e–Commerce under GST
What is e-Commerce under GST?
As per section 2(41) of revised GST model law electronic commerce means supply of goods and/or services including digital products over digital or electronic network. This means all kind of supplies which completed over digital network is covered under GST regime. This may include transaction done digital network on prepayment basis such as flipkart, first-try etc.
Under GST regime e-Commerce operator is classified under two head:
- e-Commerce operator as an taxable entity
- e-Commerce operator as on tax collection entity
Class 1. As taxable entity:
Central government or state government, as the case may be, may specify categories of services under this class. If such services are provided by e-Commerce operator by digital means, whether on its own account or as an agent of other supplier, it is always presumed that same are supplied by e-Commerce operator.
Now the consequences of e-Commerce operator supplying such specified services are below:
- The turnover of such supplies shall be included in the turnover of e-commerce operator and not in the turnover of the actual supplier.
- E commerce operator is liable to pay tax on such supplies.
- No threshold limit is specified for such e-Commerce business. Such e-Commerce supplier has to obtain GST registration for every rupee of transaction.
- e-Commerce business has to apply for registration in each of the state where it affects its supplies.
- The original supplier, who supplies the services to e-Commerce operator, shall apply for registration in case his aggregate turnover exceeds Rs 25 lacs.
Class 2. As tax collection entity:
- Every electronic commerce operator, not being an agent, shall collect an amount calculated at the rate of one percent of the net value of taxable supplies made through it where the consideration with respect to such supplies is to be collected by the E-commerce operator.
- Calculation of net value of taxable supplies:
- e-Commerce operator need not to collect tax in case where it is working as an agent.
- In such case, e-Commerce operator, which deducting its service charges from the amount payable to supplier, shall also collects 1% of value of taxable supplies and deposited it to appropriate government.
- The above collection shall be deposited by e-Commerce operator to appropriate government within 10 days from the end of the month in which collection is made.
- No threshold limit is specified for such e-Commerce operator.
- The actual supplier which filling GST return shall submit supply to tax and claim the credit of tax collected by e-Commerce operator.
- e-Commerce operator shall be taxed on its service charge collected from supplier separately if its supply of services falls in terms of levy under the act.
Thus, in essence, every e-Commerce operator has to apply for registration in every state from where it affects its supplies. Every e commerce operator needs to collect 1% of taxable supplies from the actual supplier and deposited the same to appropriate government. This is done to broaden the tax base and transparency in GST compliance.