itself supplies service → E-Commerce Operator must obtain compulsory registration, collect TCS @0.5% u/s 52.
• If supplier supplies through E-Commerce Operator → Supplier entitled to threshold exemption (INR 20 lakh / INR 10 lakh).

Tax Credit:

• Supplier can take credit of Tax Collected at Source collected by E-Commerce Operator and pay balance GST liability.
• If supplier is unregistered, E-Commerce Operator may not collect Tax Collected at Source.

Comparison: Section 52 vs Section 9(5)

Aspect	Section 52 (TCS)	Section 9(5) (Deemed Supplier)
Tax Liability	TCS on net value by ECO	Full GST liability by ECO
Registration	Mandatory for ECO & supplier	ECO mandatory; supplier optional
Threshold	Not applicable	Applicable to supplier
Compliance	GSTR-8	GSTR-3B (Table 3.1.1)
Reverse Charge	Not applicable	Applicable

GST on E-Commerce Sale of Services

Type of Service	Who Pays Tax?	Supplier Registration Required?	Threshold Applicability	TCS @1% (Sec. 52)
Passenger Transport (Ola, Uber, Rapido, etc.)	ECO	Not required (supplier exempt)	Applicable	No TCS (covered under 9(5))
Hotel/Accommodation (OYO, MMT, Goibibo, etc.)	ECO (if supplier turnover < threshold)	Yes, if turnover > INR 20L/10L	Applicable	No TCS (covered under 9(5))
Housekeeping (UrbanClap/TaskRabbit – plumbing, carpentry, etc.)	ECO (if supplier turnover < threshold)	Yes, if turnover > INR 20L/10L	Applicable	No TCS (covered under 9(5))
Restaurant Services (Zomato, Swiggy – except hotels with tariff > INR 7,500)	ECO	Not required (supplier exempt)	Applicable	No TCS (covered under 9(5))
Other Services via ECO (e.g., Online tuition, freelancing, consultancy, legal, IT, etc.)	Supplier	Yes, if turnover > INR 20L/10L	Applicable	Yes (ECO collects TCS & supplier claims credit)
Supplier selling own services via own website (not marketplace)	Supplier	Yes, if turnover > INR 20L/10L	Applicable	Not applicable (no third-party ECO)

Quick Rules to Remember:

• Notified Services (Sec. 9(5)) → ECO pays GST directly, supplier may be exempt if below threshold, no TCS.
• Other Services via ECO → Supplier pays GST, ECO collects TCS @1%.
• Supplier’s own website → Normal GST liability, no TCS.
• Threshold exemption (INR 20L / INR 10L) applies to suppliers except when mandatory registration is triggered.

OIDAR Services (Online Info & Database Access/Retrieval) : Includes cloud services, digital content, online ads. Overseas providers must register via Form GST REG-10.

GST under Penalties on E-Commerce Sale of Services  (Finance Act 2023)

Section 271H: INR 10,000 to INR 1,00,000 for incorrect TCS returns.

53rd GST Council Decision: E-Commerce Operator’s face penalty INR 10,000 or tax amount (whichever is higher) if they:

• Allowing supply by unregistered persons , Allow unregistered sellers (except exempt).
• Allowing ineligible inter-state supply or Allow sellers to supply outside registered states.
• Furnishing incorrect outward supply details. or Fail to file accurate GSTR-8.