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Key Takeaways
- Under Section 9(5) of the CGST Act, 2017, e-commerce operators (ECOs) must pay GST on notified services like cab bookings, accommodation, and food delivery instead of the actual service providers.
- Service providers offering notified services via e-commerce platforms are exempt from GST registration, even if their turnover exceeds the threshold, as the tax liability shifts to the platform.
- The tax liability under Section 9(5) follows the reverse charge mechanism, where the e-commerce operator is treated as the supplier and pays GST directly to the government.
You are a small business owner providing cab services through an online platform, or perhaps you run a guesthouse listed on a popular travel website. You rely on these e-commerce operators (ECOs) to get customers, but suddenly, you find out that you are not responsible for paying goods and services tax (GST) for the platform you use.This might sound like a relief, but what does it mean for you?Section 9(5) of the Central Goods and Services Tax (CGST) Act, 2017, shifts the responsibility of GST payment from the actual service provider to the e-commerce operator for certain notified services. This blog will briefly summarise everything you need to know about GST under Section 9(5).
Compliance and Return Filing for E-Commerce Operators under Section 9(5)
Section 9(5) of the Central Goods and Services Tax (CGST) Act, 2017, places the responsibility of tax compliance on e-commerce operators for certain notified services. This section is particularly relevant for service-oriented businesses operating through e-commerce platforms, such as restaurants, housekeeping, accommodation, and motor cabs. The liability to pay tax falls on the e-commerce operator, treating them as if they are the supplier of these services.
E-Commerce Operator
An e-commerce operator is defined under Section 2(45) of the CGST Act, 2017, as any person who owns, operates, or manages a digital or electronic facility or platform for electronic commerce. Examples of e-commerce operators include platforms like Amazon, Flipkart, Zomato, and Swiggy. These operators facilitate third-party suppliers to supply goods or services through their online marketplace.
Supplier of Services (Registered Person)
The supplier of services, in this context, refers to the actual service providers who use the e-commerce platform to offer their services. These suppliers can be registered or unregistered under GST. However, for the services notified under Section 9(5), the e-commerce operator is liable to pay the tax, regardless of whether the supplier is registered.
Applicability of Section 122(1B)
Section 122(1B) of the CGST Act of 2017 was introduced to impose penalties on e-commerce operators for specific non-compliances. According to this section, an e-commerce operator can be penalised if they allow unregistered persons to supply goods or services through their platform, except when such supplies are exempt from GST. The operator can also be penalised if a registered person supplies goods or services outside their registered state through the e-commerce platform.
Compliance Requirements for Supplies u/s 9(5)
- Registration : E-commerce operators must obtain GST registration mandatorily, irrespective of the value of supply made by them. This applies even if the operator has no physical presence in India. In such cases, they must appoint an agent to comply with GST regulations.
- Tax Collection at Source (TCS) : Under Section 52 of the CGST Act, e-commerce operators are required to collect TCS at the rate of 1% on the net value of taxable supplies made through their platform. This TCS will be collected from the suppliers and deposited with the government.
- Return Filing : E-commerce operators must file Form GSTR-8 every month, which includes details of TCS collected and supplies made through their platform. Additionally, they must file an annual return in Form GSTR-9B.
- Reverse Charge Mechanism (RCM) : For the services notified under Section 9(5), the e-commerce operator is liable to pay GST on behalf of the supplier. This is treated as a reverse charge mechanism, where the liability to pay tax shifts from the supplier to the e-commerce operator.
What Distinguishes Section 9(5) from Section 52 of the CGST Act?
Here are the key differences between these two provisions, their applicability, and their implications under the CGST Act.
