E-commerce operators in new Modle GST law

Revised draft of revised Model GST law is released by cbec some days back. On first time reading we found that e-commerce operators are going to have a sigh of relief after changes in law. E-commerce operators were segregated in two parts in earlier law. The e-commerce portal and aggregators. Definition of supply in earlier Model GST law included the services provided by an aggregator in supply. This inclusion put the liability to pay tax on all supply via an aggregator by aggregator. This was a huge burden on services provided by an aggregator as they were required to registration without any threshold limit.

Supply in earlier Law sub clause 4 of section 3 in earlier draft of Model GST law read as “Notwithstanding anything contained in sub-section (1), the supply of any branded service by an aggregator, as defined in section 43B, under a brand name or trade name owned by him shall be deemed to be a supply of the said service by the said aggregator”  (This part is removed now)

This inclusion made the supply via an aggregator their own supply. Also the Aggregator in the earlier law was defined in subclause (a) to section 43B as   “‘aggregator’ means a person, who owns and manages an electronic platform, and by means of the application and a communication device, enables a potential customer to connect with the persons providing service of a particular kind under the brand name or trade name of the said aggregator”

This definition has also been removed in new draft. Term aggregator is not used anywhere in new Model GST draft. If I compare the situation earlier and now.In the erstwhile law e-commerce operators were divided into two parts.

Treatement of E-commerce operators in earlier (old) Model GST law:

1. Aggregator: Supply via an aggregator was taken as their own supply ans they were responsible to charge and pay tax on that supply.
2. E-commerce portal: E-commerce portals were covered in provisions for tax deduction at source meaning thereby that they were not required to pay tax on supply via their portal but to deduct and deposit a percentage of tax from the payments they collec from customer and pay to supplier.

Treatement of E-commerce operators in revised Model GST law:

In the revised Model GST draft law the term aggregator has been removed. In the levy itself in section 8 (of CGST/SGST, same provisions are also there in definition of levy in IGST) Sub clause 4 of levy covers the E-commerce operators.

Section 8 (CGST/SGST) Clause (4) reads as ” The Central or a State Government may, on the recommendation of the Council, by notification, specify categories of services the tax on which shall be paid by the electronic commerce operator if such services are supplied through it, and all the provisions of this Act shall apply to such electronic commerce operator as if he is the person liable for paying the tax in relation to the supply of such services:

Via this clause CG/SG has been given power to specify the categories where the e-commerce operator will have to pay tax as if they were their own supplies and all other provisions of Law will be applicable as if e- commerce operator was the person liable to pay tax. Important thing to note that this provision is only for services. E- commerce portals supplying goods are completely out of the preview of levy of GST. The e-commerce portals engaged in services will have pay GST but only if they are covered in specified categories. If they are not covered in specific categories of services even they will not be covered by the provisions of GST.\

Related Topic:
Impact analysis of GST on E-commerce operator

Although all of the E-commerce portals are required to deduct and pay the tax from the money they collect on behalf of the original supplier. Provisions for tax deduction are provided in section 56 of the revised draft of Model GST law. We can sum up the existing provisions like this.

Further these two proviso are added to fix the liability of GST on e-commerce operators don’t have a place of business in India.Their representative will be liable to discharge all liabilities under GST. Even if they don’t have a representative they will have to appoint one for GST purpose.

PROVIDED that where an electronic commerce operator does not have a physical presence in the taxable territory, any person representing such electronic commerce operator for any purpose in the taxable territory shall be liable to pay tax:
PROVIDED FURTHER that where an electronic commerce operator does not have a physical presence in the taxable territory and also he does not have a representative in the said territory, such electronic commerce operator shall appoint a person in the taxable territory for the purpose of paying tax and such person shall be liable to pay tax.

Similar changes are also bought in Schedule V creating liability for every E-commerce operator to take registration. Although the person providing the specified (as given in section 8(4)) services through an e-commerce portal are not required to take registration. Also the person supplying online information and database access or retrieval services from a place outside India to a person in India, other than a registered taxable person

These were the basic provisions for e-commerce operators in revised draft of Model GST law. E-commerce portalw will have to deduct tax and deposit to the government by 10th of next month and give the details of all supplies via their portal in return.