The e-commerce space in India has always been subjected to scrutiny and litigation from an indirect tax perspective. With a view to monitor transactions done through e-commerce operators, the GST regulations have vested e-commerce players with additional compliance burden.
The GST regulations provided that, e-commerce operators are required to collect tax at source (‘TCS’) at the rate of 1 percent (0.5 percent CGST plus 0.5 percent SGST) of the value of taxable supplies made by other registered suppliers through them. These provisions were deferred until 30 September, 2018. However, the Government has notified these provisions to be effective from October 1, 2018.
The key takeways from the TCS provision are summarized herein below:
(a) TCS needs to be undertaken on the value of taxable supplies – if the underlying supplies are exempt or not subject to GST, TCS should not apply;
(b) The supplies should be made by other suppliers. Therefore, if the e-commerce operator are paying GST as the supplier of service, TCS should not apply;
(c) The consideration for the supplies made by other suppliers on the platform should be collected by the e-commerce operator.
The Government has recently issued FAQ’s to provide clarity on the TCS provisions. It has been clarified that the TCS provisions are applicable not only to Indian e-commerce players but even foreign e-commerce operators will be required to collect TCS if the suppliers (supplying through them) are located in India and are supplying goods or services or both to customers located in India. Essentially, if the underlying supply is taxable in India, e-commerce operators (even though located outside India), will have to collect TCS on the supplies.
As a result of the above provisions, foreign e-commerce operators will also be required to collect TCS in India and undertake the necessary compliances in India. This would entail increase in compliances for foreign e-commerce operators as they would have to obtain registrations in all the States in India as the obligation to collect TCS is for every supply made by the suppliers. It has further been clarified that if the foreign e-commerce operators do not have a place of business in the States then an agent can be appointed on behalf of the e-commerce operator to undertake the requisite compliances. Thus, it would be good to identify such e-commerce operators in your jurisdiction and sound them off of the above provisions in India.
Notably, some foreign e-commerce operators may have already been registered in India for supplying ‘Online Information and Database Access and Retrieval (‘OIDAR’) services’ to customers in India and paying GST on such OIDAR services as a supplier of service. Such e-commerce operators will not be required to collect TCS as e-commerce operators are paying taxes as a supplier of service.