E-commerce operator under GST: Taxability Analysis with AAR

The Authority for Advance Ruling (AAR) constituted under the Goods and Services Tax (GST) Law has recently pronounced advance rulings clarifying certain positions on the applicability of GST on e-commerce operators which are discussed hereunder. These need to be read in the background of the question involved. it covers the questions such as whether an e-commerce operator is liable to be registered and what are the basis of classification under the Category of E-Commerce Operator under GST.

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E-commerce operator under GST: Analysis with AAR (In re Gensol Ventures Pvt. Ltd. vs. GST AAR Gujarat dated 27-08-2021)

Whether an e-commerce operator is liable to be registered and what is the basis of classification under the Category of E-Commerce Operator?

The applicant intends to own, develop an electronic/digital platform for booking cabs. Section 2(44) defines “electronic commerce” means the supply of goods or services or both, including digital products over the digital or electronic network, and “electronic commerce operator(ECO)” means any person who owns, operates or manages digital or electronic facility or platform for electronic commerce.

Thus, the applicant falls under the category of E-Commerce Operator Further, as per clause (iv) of Section 24 of CGST Act, a person who is required to pay tax under sub-section (5) of section 9 shall be required to be registered under this Act.
Thus, since the applicant falls under section 9(5) of this act, it needs to obtain compulsory registration.

Whether the e-commerce operator is liable to pay or discharge Goods & Service Tax (GST) in accordance to Section 9(5) of the CGST Act, 2017

Section 9(5) of CGST Act, 2017 states that:
The Government may, on the recommendations of the Council, by notification, specify categories of services the tax on intra-State supplies of which shall be paid by the electronic commerce operator if such services are supplied through it, and all the provisions of this Act shall apply to such electronic commerce operator as if he is the supplier liable for paying the tax in relation to the supply of such services”.

Further, the Central Government has notified that in case of services by way of transportation of passengers by a radio-taxi, motorcar, maxicab, and motorcycle, the tax on intra-State supplies shall be paid by the electronic commerce operator.
Thus, it is clear that the applicant shall be held liable to discharge the amount of tax as if he is the supplier under the provisions of this Act for the services supplied through the electronic platform.

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What shall be the value of supply for passenger transportation service on which Goods and Service Tax (GST) be charged?

The e-commerce operators are required to discharge the amount of tax on the value of supply of services provided as per Section 15(1) of the CGST Act, 2017 i.e., on the transaction value which is the price actually paid or payable for the supply of goods or services or both where the supplier and the recipient of the supply are not related, and the price is the sole consideration for the supply.

There are certain inclusions and exclusions that are prescribed under the GST laws. Section 15(3) of the CGST Act, relating to discount, provides that discounts given before or at the time of supply recorded in the invoice can be reduced from the value of supply. Hence the applicant stands liable to pay the amount of tax on the value of supply determined above.

In this case, the applicant collects the consideration (after discount) from the customer and remits total consideration to Driver/s in which one component of it comprises of discount offered to customers which are marketing expense to applicant. Thus marketing expenses (of the applicant) paid by the applicant to Driver cannot be said to be a consideration for or towards any service by Driver since no reciprocal activity is performed by Driver in order to receive such compensation and tax cannot be applied.

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What is the Rate of Tax and Service Accounting Code for the services supplied in terms of passenger transportation service under GST Law?

Notification No. 11/2017-Central Tax (Rate) dated 28-06-17 states a description of services and their applicable rates.
1. Entry no. 8(ii) i.e., Transport of passengers, with or without accompanied belongings by-
(a) air-conditioned contract carriage other than a motor cab;
(b) air-conditioned stage carriage;
(c) radio taxi.
Shall be leviable at 5% provided that credit of input tax charged on goods or services used in supplying the service has not been taken.

2. Entry no. 8(vi) i.e., Transport of passengers by motor cab where the cost of fuel is included in the consideration charged from the service recipient
Shall be leviable at 5% provided that credit of input tax charged on goods and services used in supplying the service, other than the input tax credit of input service in the same line of business (i.e. service procured from another service provider of transporting passengers in a motor vehicle or renting of a motor vehicle), has not been taken.
Further, Service Accounting Code shall be 996412-Taxi services including radio taxi and other similar services.

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Author Profile

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CA Shiwali Shukla
Shiwali Shukla is a member of ICAI since 2018 & She has excelled in Chartered Accountancy & follows an innovative & talented approach towards work, She is also an Ex- Employee of Ernst & Young. She is having the Expertise in the filed of Direct Taxation, Indirect Taxation, Company Law matters & Finance. She is also having more than 3 years of Experience in the same field. & more than 3 years if Experience in the field of Direct as well as Indirect Taxation..

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