E-Commerce is India’s fastest growing and most exciting channel for online commercial transactions. It deals with cross-border transactions and eases the international brands to reach Indian customers.

To outline, many E-Commerce businesses or person dealing with such platform are unaware of the applicable tax compliances resulting from conceptual flaws.

What is E-Commerce

E-Commerce refers to buying and selling of goods/ services via internet- For e.g., Online shopping. Any person who supply goods/ service through the portal is called “E-Commerce Participant”. Further, any person who manages the portal is referred as “E-Commerce Operator”.

Fouls under Goods and Services Tax (GST)

Registration

  • E-Commerce operator

Usually, when suppliers reaches the threshold limit is required to get GST registration. However, the GST law has prescribed few classes of person including E-Commerce Operator to register mandatorily irrespective of the threshold limit.
(as per Section 24 of the Central GST Act)

  • E-Commerce participant

Any person who supplies goods/ services or both, through an e-commerce operator (except notified supplies) needs to obtain GST registration irrespective of the threshold limit.

Notified supplies: It namely includes such as restaurant services, including cloud kitchens, housekeeping and accommodation services, and motor cabs - the GST liability falls on the E-Commerce Operator.
(as per Section 9(5) of the Central GST Act)

Analysis of Tax Collected at Source (TCS)

TCS means the tax collected by an E-Commerce Operator from the consideration received by it on behalf of the supplier and remit the same to his GST account. It will be charged as per prescribed percentage of the net taxable supplies depending upon the supplies.
(as per Section 52 of the Central GST Act)

TCS will be deducted during the month in which the supply is made and will be deposited within 10 days from the month-end of supply.

Fouls under Income-tax (IT)

Tax Deduction at Source (TDS)

The Finance Bill 2020 widened the scope of TDS by bringing E-Commerce Participants within tax range and asked E-commerce Operators to deduct TDS while making a payment to resident E-Commerce Participant basis the defined criteria in the IT Act.
(as per Section 194-O of the IT Act)

TDS to be deducted on the Gross amount of sales/ services along with an exception to the Individual/ HUF subject to the transaction limit of 5 Lakhs in case if PAN is furnished.

Equalization Levy 2.0 (EL)

The first EL was introduced via Finance Act, 2016 and is made applicable to the specified services (namely advertisement services) provided by non-resident service providers.

The government has extended the scope and introduced EL 2.0 via the Finance Act, 2020. This EL 2.0 imposes the tax mandate on consideration receivable by the non-resident E-Commerce Operator.

Applicability

The EL 2.0 will be charged at the rate of 2% on the amount of consideration and unlike in the case of EL 1.0, the deduction of the levy is the responsibility of the non-resident E-Commerce Operator and is to be discharged by the operator itself. 

Further, the levy has to be discharged on a quarterly basis.

This EL 2.0 covers the following E-commerce supplies subject to the condition that the recipient should be Indian resident or IP address shall be located in India:

  • Online sale of goods owned by the e-commerce operator;
  • Online provision of services provided by the e-commerce operator;
  • Online sale of goods or provision of goods facilitated by the e-commerce operator;
  • Any combination of the above

It also provide few exceptions on EL 2.0 applicability:

  • The non-resident E-Commerce Operator has a permanent establishment in India and the supply are effectively connected to such permanent establishment;
  • The EL 1.0 is applicable;
  • The gross receipts/ turnover of such Operator from online supply is less than 2 crores in a year.

The EL 2.0 payment schedule stated below:

Quarter closing date Due Date
30 June 7 July
30 September 7 October
31 December 7 January
31 March 31 March
Payment Schedule

In case of defaults, simple interest will be imposed on late payments, and failure to pay the levy will incur a penalty equivalent to the amount of the levy.

An Annual Statement in Form-1 to be furnished to the tax authorities (Income-tax portal) on or before 30th June of the subsequent financial year.

If a taxpayer fails to furnish the statement within the prescribed time, he has to pay a penalty of INR 100 per day till the default continues.

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Disclaimer
The content of this article is for information purpose only and does not constitute advice or a legal opinion and are personal views of the author. It is based upon relevant law and/or facts available at that point of time and prepared with due accuracy & reliability. Readers are requested to check and refer to relevant provisions of statute, latest judicial pronouncements, circulars, clarifications etc before acting on the basis of the above write up. The possibility of other views on the subject matter cannot be ruled out. By the use of the said information, you agree that the Author / Treelife Consulting is not responsible or liable in any manner for the authenticity, accuracy, completeness, errors or any kind of omissions in this piece of information for any action taken thereof.

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