2025 (8) TMI 1288 - AAR - GST

E-commerce operator collecting payments via app exempt from reverse charge s 9(5) but must collect TCS s 52

In Re: M/s. DSoft Innovations LLP.

In Re: M/s. DSoft Innovations LLP. - TMI ISSUES PRESENTED AND CONSIDERED 1. Whether the applicant's freedeem application/ platform falls within the definition of 'electronic commerce' and the applicant is an 'electronic commerce operator' under the CGST Act. 2. If the applicant is an electronic commerce operator, whether the applicant is mandatorily required to obtain GST registration under section 24 read with section 52. 3. Whether the electronic commerce operator is liable to pay tax under reverse charge (section 9(5)) for restaurant services or other services notified under section 9(5) when the operator only collects consideration on behalf of merchants and does not provide delivery of goods/services to recipients. 4. Whether the electronic commerce operator is required to collect tax at source (TCS) under section 52 when consideration for supplies made through the platform is collected by the operator, including the applicability of TCS where supplies fall/exclude section 9(5) services. 5. Whether state-wise registration is required for TCS compliance by an electronic commerce operator, and the applicable rate structure (0.5% CGST + 0.5% SGST versus 1% IGST) for inter-state supplies where centralized management/operation is followed. 6. Whether an electronic commerce operator liable under section 9(5) must obtain separate state-wise regular taxpayer registrations to discharge section 9(5) liability (CGST+SGST) or may discharge it by charging IGST from places other than principal place of business. ISSUE-WISE DETAILED ANALYSIS - Issue 1: Characterisation as 'electronic commerce' and 'electronic commerce operator' Legal framework: Definitions in section 2(44) ('electronic commerce') and 2(45) ('electronic commerce operator') of the CGST Act; FAQ and circular guidance on vouchers and collection of consideration. Precedent Treatment: Applicant relied on a prior advance ruling; Authority noted binding nature of advance rulings under section 103 but assessed facts and law on record. Interpretation and reasoning: The freedeem platform facilitates purchase of vouchers/coupons via digital methods ('Buy Now' and 'Pay Bill'), collects consideration routed through the platform for supplies by third-party merchants, and is owned/operated/managed centrally by the applicant. Even though vouchers themselves may be instruments and not supply, the act of collecting consideration on behalf of merchants and enabling supply through a digital platform constitutes supply of services over an electronic network, meeting the statutory definition of electronic commerce. Operational facts (merchant registration, backend verification, making offers live, collection and remittance mechanics) demonstrate ownership/operation/management of a digital facility for electronic commerce. Ratio vs. Obiter: Ratio - characterization of the platform as electronic commerce and the operator as electronic commerce operator based on statutory definitions and factual matrix. Obiter - references to voucher treatment under circulars for contextual understanding. Conclusion: The applicant is an electronic commerce operator under the CGST Act. ISSUE-WISE DETAILED ANALYSIS - Issue 2: Compulsory registration as electronic commerce operator Legal framework: Section 24 (compulsory registration) clauses, notably clause (x) read with section 52 requiring registration of every electronic commerce operator required to collect TCS. Precedent Treatment: Statutory interpretation of section 24 obligations; applicant's factual admission to collecting consideration through the platform. Interpretation and reasoning: Once characterized as an electronic commerce operator, section 24(x) mandates registration irrespective of turnover where obligations under section 52 apply. The registration is distinct and in addition to any GST registration as a normal supplier. Ratio vs. Obiter: Ratio - mandatory registration requirement follows directly from statutory text applied to the factual finding that the operator collects consideration. Conclusion: The electronic commerce operator is mandatorily required to obtain GST registration under section 24 read with section 52. ISSUE-WISE DETAILED ANALYSIS - Issue 3: Liability under section 9(5) (RCM) for notified services Legal framework: Section 9(5) CGST Act and notifications under it (notification 17/2017 and subsequent amending notifications including insertion of 'restaurant service' and other categories where tax is to be paid by the electronic commerce operator). Precedent Treatment: Applicant argued it does not provide food delivery services and only collects payments; Authority examined notification scope and factual nature of services supplied through platform. Interpretation and reasoning: Section 9(5) and its notifications apply to specific categories of services supplied through an electronic commerce operator. The applicant's activities-facilitating offers, collecting consideration, not delivering goods/services or providing delivery-do not bring the supplies provided by merchants within the specific notified categories (notably the applicant does not supply restaurant services or food delivery to recipients through the operator). The Authority distinguished the