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GST Council to clarify on TCS liability of e-commerce suppliers on ONDC

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Under the GST law, every e-commerce operator is required to collect TCS at the rate of 1 per cent of the taxable value of goods/services sold through its platform

New Delhi: The Goods and Services Tax (GST) Council on July 11 is expected to clarify on the Tax Collected at Source (TCS) liability of suppliers engaged in e-commerce trading through Open Network Digital Commerce in cases where multiple operators are involved in a transaction.

ONDC or Open Network for Digital Commerce is a new initiative of the department for promotion of industry and internal trade (DPIIT). So far, there is no clarity on who should be liable for TCS compliance under GST laws.

Under the Goods and Services Tax (GST) law, every e-commerce operator is required to collect TCS at the rate of 1 per cent of the taxable value of goods/services sold through its platform.

Sources said the Law Committee, comprising Centre and state tax officers, has recommended to the Council that in a situation where multiple e-commerce operators (ECOs) are involved in a single transaction through ECO platform, the TCS compliances is to be done by the supplier-side, who finally releases the payment to the supplier.

ONDC’s open network operates in two models — inventory model and marketplace model.

Under the inventory model, a buyer places an order with an e-commerce platform, who then pays the supplier of the goods or services. Here, TCS is deducted by the e-commerce platform while making payment to the seller.

The confusion regarding liability of TCS deduction arises in the case of the market place model — where two intermediaries are involved in a single transaction.

Here, a buyer places an order on an e-commerce platform (buyer app) who then sources it from another e-commerce entity (seller app). The seller app then procures the goods from the actual supplier.

Since several entities are involved, the DPIIT has sought clarity as to whether the buyer e-commerce operator or the seller e-commerce company would be required to deduct the TCS.

Sources said in this case, TCS would be required to be deducted by the seller app while making payment to the supplier. A clarification to this effect is likely to be issued by the GST Council on Tuesday.

Incorporated on December 31, 2021, ONDC is a Section 8 company.

It is an initiative of the DPIIT to create a facilitative model to help small retailers take advantage of digital commerce. It is not an application, platform, intermediary, or software but a set of specifications designed to foster open, unbundled, and interoperable open networks.

The GST Council had last year waived mandatory registration for suppliers to e-commerce platforms in case of intra-state supplies, provided that the annual turnover of supplier is less than the GST registration threshold, which is Rs 40 lakh for goods and Rs 20 lakh for services). This provision will come into effect from October 1.

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