TCS Liability in case of Multiple E-Commerce Operators in a single transaction

E-Commerce Operator (ECO)

• Section 2(45) of CGST Act, ECO means any person who owns, operates, or manages digital or electronic facility or platform for electronic commerce.
• He is a person who supplies goods and/or services either directly or indirectly through online platforms like, online travel agencies, food delivery platforms, ride hailing apps and other digital marketplaces where sellers/ suppliers can list their products or services and buyers/recipients can place orders/ make purchases.
• Examples include Amazon, Flipkart, Myntra, Ola, Uber, Snap deal, etc.

Taxability of E-Commerce Operators

Note: In case of A and D, ECO is liable to pay tax on such services through it in all cases irrespective of the fact whether the person supplying such services through it is registered/liable to registration under Section 22(1) or not.

In case of B and C, ECO is liable to pay tax on such services supplied through it only when person supplying such services through it is not liable to registration under section 22(1). If liable, then the supplier must obtain registration and pay tax on such supplies. So, provisions under Section 9(5) will not be applicable, TCS provisions will apply.

Net Value of Taxable Supplies

Aggregate value of taxable supplies of goods and/ or services (other than notified services u/s 9(5) made during any month by all registered persons through such ECO – Taxable supplies returned to suppliers during the said month.

For example, M/s ABC Ltd, a registered supplier is supplying goods through ECO. It has made supplies of Rs.15,00,000 in the month of Sep 2023. The goods returned were worth Rs.5,00,000 to ABC Ltd. during the month of Sep 2023. Here, the net value of taxable supplies for TCS collection will be on Rs.10,00,000 and TCS @ 1%, i.e., Rs.10,000 will be deducted by the e-commerce operator. Hence, the final payment to be made to the supplier is Rs.9,90,000.

It is to be observed here, that ECOs don’t actually collect this amount from suppliers; they simply retain the TCS amount and their commission from consideration received by them and pay the remaining amount to the suppliers.

Multiple E-Commerce Opearators

In the current platform-centric model of e-commerce, the buyer interface and seller interface are operated by the same ECO. This ECO collects the consideration from the buyer, deducts the TCS under Sec 52 of the CGST Act, credits the deducted TCS amount to the GST cash ledger of the seller and passes on the balance of the consideration to the seller after deducting their service charges.

In the case of the ONDC Network (Open Network for Digital Commerce) or similar other arrangements, there can be multiple ECOs in a single transaction:

- one providing an interface to the buyer (Buyer-side ECO) and

-the other providing an interface to the seller (Seller-side ECO).

In this setup, buyer-side ECO could collect consideration, deduct their commission and pass on the consideration to the seller-side ECO.

In this context, clarity has been sought as to which ECO should deduct TCS and make other compliances under section 52 of CGST Act in such situations, as in such models having multiple ECOs in a single transaction, both the Buyer-side ECO and the Seller-side ECO qualify as ECOs as per Section 2(45) of the CGST Act.

Clarification on TCS liability under Sec 52 of the CGST Act, 2017 in case of multiple E-commerce Operators in one transaction, was given in Circular No. 194/06/2023.

Whenever a single transaction involves multiple ECOs, each serving a distinct role - one facilitating the buyer’s Interface and other facilitating seller’s interface, there can be 2 scenarios,

First Scenario- When Supplier side ECO himself is not the supplier in the said supply.

Parties involved-

Clarification-

• The compliances under section 52 of CGST Act, including collection of TCS, is to be done by the Supplier-side ECO who finally releases the payment to the supplier for a particular supply made by the said supplier through him.
• In this case, the Buyer-side ECO will neither be required to collect TCS nor will be required to make other compliances in accordance with section 52 of CGST Act with respect to this particular supply.

Elaboration-

Buyer-side ECO collects payment from the buyer, deducts its fees/commissions and remits the balance to Seller-side ECO. Here, the Seller-side ECO will release the payment to the supplier after deduction of his fees/commissions and therefore will also be required to collect TCS, as applicable and pay the same to the Government in accordance with section 52 of CGST Act and also make other compliances under section 52 of CGST Act.

Example-

Second Scenario- When Supplier-side ECO is himself the supplier of the said supply.

Parties involved-

Clarification-

• TCS is to be collected by the Buyer-side ECO while making payment to the supplier for the particular supply being made through it.

Elaboration-

Buyer-side ECO collects payment from the buyer, deducts its fees and will also be required to collect TCS, as applicable, pay the same to the Government in accordance with section 52 of CGST Act and also make other compliances under section 52 of CGST Act and remits the balance to the Supplier, who is itself an ECO as per section 2(45).

Example-

Author Name : Meghana c