GST implications on E-Commerce Operators June 2022
Flow of the session
1
Background – various business models
2
Marketplace model and its issues
3
Inventory based model and its issues
4
Aggregator model and its issues
5
TCS implications
6
Other issues
PwC | GST issues relating to E-Commerce sector
June 2022
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01 Background
Business models under e-commerce
Aggregator
Who owns a web-based application to connect the potential customer with the service provider providing service under the brand name and trade name of the aggregator
Marketplace
Providing a platform to act as a facilitator between the buyer and the seller
Inventory based Models
Inventory of goods and services is owned / purchased by e-commerce entity and is supplied to the customers directly by e-commerce operator
GST implications as well as the issues on each of the business models discussed in subsequent slides PwC | GST issues relating to E-Commerce sector
June 2022
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02 Marketplace model and its issues
Scenario 1 – Typical model of an e-commerce operator (1/3) Goods/Services are directly supplied by Sellers to the customer along with its tax invoice
Sellers (Listed and unlisted)
Types of income earned by ECO:
Forwards the order to the sellers
• Listing fees from Sellers • Commission from delivery executive
Commission (if listed) Places the order on the App
ECO
• Delivery fees from sellers Customer
Delivery or convenience charges
• Delivery fees or convenience charges from customers • Advertisement fees • Lead-generation income
Forwards the order to the partners
Delivery partners Commission
PwC | GST issues relating to E-Commerce sector
June 2022
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Scenario 1 – Typical model of an ECO (2/3) Implications with respect to the following supplies: Particulars
Registration required irrespective of the threshold limit
TCS to be deducted
Goods supplied by sellers listed on the platform
Yes
Yes
Services supplied by sellers listed on the platform
No – Registration compulsory only if turnover crosses the threshold limit
Yes – Only if the seller has obtained registration under GST
Delivery partners
No – To be evaluated only when supply is made through ECO
No – To be evaluated only when supply is made through ECO
What are the TCS implications if the sellers are not listed – Whether it will still be considered as a supply through ECO?
PwC | GST issues relating to E-Commerce sector
June 2022
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Scenario 1 – Typical model of an ECO (3/3) AAAR (KA) in the case of OPTA Cabs Private Limited
Offer by the merchant is made through the electronic operator
Acceptance of such offer by the customers through such electronic operator
Contract to supply the goods/services between the merchant and the customer through e-commerce operator
Where seller is not listed on the platform, since no offer is made by the seller to the customer, no supply is made through the ECO. Therefore, TCS implications should not arise
What if the supplier of goods is not registered for GST purposes?
PwC | GST issues relating to E-Commerce sector
June 2022
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Scenario 2 – More than one ECO + payments collected by 3rd party Makes payment on weekly settlement basis
Sellers (Listed and un-listed)
TCS Implications:
Forwards the order to the Sellers
Payment Mgt Co Commission (if listed) Places order on the App
Forwards order to ECO 2
ECO 2
ECO 1 Commission charges
Forwards the order to the partners
Makes payment
Customer Delivery charges
• Where more than one ECO are involved – TCS to be collected by ECO 2 who makes the payment to Sellers • Where a different entity is responsible for collection and management of payment - If the payment entity collects the money on behalf of ECO, the ECO is responsible for deducting the TCS
Delivery partners Commission
PwC | GST issues relating to E-Commerce sector
June 2022
9
Other issues TCS implications on export/ import and exempt supply of goods / services
TCS implications on Consumer to Consumer (C2C) sales
• Exports of goods are given the status of being zero-rated in terms of Section 16 of the IGST Act, 2017
• Definition of supply only covers supplies made by a person in the course or furtherance of business
• However, such supplies continue to be leviable to tax for GST purposes – hence TCS is to be deducted?
• Since the sale does not qualify as supply, there is no requirement to deduct TCS
• TCS implications on exempt supply of goods?
Sharing of discount • Discounts are offered by ECO to the customers • In certain situations, the discounts offered by the ECO are shared in a predefined manner between the ECO and the supplier • On what value should the GST be charged?
• What is the TCS implications in case of import of goods/ services into India?
PwC | GST issues relating to E-Commerce sector
June 2022
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03 Inventory based model and its issues
Inventory based model and its issues Procures the goods/service for his own account
Supplier
Customer
ECO
Invoice in the name of ECO
• Inventory based model is where the inventory of goods and services are owned by an e-commerce entity and sold to the customers directly (B2C)
Places the order on the App
Provides the goods/service on its own account
• Goods are stored in dark stores or warehouses • Goods / services are usually not available for sale over the counter • In certain cases it may also be a back-to-back purchase and sale • GST implications as that of Retail Stores – GST credit is available to be set-off against output GST
• No TCS to be deducted in this model • What happens in case you are reseller of services? Place of supply, etc.
