GST Circular: ECOs Must Pay GST Liability Under Section 9(5) in Cash

CBIC has issued 𝗖𝗶𝗿𝗰𝘂𝗹𝗮𝗿 𝗡𝗼. 240/34/2024-𝗚𝗦𝗧 (𝗱𝗮𝘁𝗲𝗱 31.12.2024), introducing a significant update for e-commerce operators (ECOs) paying GST under Section 9(5) of the CGST Act.

🔑 𝗞𝗲𝘆 𝗛𝗶𝗴𝗵𝗹𝗶𝗴𝗵𝘁𝘀:

📌 𝗠𝗮𝗻𝗱𝗮𝘁𝗼𝗿𝘆 𝗖𝗮𝘀𝗵 𝗣𝗮𝘆𝗺𝗲𝗻𝘁: ECOs must now pay the entire GST liability for supplies covered under Section 9(5) using their electronic cash ledger only.
👉 Previously, this restriction applied only to restaurant services. Now, it extends to all ECOs.

📌 𝗥𝗲𝘀𝘁𝗿𝗶𝗰𝘁𝗶𝗼𝗻 𝗼𝗻 𝗜𝗧𝗖 𝗨𝘀𝗮𝗴𝗲: Input Tax Credit (ITC) cannot be used to settle GST liability for supplies facilitated under Section 9(5).

📌 𝗜𝗧𝗖 𝗳𝗼𝗿 𝗢𝘄𝗻 𝗦𝘂𝗽𝗽𝗹𝗶𝗲𝘀: However, ITC can still be used for discharging GST liability on services directly supplied by the ECO.

📊 𝗜𝗺𝗽𝗮𝗰𝘁 𝗼𝗻 𝗘𝗖𝗢𝘀:

• Significant shift for ECOs who previously used 𝗜𝗧𝗖 to discharge Section 9(5) liabilities.
• May 𝗶𝗺𝗽𝗮𝗰𝘁 𝘄𝗼𝗿𝗸𝗶𝗻𝗴 𝗰𝗮𝗽𝗶𝘁𝗮𝗹 𝗿𝗲𝗾𝘂𝗶𝗿𝗲𝗺𝗲𝗻𝘁𝘀 as payments will need to be made in cash rather than utilizing available credits.
• 𝗜𝗻𝘁𝗲𝗿𝗲𝘀𝘁 𝗰𝗼𝘀𝘁𝘀 may increase due to the higher cash outflows required for GST payments.
• Uncertainty remains about 𝗿𝗲𝘁𝗿𝗼𝘀𝗽𝗲𝗰𝘁𝗶𝘃𝗲 𝗮𝗽𝗽𝗹𝗶𝗰𝗮𝘁𝗶𝗼𝗻, as the circular doesn't explicitly clarify this point.
• Since the restriction arises from a 𝗰𝗶𝗿𝗰𝘂𝗹𝗮𝗿 (not an amendment in CGST Act), it could be legally challenged under 𝗦𝗲𝗰𝘁𝗶𝗼𝗻𝘀 9(5), 49, 𝗮𝗻𝗱 49𝗔 of the CGST Act.