factual matrix from situations where the operator itself supplies or arranges the specified services to recipients. Ratio vs. Obiter: Ratio - on given facts, the operator is outside the scope of section 9(5) because the notified services are not supplied through the operator in the manner envisaged by the notification. Obiter - general remarks about scope of notifications and examples of covered services. Conclusion: The applicant is outside the scope of section 9(5) liability for the services notified thereunder on the facts before the Authority. ISSUE-WISE DETAILED ANALYSIS - Issue 4: Obligation to collect TCS under section 52 Legal framework: Section 52(1) (TCS by electronic commerce operator), explanation excluding services notified under section 9(5) from 'net value of taxable supplies'; relevant Government notifications prescribing rates and compliance. Precedent Treatment: Authority referenced statutory text and government FAQs/circulars clarifying TCS mechanics and state-wise registration for TCS. Interpretation and reasoning: Section 52 mandates collection of TCS by an electronic commerce operator where the consideration for taxable supplies (other than those specified under section 9(5)) is collected by the operator. The applicant admits to collecting consideration via the platform and remitting merchant shares after deductions. Irrespective of the applicant's denial of providing restaurant/delivery services, fact of collection triggers TCS obligations. The exclusion in the 'net value' explanation means that supplies notified under section 9(5) are not part of the TCS base, but does not absolve the operator from the collection obligation for other taxable supplies. The Authority therefore finds the operator liable to collect TCS under section 52. Ratio vs. Obiter: Ratio - electronic commerce operator collecting consideration is liable to collect TCS under section 52, subject to exclusion of section 9(5) notified services from the net value computation. Obiter - discussion of voucher treatment and interplay with vouchers as instruments. Conclusion: The applicant is required to collect TCS under section 52 for taxable supplies made through the platform where consideration is collected by the operator; supplies under section 9(5) are excluded from the TCS base but do not negate the operator's overall TCS obligation. ISSUE-WISE DETAILED ANALYSIS - Issue 5: State-wise registration for TCS and applicable rate structure Legal framework: Section 52 and related notifications prescribing TCS rates; FAQ on TCS under GST (GST Council Law Committee clarifications) addressing requirement of registration in each State/UT and rate (0.5% CGST + 0.5% SGST; 1% IGST for inter-state). Precedent Treatment: Reliance on official FAQ and notifications applicable to TCS regime; statutory text requiring compliance across intra-state and inter-state supplies. Interpretation and reasoning: The FAQ clarifies that e-commerce operators must register in each State/UT where suppliers listed on their platform are located because the TCS obligation arises for every intra-state or inter-state supply. Administrative facilitation allows declaration of head office as place of business for registration where no physical presence exists, but registration per State is still required. The rate structure is statutory/notification-driven: 0.5% under each of CGST and SGST for intra-state and 1% under IGST for inter-state supplies. Ratio vs. Obiter: Ratio - mandatory state-wise registration for TCS compliance and prescribed TCS rates as per notifications and FAQ. Obiter - administrative facilitation details. Conclusion: The applicant must obtain registration for TCS in each State/UT as required and collect TCS at the prescribed rates (0.5% CGST + 0.5% SGST for intra-state; 1% IGST for inter-state) with deductions/reflections recorded under respective registrations. ISSUE-WISE DETAILED ANALYSIS - Issue 6: Requirement of separate state-wise regular taxpayer registrations to discharge section 9(5) liability Legal framework: Section 9(5) and section 24 registration obligations; interplay between regular taxpayer registrations and liability to pay tax as electronic commerce operator for specified services. Precedent Treatment: Considered but rendered moot by factual finding on section 9(5) applicability. Interpretation and reasoning: Because the Authority has held the applicant outside the scope of section 9(5) on the facts, the question of whether separate state-wise regular taxpayer registration is mandatory for discharging section 9(5) liability is rendered infructuous in the present matter. No adjudication on the broader legal proposition was undertaken. Ratio vs. Obiter: Obiter - question not decided due to factual non-applicability; no ratio on state-wise regular taxpayer registration for section 9(5) liabilities. Conclusion: Question rendered infructuous by the finding that section 9(5) does not apply to the applicant on the facts; no ruling given on mandatory separate regular state-wise registrations for discharging section 9(5) liability. ADDITIONAL NOTE ON PRECEDENTIAL BINDING Authority's observation: Advance rulings are binding on the applicant and concerned officers under section 103 of the CGST Act; prior advance ruling relied upon by applicant was noted but decision is based on statutory provisions, notifications, circulars and factual matrix presented.