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Quick Snapshot:
An E-Commerce Operator under GST is anyone who owns, operates or manages a digital platform for electronic commerce. The law places two separate obligations on every ECO. Under Section 9(5), the ECO pays GST directly on six notified services including cab rides, accommodation, housekeeping, cloud kitchen orders and local delivery, but only when the actual supplier is small or unregistered. Under Section 52, the ECO collects Tax at Source at 0.5% on the net value of all other taxable supplies made through its platform and deposits it with the government by the 10th of the following month. The supplier gets credit for this TCS in their electronic cash ledger. Monthly compliance is through GSTR-8 and annual through GSTR-9B, and a separate TCS registration is mandatory in every state where the ECO operates, regardless of existing GST registration.
Who is an ECO?
Electronic Commerce Operator (ECO) means any person who owns, operates or manages digital or electronic facility or platform for electronic commerce defined u/s 2(45) of CGST Act. Examples: Amazon, Uber, Ola, etc.
Two Separate Obligations of an ECO
There are two obligations in respect of tax which are to be complied by an ECO. Both of these obligations are explained below:
1. Tax Payable by the ECO on Notified Services u/s 9(5) of CGST Act:
For the purpose of section 9(5), the government has notified has following categories of services, if supplied through an ECO, GST on such supplies shall be paid by the ECO.
| Service | Platform Examples | ECO Pays GST? | Exception (ECO does NOT pay) |
|---|---|---|---|
| Passenger transport by radio-taxi, motorcab, maxicab, motorcycle or any motor vehicle | Ola, Uber, Rapido | Yes | Omnibus services |
| Passenger transport by omnibus | State transport, private bus aggregators | Yes | When the actual supplier is a company |
| Accommodation in hotels, inns, guest houses, clubs, campsites or commercial lodging | Goibibo, TripAdvisor | Yes | When the accommodation provider is independently liable for GST registration |
| Housekeeping services like plumbing, carpentry etc. | Urban Company | Yes | When the service provider is independently liable for GST registration |
| Restaurant services from cloud kitchens (not from specified premises) | Swiggy, Zomato | Yes | When the restaurant operates from a “specified premises” (hotel room rate above ₹7,500/day) |
| Local delivery services | Porter | Yes | When the delivery provider is independently liable for GST registration |
Two things that apply to all of the above:
• This applies to services only. Goods supplied through an ECO are not covered under this provision.
• Once this rule applies, the ECO is treated as the supplier and takes on full GST liability for that supply.
Can ECO required to pay tax u/s 9(5) is liable to reverse proportionate ITC to the extent of supplies made u/s 9(5)?
1. Tax for supplies notified u/s 9(5) has to be fully paid using E-cash ledger only.
2.ECO is not liable to reverse ITC for the supplies made u/s 9(5).
2. Collection of Tax at Source u/s 52 of CGST Act:
What is TCS under GST?
When a supplier sells goods or services through an ECO like Amazon, and the ECO collects the payment on the supplier’s behalf, the ECO must deduct a small percentage of tax before passing the money to the supplier. This is Tax Collected at Source (TCS).
TCS does not apply in two situations:
• The buyer pays the supplier directly, without the ECO collecting the money.
• The seller sells through their own website and collects payment themselves.
Who collects TCS?
Every ECO that is not acting as an agent must collect TCS on the net value of taxable supplies made through it by other suppliers, but only when the ECO collects the consideration on the supplier’s behalf.
Rate of TCS:
| Type of Supply | Tax Head | Rate |
|---|---|---|
| Intra-state (within same state) | CGST + SGST | 0.25% + 0.25% = 0.5% total |
| Inter-state (across states) | IGST | 0.5% |
Example: A product sells at ₹1,180 (including 18% GST) through an ECO. The net taxable value is ₹1,000. For an inter-state supply, TCS at 0.5% = ₹5. The ECO pays ₹995 to the supplier and deposits ₹5 to the government.
What is the “Net Value of Taxable Supplies”?
