GST Council to Provide Clarity on TCS Liability for E-commerce Suppliers on ONDC Platform
- ByStartupStory | July 9, 2023
The GST Council is set to provide clarity on the Tax Collected at Source (TCS) liability of suppliers engaged in e-commerce trading through Open Network Digital Commerce (ONDC) in cases involving multiple operators. The ONDC, an initiative of the Department for Promotion of Industry and Internal Trade (DPIIT), aims to address the lack of clarity regarding TCS compliance under GST laws.
Under the GST law, e-commerce operators are required to collect TCS at a rate of 1% on the taxable value of goods/services sold through their platforms. However, when multiple e-commerce operators are involved in a single transaction through the ECO platform, it is uncertain who should be liable for TCS compliance.
The Law Committee, comprising both central and state tax officers, has recommended to the GST Council that in such cases, the TCS compliance should be done by the supplier-side, who ultimately releases the payment to the supplier. This recommendation seeks to address the confusion surrounding TCS deduction in situations where the marketplace model is involved.
In the marketplace model, a buyer places an order on a buyer app, which is then sourced from another e-commerce entity (seller app), who procures the goods from the actual supplier. The involvement of multiple entities necessitates clarity on the responsibility for deducting TCS.
According to sources, in the marketplace model, the TCS would be deducted by the seller app when making payment to the supplier. A clarification on this matter is expected to be issued by the GST Council.
The ONDC, established on December 31, 2021, is a Section 8 company initiated by the DPIIT. It aims to create a facilitative model that enables small retailers to benefit from digital commerce. The ONDC is not an application, platform, intermediary, or software, but a set of specifications designed to promote open, unbundled, and interoperable open networks.
In a bid to ease compliance for suppliers to e-commerce platforms, the GST Council had waived mandatory registration for intra-state supplies if the supplier’s annual turnover is below the GST registration threshold. This provision will come into effect from October 1.
As the GST Council convenes on Tuesday, a clarification on TCS liability is expected to provide much-needed clarity and guidance to stakeholders in the e-commerce sector.
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