4 days ago7 min read

Supplies u/s 9(5): GST on Notified Services by E-commerce Operators

The CGST Act's Section 9(5) is a unique case that deals with online retailers. Like any other enterprise, an e-commerce operator is responsible for paying taxes for customer-focused businesses that function through it, such as motor taxis, housekeeping and hotel accommodations, cloud kitchens for restaurants, and more. In this article, we will highlight supplies under Section 9(5) in detail and explain the applicability and implications of GST on notified services provided by e-commerce operators.

What is section 9(5) and Services covered under Section 9(5)

According to Section 9(5), the government may assign the types of services an online retailer is responsible for collecting and paying GST as though the retailer were the service producer. Such an e-commerce provider will apply to all the clauses, not the individual people who offer products through him. The service categories listed by the government in this section are as follows:

Facilities for transportation services like motorcar, taxicab, motorcycle, and radio-taxi, such as Ola and Uber. Therefore, a person is also excluded from registration laws if he uses Uber to start driving five cars and earns Rs. 25 lakh.

The arrangement of housing services in hotels, inns, guest houses, clubs, campsites, or other commercial properties for residential purposes unless the provider of such services through an electronic-commerce operator registers because of turnover that exceeds a certain level. Take Goibibo and MakeMyTrip, for instance. Section 9(5) does not apply to hotels with yearly profits of more than Rs. 20/10 lakh; instead, the hotel should register and pay GST.
Housekeeping services, like plumbing and carpentry, are exempt from licensing requirements if the provider uses an electronic commerce operator and their turnover surpasses the criterion.

Applicability of Section 9(5) of CGST Act

This section focuses on specific service categories that, if given through an e-commerce operator, are subject to income tax and billing by the operator. This comprises

Services for passenger transportation
Cleaning services
Cloud kitchens have been included in restaurant facilities
Services for accommodation

According to the reverse charge, e-commerce operators pay tax as if they were the supplier, irrespective of whether the supplier is registered under GST. This section will primarily cover intra-state supplies. In the past, restaurants and cloud kitchens that promised their services through e-commerce systems like Zomato, Swiggy, and others had to pay GST for such services. However, e-commerce enterprises Swiggy and Zomato will be obligated to pay under the reverse charge mechanism as of January 1, 2022. Regardless of whether the restaurant (the real supplier) is registered under GST, it must be paid using electronic cash records at a rate of 5%. Furthermore, no Input Tax Credit claim is possible in this situation.

The e-commerce operator could issue the invoice for any services listed under Sec. 9(5). Assume that the e-commerce operator offers a variety of analyses and integration under a single order [Sec 9 (5)]. The e-commerce operator must then raise a separate bill for the element under notified services. Imagine that the e-commerce company is not physically present in the taxable area. In that situation, whoever demonstrates the e-commerce operator in that territory for any specific purpose will be answerable for taxes. Suppose the e-commerce operator is neither physically present nor has a member in the taxable territory. The person responsible for paying the tax will be assigned by the e-commerce operator.

GST Registration for E-Commerce Sellers under Section 9(5)

According to the CGST regulatory frameworks, e-commerce operators must apply for Registration regardless of the profit they earn in a fiscal year. A minimum deduction is granted, nevertheless, to the provider of those services. In other words, even if their turnover surpasses the threshold, they are exempt from registering. All e-commerce operators, irrespective of turnover, must register. Online retailers are exempt from the Rs. 20 lakh/10 lakh specified threshold. The composition scheme does not enable them to register.

E-commerce sellers are individuals using an e-commerce operator to sell goods or services. In addition to selling through their offices and stores, they may sell through one or more e-commerce companies. For using the GST provisions, the sellers fall into three categories. These include:

Selling goods: Despite possessing a turnover below the Rs. 40/20/10 lakh threshold, these sellers must register for GST. It implies that they must register before selling on the e-commerce platform. When registering as a seller on any platform, including Amazon, Flipkart, and others, a GSTIN is required immediately.

Selling goods or services not specifically covered by Section 9(5): These distributors must register and collect GST only if their overall income exceeds the 20/10 lakh threshold. Additionally, GST is not levied on trades conducted through e-commerce operators if they are not enrolled. (CGST Notification No. 65/2017)

Selling services covered by Section 9(5): Even if their turnover exceeds the threshold, such sellers are excluded from registering under GST. Anyone selling goods or services through an online platform is not eligible for registration under the GST regime. He must only register under the regular scheme.

