Impact of gst on e commerce & jobwork as updated on 25th Nov 2016

1. E - Commerce
- Saurabh Batavia 1/7/2017

2. E-commerce Models
• Owner & Seller of the goods are the same person. The owner himself own
the goods, which he sells through an online Portal.
• Eg: Just Buy Live
Inventory
Model
• Services are provided under the brand name of another person
• Eg: Ola, Uber, etc.
Aggregator
Model
• Here, Goods & Services are sold under the name of the original Owner.
• i.e buyers & sellers come across a place to buy & sell – which is helped by
e-commerce operator.
• Eg: Flipkart, amazon, etc.
Market
Place
• Consumer to Consumer: Here a consumer himself sells goods directly to
another consumer.
• The E-commerce Operator assists the consumers to buy or sell goods
using their web portal.
• Eg: Olx, Quiker, etc.
C2C Model
• They own a particular database. Access to such information is provided to
consumer for a charge.
• Eg: Shadi.com
Online Info
Model
- Saurabh Batavia 1/7/2017

3. Definitions
• means supply of goods and/or services including digital products over
digital or electronic network
• Thus, every model except the inventory model shall be covered here.
Electronic commerce
• means any person who owns, operates or manages digital or electronic
facility or platform for electronic commerce
Electronic commerce operator (ECO)
• The major difference between the two is that while an aggregator(Ola) only
connects the customer with the supplier/service provider, whereas an
ecommerce operator(Flipkart) facilitates the entire process of the supply of
goods/provision of service. So flipkart not only connects the customer but
also provides all information about the product and looks after the delivery
and refund process. Hence and e commerce operator is larger than an
aggregator.
Difference between E-commerce & Aggregator
- Saurabh Batavia 1/7/2017

4. Existing Provision
VAT/CST
• In case of Market place model, the applicable
VAT/CST is paid by the vendor of Goods.
Entry Tax
• Generally entry tax like Octroi is charged by state
government & no input is allowed for the same.
Service Tax
• ST is paid by e-commerce operator who is providing
services to the vendor of goods.
• Aggregator
- Saurabh Batavia 1/7/2017

5. Issues in existing Provisions
 More complex tax framework involving VAT / CST, excise,
and / or service taxes.
 Hard time categorising their offerings into 'goods' or
'services' for charging either value added tax (VAT) /
Central Sales Tax (CST) or service tax.
 The interstate movement of goods from one state to
another is a nightmare for an ecommerce operator
because of the requirement of statutory forms, waybills,
road permits etc.
 There was no enough guidelines on taxation and
documentation management for typical ecommerce
sector transactions like e-wallet, Cash on delivery, gift
vouchers, etc.
- Saurabh Batavia 1/7/2017

6. Sec 56 - Collection of Tax at
Source
 E-commerce Operator (ECO) shall collect 1% Tax at
Source (TCS) of the ‘net value of taxable supplies’ made
through it, where the consideration is to be collected by
the ECO.
 ‘Net value of taxable supply’:
 ‘Net value of taxable supply’ shall exclude service
mentioned in Sec. 8(4) of GST Law (similar provision in
IGST law u/s 5(3)):
 Categories of services specified by CG /SG which are
provided through ECO on which the ECO shall be liable for
paying tax.
Particulars Amount
Sum of taxable supplies (of goods or
services)
xxx
(Less:) Returns (xxx)
Net value of taxable supply xxx
- Saurabh Batavia 1/7/2017

7. Sec 56 - Collection of Tax at
Source
 The amount collected by the ECO shall be deposited to
Government within 10 days of the next month.
 Every ECO who collects tax as above shall also file a return
within 10 days of the next month containing the following
details:
 Supplies of goods/services
 Returns during the month
 Tax collected
 The supplier whose Tax is deducted can avail input of TCS
deducted by ECO.
 The details furnished by the ECO shall be matched with that
furnished by the Supplier. Discrepancies, if any, shall be
communicated to both the persons.
 If the discrepancy is not rectified by the supplier or the ECO,
then the discrepancy shall be added to the Output Tax
Liability of the Supplier for the month succeeding the month
in which discrepancy is communicated.
 Interest shall be charged at the rate specified in S. 45(1).
- Saurabh Batavia 1/7/2017

8. Sec 56 - Collection of Tax at
Source
 Any authority above the rank of Joint Commissioner
may serve a notice, requiring the operator to furnish
details relating to—
 supplies of goods or services effected through such
operator
 stock of goods held by the suppliers which is managed
by such operators and declared as additional places of
business by such suppliers.
 Every ECO on whom notice has been served shall
furnish the details within 15 days from the date of
service of notice.
 Any person who fails to provide information as
required above shall be liable to penalty upto Rs.- Saurabh Batavia 1/7/2017

