GST MASTERCLASS. Selling online

In e-commerce, firms owning or managing the buy-sell platform are known as operators and those listing their goods/services for sale are termed suppliers. GST has made elaborate provisions to bring both under the tax net.

Flipkart is an e-commerce operator because it facilitates external firms to sell goods through their platform. Pepperfry, which supplies furniture through its own website, would also be considered an e-commerce operator.

The e-commerce operator is required to collect (i.e. deduct) an amount calculated at the rate of 1 per cent of the net value of taxable supplies out of the consideration paid or payable to the actual supplier of goods or services in respect of supplies of goods and/or services made through such operator.

The amount so deducted/collected is called Tax Collection at Source (TCS). The 1-per cent TCS seems to be introduced for control purposes, for identifying suppliers who would pay the balance GST. The supplier can take credit of the TCS paid by the e-commerce operator.

The time/intervals at which the e-commerce operator should make such deductions is earlier of the two events: (i) the time of credit of any amount to the account of the actual supplier of goods and/or services; (ii) the time of payment of any amount in cash or by any other mode to such supplier.

An electronic commerce operator can sell goods and/or services on his own behalf. However, it would be treated as any other form of supply of goods and/or services and chargeable to tax accordingly. Since the goods and/or services are supplied on his own behalf, provisions of TCS do not apply to such transactions.

The actual suppliers can claim the credit of the TCS by e-commerce operators. TCS deposited by the operator into the government account will be reflected in the cash ledger of the registered supplier. This can be used by the suppliers at the time of discharge of tax liability.

The supplier who has supplied the goods or services through the operator shall claim credit, in his electronic cash ledger, of the amount collected and reflected in the statement of the operator.

The GST Network would match the details of supplies and the amount collected as furnished by e-commerce operator with the corresponding details of outward supplies furnished by the concerned supplier.

Where the details of outward supplies furnished by the operator do not match with the corresponding details furnished by the supplier, the discrepancy shall be communicated to both persons.

To sell online through the e-commerce portals, a firm has to register as normal tax payer under GST and file all returns. This has to be done even if a firm is exempted from registration on account of low turnover.

Even composition traders are not allowed to sell goods through the e-commerce portals. This provision will keep the small firms not registered with the GSTN out of the e-commerce business,

The TCS mechanism will increase the compliance burden of e-com operators as they will have to maintain tax collection records, furnish them to the Government every month and undertake reconciliation.

The writer is from the Indian Trade Service. The views are personal. Adapted from his book, ‘The GST Nation: A Guide for Business Transformation’

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