Agreement between “ECO and supplier” + “ECO and customer” to be read carefully before concluding on the GST implications
PwC | GST issues relating to E-Commerce sector
June 2022
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04 Aggregator model and its issues
GST Charge Under Section 9(5) Section 9(5) provides certain categories of services where GST shall be payable by the e-commerce operator:
1
Services by way of transportation of passengers by a radio-taxi, motorcab, maxicab and motorcycle
2
Services by way of providing accommodation in hotels except where the service provider is liable to be registered under Section 22(1)
3
Services by way of house-keeping, such as plumbing, carpentering etc, except where the service provider is liable to be registered under Section 22(1)
4
Supply of restaurant services other than the services supplied by restaurants, eating joints, etc. located at specified premises
PwC | GST issues relating to E-Commerce sector
June 2022
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Scenario 1 – Taxi/Bike aggregator Mechanics
ECO
• ECO provides an IT application through which the booking can be made
• The customer may either pay the ECO operator or may directly pay the taxi provider Statement of services
Platform fees
GST implications • Per Section 9(5), ECO operator is liable to pay GST on all taxi/ bike service provided through its platform
• ECO is liable to pay GST on platform fees Taxi service provider
Customer Actual provision of service
Whether the ECO will be required to do TCS as well?
PwC | GST issues relating to E-Commerce sector
June 2022
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Scenario 2 – Hotel aggregator Outside India or in India
ECO
Mechanics • ECO provides an IT application through which the booking can be made
• ECO may be located in India or outside India Supplier is listed on the App
Convenience fees
• The customer pays ECO for hotel booking GST implications – two fold • Hotels unregistered – ECO liable to pay GST on hotel supplies • Hotels registered – Hotel operator liable to pay GST on hotel supplies; ECO to deduct TCS
Hotel
• In case of ECO is outside India - appointment of a representative for the purpose of discharging GST
Customer Actual provision of service
• Commission – ECO to raise GST invoice on hotels
India
• If ECO is located outside India - commission not subject to GST as intermediary located outside India
GST on minimum guarantee payments received by the hotels? State-wise GST registration - can there be one registration and GST payment by ECO/ representative? Hotels registered – whether ECO located outside India liable to do TCS? PwC | GST issues relating to E-Commerce sector
June 2022
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Scenario 3 – Restaurant aggregator Mechanics
ECO
• ECO provides an IT application through which the food orders can be booked
Supplier is listed on the App
• The customer pays ECO for restaurant services Delivery of food
Platform fees paid by the restaurant
GST implications • Per Section 9(5), ECO liable to pay GST on all restaurant service provided through its platform • ECO is liable to pay GST on platform fees • Where supply made by non-restaurant, no liability on ECO but on the supplier to discharge GST
Restaurant
Customer Actual provision of service
What would qualify as restaurant services? Whether ECO responsible for incorrect classification of supply? TCS implications on prepackaged goods supplied? Whether bakeries, sweet shops, standalone ice cream parlours, etc who are supplying food and beverages are subject to 9(5)? PwC | GST issues relating to E-Commerce sector
June 2022
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05 TCS implications
TCS Under Section 52 Section 52 of the GST Act provides that : • every electronic commerce operator (other than agent)
Additional GST liability to accrue in case of un-reconciled revenue
Matching Concept
1% (i.e 0.5% CGST and 0.5% SGST or 1% IGST)
TCS Rate
• shall collect an amount as TCS • on the net value of taxable supplies made through it by other suppliers • where the consideration with respect to such supplies is to be collected by the operator
E-commerce operator to file a Monthly Return in FORM GSTR–8
TCS to be computed and disclosed supplierwise, month-wise
Form GSTR–8
TCS u/s 52
Computation
Registration requirements
Type of TCS
TCS is to be collected in accordance with the tax charged on the invoice Separate registration
TCS registration in every state where the supplier is located
“Net value of taxable supplies” means aggregate value of taxable supplies of goods or services made during the month reduced by the value of taxable supplies returned to the suppliers PwC | GST issues relating to E-Commerce sector
June 2022
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Illustration of TCS Particulars
• TCS to be collected in the month of supply irrespective of the collection of payment
Intra state supplies (Rs)
Inter state supplies (Rs)
Taxable value of supply made by the vendor in June 2022
1200
2500
Less: Credit notes issued by the vendor in June 2022
200
500
1. Utilize the TCS for making payment of his outward supplies under GSTR 3B; or
Net taxable value of supplies made by the vendor in June 2022
1000
2000
2. Claim a refund of the TCS credited to him
CGST – 5 SGST – 5
IGST - 20
TCS to be deducted in June 2022 (based on the underlying supply)
• TCS to be discharged by cash only • Vendor can either:
Whether TCS is applicable on cash on delivery orders?
PwC | GST issues relating to E-Commerce sector
June 2022
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06 Other issues
Cloud Kitchen Mechanics
Cloud Kitchen
In some cases, may have a back-to-back arrangement
• Cloud Kitchen unlike a typical restaurant – does not have sitting and serving area • The customer pays Cloud Kitchen for the food order Supply of food
GST Issue • Reduced rate of 5% is applicable on the supplies being effected by a restaurant
• Clarification issued by the department that cloud kitchen qualifies as restaurant and therefore entitled to 5% GST Restaurant
PwC | GST issues relating to E-Commerce sector
Customer
June 2022
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Others
Co- branding / marketing arrangements
•
Activities undertaken which would entail marketing of co-party as well
•
Whether such transactions are to be treated as barter?
•
In case where the co-party is outside India, whether the marketing activities in India would be treated as intermediary?
GST implications on such transactions to be evaluated in detail
Barter transactions •
Various arrangements where services are provided by both the parties in a contract without consideration
•
Need to evaluate whether activity is provided from both parties in order to evaluate barter position
GST implications on such transactions to be evaluated in detail
PwC | GST issues relating to E-Commerce sector
June 2022
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Thank you
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