Digital gold platform operator classified as e-commerce operator under Section 2(45) CGST Act, must collect tax at source

The AAR, Karnataka ruled that an applicant operating a digital gold platform must be treated as an electronic commerce operator under GST law, not as an agent. Despite the applicant's contention that they merely collect commission and facilitate transactions between buyers and sellers through an escrow account, the AAR held that they fall within the definition of e-commerce operator under Section 2(45) of CGST Act 2017. Consequently, the applicant is required to collect tax at source under Section 52 and obtain compulsory registration under Section 24(x) read with Rule 12 of CGST Rules 2017, rejecting their claim for agent status exclusion.

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Issues Involved:
1. Whether the applicant qualifies as an 'Agent' for GST purposes and is excluded from the applicability of Notification No. 52/2018 - Central Tax, read with Section 52 of CGST Act, 2017.
2. Whether the applicant is required to obtain registration as an E-commerce operator as per Rule 12 of Central Goods and Services Tax Rules, 2017.

Issue 1: Qualification as an 'Agent'

The applicant, M/s. Changejar Technologies Pvt. Ltd., provides an online platform ("Jar") for the sale of digital gold offered by Digital Gold India Private Limited (DGIPL). The applicant collects a commission based on the value of digital gold sold, with the entire sale proceeds paid directly to DGIPL through an escrow account. The applicant argued that they merely provide a platform for transactions and do not assume responsibility for the gold's authenticity or quality, thus qualifying as an 'Agent' and being excluded from Section 52 of the CGST Act, 2017.

The Authority examined the definitions under Sections 2(44) and 2(45) of the CGST Act, 2017, and concluded that the applicant owns, operates, or manages a digital platform for electronic commerce, fitting the definition of an Electronic Commerce Operator (ECO). The agreement between the applicant and DGIPL explicitly states that the parties act as independent contractors and do not hold an agent-principal relationship. Therefore, the applicant qualifies as an ECO and not as an agent, making them liable under Section 52 of the CGST Act, 2017.

Issue 2: Requirement for Registration as an E-commerce Operator

The applicant contended that since they qualify as an agent, the provisions of Section 52 of the CGST Act, 2017, titled "Collection of Tax at Source," would not apply, and thus, they are not required to obtain registration as an E-commerce operator under Section 24(x) of the CGST Act, 2017.

The Authority determined that since the applicant is an ECO and is required to collect tax at source under Section 52 of the CGST Act, 2017, they must obtain compulsory registration under Section 24(x) of the CGST Act, 2017, read with the provisions of Rule 12 of the CGST Rules, 2017.

Ruling:

a. The applicant qualifies as an electronic commerce operator and is not an agent of DGIPL, thus falling under the purview of Notification No. 52/2018 - Central Tax, read with Section 52 of the CGST Act, 2017.

b. The applicant is required to collect tax at source under Section 52 of the CGST Act, 2017, and must be registered compulsorily under Section 24(x) of the CGST Act, 2017, read with Rule 12 of the CGST Rules, 2017.

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