Introduction:
The Central Goods and Services Tax Act, 2017 (CGST Act) provides provisions for TCS (Tax Collection at Source) liability in e-commerce transactions. A query has been raised regarding the TCS liability in situations involving multiple E-commerce Operators (ECOs) in a single transaction, particularly in the context of Open Network for Digital Commerce (ONDC).
Platform-centric Model:
- In the current platform-centric model, a single ECO operates both the buyer interface and the seller interface.
- This ECO collects the consideration from the buyer, deducts the TCS under Section 52 of the CGST Act, and credits the deducted TCS amount to the GST cash ledger of the seller.
- The ECO then passes on the balance of the consideration to the seller after deducting their service charges.
Multiple ECOs in a Single Transaction:
- In the case of the ONDC Network or similar arrangements, there can be multiple ECOs involved in a single transaction.
- One ECO provides an interface to the buyer, while another ECO provides an interface to the seller.
- Clarity is sought regarding which ECO should deduct TCS and fulfill other compliances under Section 52 of the CGST Act in such situations, as both the buyer-side and seller-side ECOs qualify as ECOs as per Section 2(45) of the CGST Act.
Clarification:
Issue 1: Supplier-side ECO not being the supplier in the transaction:
- In a situation where multiple ECOs are involved in a single transaction, and the supplier-side ECO is not the supplier of the goods or services, the liability for compliances under Section 52, including the collection of TCS, lies with the supplier-side ECO.
- The supplier-side ECO, who finally releases the payment to the supplier, must collect TCS as applicable and pay it to the government in accordance with Section 52 of the CGST Act.
- The supplier-side ECO is also responsible for other compliances under Section 52 of the CGST Act.
- The buyer-side ECO, in this case, is not required to collect TCS or fulfill other compliances under Section 52 of the CGST Act for this particular supply.
Issue 2: Supplier-side ECO being the supplier in the transaction:
- In a situation where multiple ECOs are involved in a single transaction, and the supplier-side ECO is the supplier of the goods or services, the liability for TCS lies with the buyer-side ECO.
- The buyer-side ECO, while making payment to the supplier, must collect TCS as applicable and pay it to the government in accordance with Section 52 of the CGST Act.
- The buyer-side ECO is also responsible for other compliances under Section 52 of the CGST Act.
Conclusion:
The circular provides clarification on TCS liability under Section 52 of the CGST Act in scenarios involving multiple E-commerce Operators in a single transaction. The liability for TCS and other compliances depends on whether the supplier-side ECO is the supplier or not. These guidelines aim to ensure uniformity in the implementation of the law across field formations.
This Article is only a knowledge-sharing initiative and is based on the Relevant Provisions as applicable and as per the information existing at the time of the preparation. In no event RMPS & Co. or the Author or any other persons be liable for any direct and indirect result from this Article or any inadvertent omission of the provisions, update etc. if any.
Published on: July 20, 2023