9. Impact of GST on E-Commerce
 Any supplier supplying goods through ECO, shall get himself
registered under GST. [S. 6(x)]
 Every ECO, irrespective of threshold shall get himself registered.
 ECO shall not be eligible for Composition Levy.
 Place of provision of Supply
 Stock transfer from the warehouse or godown shall also be
covered under ‘supply’, hence Tax would be payable on it.
However, input of such tax can be availed by the entity when the
goods are finally sold to consumer.
 Freebies or discounts will have to be explicitly mentioned in the
invoice to arrive at transaction value on which GST is applicable.
Any post sale discount will attract GST.
 Thus there shall be sudden increase in compliance for both
seller and ecommerce platform, they have to make necessary
changes to their ERPs, new rules impact cash flows of small
sellers (due to TCS).
 If an ecommerce platform wrongfully reports supply against a
seller unless reconciled, it is considered as supply by seller
which is unfair.
- Saurabh Batavia 1/7/2017

10. Online information and database access or
retrieval services
 Place of supply shall be the location of the recipient of service. Person receiving
such services shall be deemed to be located in the taxable territory if any two of
the following non-contradictory conditions are satisfied, namely:-
(i) the location of address presented by the recipient of service via internet is in
taxable territory;
(ii) the credit card or debit card or store value card or charge card or smart card
or any other card by which the recipient of service settles payment has been
issued in the taxable territory;
(iii) the billing address of recipient of service is in the taxable territory;
(iv) the internet protocol address of the device used by the recipient of service
is in the taxable territory;
(v) the bank of recipient of service in which the account used for payment is
maintained is in the taxable territory;
(vi) the country code of the subscriber identity module (SIM) card used by the
recipient of service is of taxable territory;
(vii) the location of the fixed land line through which the service is received by the
recipient is in taxable territory.
- Saurabh Batavia 1/7/2017

11. Special provision for payment of tax by a supplier of online information and
database access or retrieval services located outside India to specified
person in the taxable territory
 Sec. 12 provides that
 supplier of such service located in non-taxable territory
shall be liable to pay tax on services received by non-
taxable online recipient. If an intermediary is involved,
such intermediary shall be liable to pay the tax if he
satisfies all the following conditions, namely :- (a) the
invoice or customer’s bill or receipt issued or made
available by such intermediary taking part in the supply
clearly identifies the service in question and its supplier
in non-taxable territory; (b) the intermediary involved in
the supply does not authorise the charge to the
customer or take part in its charge i.e. intermediary- Saurabh Batavia 1/7/2017

12. “means undertaking any treatment or
process by a person on goods belonging
to another registered taxable person and
the expression ‘job worker’ shall be
construed accordingly”
JOBWORK
- Saurabh Batavia 1/7/2017

13. Section 55: Special procedure for
removal of goods for certain
purposes
1) A “principal” may send any inputs or capital goods without payment
of tax to a job worker for job-work and after completion of work,
within 1 year or 3 years(moulds and dies, jigs and fixtures, or tools
sent out to a job-worker for job-work):
a. Bring back inputs or capital goods to any of his place of Business
without payment of tax.
b. Supply such inputs, from the place of business of job worker on
payment of tax within India or with or without payment of tax for
export
2) Provided the Principal shall not supply goods from the place of Job-
worker unless he declares it as an additional place of business,
except where:
• The job worker is registered under GST u/s 23.
• The “principal” is engaged in the supply of such goods as may be
Notified by the Commissioner in this behalf.
3) The responsibility for accountability of the inputs and/or capital
- Saurabh Batavia 1/7/2017

14. Section 55: Special procedure for
removal of goods for certain
purposes
4) Where the input or capital goods sent for job-work are not received
as per clause (a) or (b), it shall be deemed that such input had
been supplied by the principal to the job worker on the day when
said inputs were sent out.
5) However, any waste and scrap generated during the job work may
be supplied by the job worker directly from his place of business
on payment of tax if such job worker is registered, or by the
principal, if the job worker is not registered.
- Saurabh Batavia 1/7/2017

15. Input tax credit in respect of inputs
sent for job work
 The “principal” shall be allowed input tax credit on
inputs or capital goods sent to a job-worker for job-
work.
 Input credit on inputs or capital goods shall be
allowed even if the inputs are directly sent to a job
worker for job-work without being first brought to his
place of business.
 Where the inputs or capital goods are sent directly
to a job worker, the period of one year (for returning)
shall be counted from the date of receipt of inputs by
the job worker. (except moulds and dies, jigs and
fixtures, or tools)- Saurabh Batavia 1/7/2017

16. Inputs removed for job work and returned on or
after the appointed day
 Where any inputs received in a factory had been removed to a job
worker in accordance with the provisions of earlier law prior to the
appointed day and are returned to the factory on or after the
appointed day, no tax shall be payable if such inputs are returned
to the factory within six months from the appointed day.
 The aforesaid period on sufficient cause may be extended for a
further period not exceeding two months
 If goods are not returned as above input tax credit shall be liable to
be recovered.
 Provided the Manufacturer & Job-worker has stated the details of
stock in prescribed forms as on the appointed day.
- Saurabh Batavia 1/7/2017

17. - Saurabh Batavia 1/7/2017