| Parameters | Section 9(5) of CGST Act | Section 52 of CGST Act |
| Scope | Applies to specific services notified by the government where the e-commerce operator is liable to pay GST on behalf of the supplier. | Applies to all taxable supplies made through an e-commerce operator where the operator collects tax at the source (TCS) from the supplier. |
| Liability | The e-commerce operator is treated as the supplier and is liable to pay GST on the specified services. | The e-commerce operator collects TCS at 1% on the net value of taxable supplies made through it by other suppliers. |
| Services covered | Includes services like passenger transport, accommodation, housekeeping, and restaurant services. | Applies to all taxable supplies made through the e-commerce platform, irrespective of the type of goods or services. |
| Registration requirement | The actual supplier of services is not required to register under GST if their turnover exceeds the threshold limit, as the e-commerce operator is liable to pay GST. | Both the e-commerce operator and the actual supplier must obtain GST registration. |
| Compliance | The e-commerce operator must comply with GST provisions as if they are the supplier of the services. | The e-commerce operator must file monthly and annual statements (GSTR-8) detailing the supplies made through it and the TCS collected. |
| Reverse aharge mechanism | Applicable, as the e-commerce operator is liable to pay GST on behalf of the supplier. | Not applicable, as the e-commerce operator collects TCS from the supplier. |
| Threshold exemption | Not applicable to the actual supplier, as the e-commerce operator is liable to pay GST. | Applicable to the actual supplier, who can avail of the threshold exemption. |
| Return filing | The e-commerce operator must file a GSTR-3B and a GSTR-1 for the specified services. | The e-commerce operator must file a GSTR-8 monthly and a GSTR-9B annually. |
| Tax invoice | The e-commerce operator issues the GST invoice for the specified services. | The actual supplier issues the GST invoice, and the e-commerce operator collects TCS. |
| Penalty | Penalties may be imposed on the e-commerce operator for non-compliance with GST provisions. | Penalties may be imposed on the e-commerce operator for non-compliance with TCS provisions. |
| Examples | Services provided by radio-taxis, motor cabs, hotels, guest houses, and housekeeping services. | All taxable supplies made through e-commerce platforms like Amazon, Flipkart, etc. |
Final Verdict on Section 9(5) GST
Section 9(5) of GST significantly impacts e-commerce operators and service providers by shifting tax liability from the latter to the former. While service providers of notified services like cab booking, accommodation, and food delivery are relieved from GST registration, e-commerce operators must comply with tax collection, return filing, and reporting obligations. This shift ensures smoother compliance and efficient tax administration. However, operators must adhere to Section 122(1B) to avoid penalties. Understanding the distinction between Section 9(5) and Section 52 is crucial for compliance. Staying informed and compliant with GST regulations and using a GST calculator is essential for seamless e-commerce operations.
FAQS - FREQUENTLY ASKED QUESTIONS
Which services are covered under Section 9(5)?
Services notified under Section 9(5) include passenger transport (motor cabs), restaurant services (including cloud kitchens), accommodation (hotels, guesthouses), and housekeeping. When supplied via an e-commerce platform, the operator bears the tax liability instead of the actual service provider.
Who is liable to pay GST under Section 9(5)?
The e-commerce operator, not the service provider, is liable to pay GST for the notified services supplied through their platform. Platforms like Swiggy, Zomato, or Ola must collect and pay GST instead of individual restaurants or cab drivers.
What is the GST rate for services under Section 9(5)?
The GST rate varies by service. For restaurant services (including cloud kitchens), e-commerce operators must pay 5% GST via the electronic cash ledger. Other notified services are taxed as per their applicable GST rates under the CGST Act.
Can service providers claim input tax credit (ITC) under Section 9(5)?
Input tax credit (ITC) is not available to service providers for supplies covered under Section 9(5). Since e-commerce operators are liable for GST payments, the actual service providers cannot claim ITC on such supplies.
Is GST registration mandatory for service providers under Section 9(5)?
No, service providers offering notified services through e-commerce operators are eligible for threshold exemption. That means they are not required to register for GST even if their turnover exceeds the limit, as the tax liability shifts to the e-commerce operator.
How does Section 9(5) differ from Section 52 of the CGST Act?
Section 52 mandates e-commerce operators to collect TCS on sales by third-party sellers. Section 9(5) shifts the tax liability to the operator for notified services, treating them as the deemed supplier responsible for GST payments.
How should e-commerce operators report GST under Section 9(5)?
E-commerce operators must report supplies under Section 9(5) in Table 3.1.1 (i) of GSTR-3B and pay GST in cash. These supplies should not be included in Table 3.1(a), ensuring correct compliance with GST regulations.
How should service providers report sales under Section 9(5)?
Registered service providers must report sales under Section 9(5) in Table 3.1.1 (ii) of GSTR-3B. However, since the e-commerce operator bears the tax liability, the service provider is not required to pay GST on these transactions.
What happens if the e-commerce operator has no physical presence in India?
If the e-commerce operator lacks a physical presence, GST liability falls on their representative in India. If no representative exists, the operator must appoint a person responsible for tax compliance in the taxable territory.
What penalties apply for non-compliance under Section 9(5)?
E-commerce operators failing to comply with Section 9(5) may face penalties under the general non-compliance provisions of the CGST Act. However, as per the 53rd GST Council meeting, penalties under Section 122(1B) apply only to operators liable for TCS under Section 52.
The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.
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