Filing Returns and Compliance for E-commerce Sellers u/s 9(5)

When an e-commerce website retailer provides services like housekeeping, accommodation, restaurants, and transportation, he is responsible for paying GST liability. All supplies made under Section 9(5) must be reported by the supplier and the e-commerce operator in a new table (Table 3.1.1) added to GSTR-3B. This table will become operational on August 1, 2022.

For the online retailer: Table 3.1.1 (i) will record the supplies subject to Section 9 (5). The e-commerce operator is required to contribute the tax in cash. ITC transactions are not recognised. Furthermore, these supplies are not appropriate for inclusion in GSTR-3B Table 3.1 (a).

For the service provider (registered individual): The service provider must submit the supplies subject to Section 9(5) in Table 3.1.1 (ii). Furthermore, these supplies are not appropriate for inclusion in GSTR-3B Table 3.1. (a). The producer does not have to pay taxes because the e-commerce operator is responsible for paying them.

Applying Section 122(IB): According to information from the 53rd GST Council meeting, e-commerce operators who breach Section 122(1B) of the TCS will not be reprimanded for failure to comply, except those liable to TCS under Section 52. As a result, e-commerce companies that violate Section 9(5) will face a general penalty.

Difference Between Section 9(5) and Section 52 of the CGST Act

The table below illustrates the difference between Section 9(5) and Section 52 of the CGST Act:

	Section 9(5)	Section 52
Collection of Tax Liability/TCS	The e-commerce operator is liable for taxes and he is treated as the supplier of those services.	TCS collected by the e-commerce operator on the net value of taxable supplies by other suppliers through it.
Registration	Voluntary registration by the actual supplier. Mandatory for e-Commerce operators.	Compulsory for both the e-commerce operator and the actual supplier.
Threshold Exemption	Applicable for the actual supplier.	Not applicable.
Compliance	Form GSTR-3B to be filed, specifically Table 3.1.1.	Form GSTR-8 to be filed every month (TCS collected and details regarding the supplies). Form 2A of each supplier shows the details entered in GSTR-8 by the e-commerce operator.
Reverse Charge Mechanism	Applicable	Not Applicable

Latest Update

The Finance Minister recommended modifying Subsection (1B) of Section 122 of the CGST Act in the Union Budget 2024. The amendment will restrict the subsection’s application to electronic commerce operators, who must collect taxes at the source according to Section 52 of the Act. The preceding change takes effect immediately, starting on October 1, 2023, the day the previous subsection went into effect. The regulations of the Act will be executed in a way that makes the e-commerce operator liable for submitting taxes on the consumption of those services, just like if he were the service provider.

Conclusion

In conclusion, the specific tax obligations imposed on e-commerce companies under India's GST framework are spelled out in detail in Sections 9(5) and 52 of the CGST Act, 2017. Regardless of the supplier's registration status, Section 9(5) mandates that e-commerce operators assume responsibility for collecting and paying GST on specific services as if they were the supplier. Section 52, on the other hand, establishes the TCS mechanism, which allows e-commerce companies to collect taxes on the net value of taxable supplies that other suppliers make using their platform. Section 52 covers the wider range of e-commerce transactions, whereas Section 9(5) mainly refers to intra-state deliveries of certain services.

FAQ

Q1. What are supplies under Section 9(5) of GST?

According to Section 9(5) of the CGST Act, if an electronic commerce operator (ECO) offers services such as passenger transport, lodging, housekeeping, or restaurant services, they must pay tax on those services.

Q2. What are taxable supplies under GST?

A supply must be taxable to be subject to GST. Any goods, services, or both taxable under the Act are regarded as a taxable supply. Exemptions can be permitted to particular products or services or to a set of people or associations that supply them.

Q3. What are the notified services under GST?

According to Section 9(5) of the CGST Act, if an electronic commerce operator (ECO) provides support like passenger transport, accommodation, housekeeping, or restaurants, they must pay tax on these services.

Q4. What is the GST rate for e-commerce services?

GST is obtained by e-commerce at the rate of 18% of the seller's commission. Furthermore, they should deduct 0.5% of the payment to sellers as Tax Collection at Source (TCS).

Q5. What is the impact of GST on e-commerce operators?

Sellers on e-commerce portals are required to pay 1% more in tax payments on their gross turnover than they do on the goods they sell under the GST. Due to this, small and medium global market vendors that offer economic goods now face a huge tax burden.

Q6. Is GST mandatory for e-commerce?

If an e-commerce operator receives a deposit for a taxable supply, they are compelled to collect tax (apart from those required to pay tax under section 9(5) of the CGST Act, 2017). Consult Section 52(1) of the 2017 CGST Act.