It is the aggregate value of all taxable supplies made by registered persons through the ECO, excluding supplies already covered under Section 9(5). The supply value includes all taxes, duties, fees and charges under any law, except CGST, SGST, UTGST, IGST and GST Cess.
Compliance for ECO:
| Obligation | Form | Due Date |
|---|---|---|
| Deposit TCS to government | GSTR-8 | By 10th of the following month |
| Monthly TCS statement | GSTR-8 | Within 10 days after end of each month |
| Annual TCS statement | GSTR-9B | On or before 31st December of the following financial year |
Important points on GSTR-8 filing:
• A nil GSTR-8 is not required if there is no TCS liability in a tax period.
• GSTR-8 is required only when supplies are made through the ECO and TCS has been collected, or when the ECO needs to amend details from an earlier return.
• GSTR-8 cannot be filed after 3 years from its original due date, unless the government permits otherwise.
Rectification of errors in GSTR-8:
If the ECO identifies any error in a filed GSTR-8 on its own, it can correct it in the GSTR-8 of the month in which the error is noticed. Interest under Section 50 applies on any shortfall. However, rectification is not allowed after 30th November following the end of the financial year or the date of filing GSTR-9B, whichever is earlier.
How does the supplier get credit for TCS?
The TCS amount deducted by the ECO gets credited directly to the supplier’s electronic cash ledger. The supplier can use this credit to pay their GST liability.
Frequently Asked Questions (FAQs)
Does an ECO need a separate TCS registration even if it already has a GSTIN?
Yes. An ECO must obtain a separate registration for TCS regardless of whether it is already registered under GST as a supplier.
Is TCS applicable on exempt supplies?
No. TCS does not apply on exempt supplies.
Does TCS apply on supplies made by unregistered suppliers through an ECO?
No. If the supplier is not liable for GST registration, the ECO is not required to collect TCS on supplies made by such suppliers.
Is TCS collected on supplies where the recipient pays tax under RCM?
No. TCS does not apply on supplies where the recipient is liable to pay tax under the reverse charge mechanism.
Does TCS apply on supplies made by a composition taxpayer through an ECO?
It depends on what is being supplied. TCS applies on goods supplied by a composition taxpayer through an ECO. However, a composition taxpayer cannot supply services through an ECO that is liable to collect TCS. This restriction comes directly from Section 10(2)(d) of the CGST Act.
Is TCS applicable on import of goods or services?
No. Imports where the recipient pays tax under RCM are outside the scope of TCS. Import of goods falls under the Customs Act, 1962 and is therefore outside the purview of TCS entirely.
Can an ECO use its own ITC balance to pay TCS?
No. An ECO cannot use its input tax credit to pay TCS. TCS must be paid in cash only.
How are sales returns handled for TCS calculation?
TCS is collected on the net value of taxable supplies. Returns made by a customer can be adjusted against the gross supplies made by that specific supplier. This adjustment is done separately for each supplier on a GSTIN basis. For example, if suppliers A and B both sell through the same ECO, their net values are calculated independently and not clubbed together.
What if returns in a tax period are higher than sales? Can a negative amount be reported?
No. A negative amount cannot be declared in GSTR-8. If returns exceed supplies in a given tax period, the excess is simply ignored. It cannot be carried forward to the next tax period either.
When exactly must the ECO collect TCS?
TCS must be collected at the time the supply takes place, not when the payment is received. For example, if a supply happens on 30th October but the ECO receives payment in November, the ECO must report and collect TCS in the October statement itself.
Does an ECO need to register in every state or union territory?
Yes. An ECO must obtain TCS registration in each state or union territory where its suppliers are located, since TCS obligations arise on both intra-state and inter-state supplies.
What about foreign ECOs that have no physical presence in India?
A foreign ECO whose suppliers and customers are located in India is still liable to collect TCS. It must obtain registration in each state or union territory. If it has no physical presence in a particular state, it can appoint an agent to handle compliance on its behalf.
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