In pursuance of the recommendation of the 55th GST Council meeting, the CBIC has issued circular No. 240/34/2024- GST dated 31st December 2024 to clarify whether the ITC is required to be reversed by the e-commerce operators to the extent of the supply made under Section 9(5) of CGST Act, 2017.
1. Issue under Consideration
- Circular No. 167/23/2021 – GST dated 17.12.2021 clarified that electronic commerce operators (“ECOs”), required to pay tax under section 9(5) of CGST Act, are not required to reverse ITC in respect of supply of restaurant services through their platform on which GST is payable under section 9(5) of CGST Act.
- Now clarification is required regarding the requirement of reversal of ITC with respect to supply of services, other than restaurant services, under section 9(5) of CGST Act.
- Whether e-commerce operators, required to pay tax under section 9(5) of the CGST Act, are liable to reverse proportionate ITC on their inputs and input services to the extent of supplies made under section 9(5) of the CGST Act
2. Clarification
CBIC has clarified that:
- ECO, liable to pay tax under Section 9(5) of CGST Act, are liable to pay tax in following 2 scenarios:
- Supplies notified under section 9(5) of CGST Act for which e-commerce operators are liable to pay tax as if he is the supplier of the said services.
- Supply of his own services by providing his electronic platform for which he charges platform fee /commission etc. from the platform users.
E.g., For the foods delivered through Zomato, the e-commerce operator, i.e., Zomato, is liable to make following payments:
- GST under Section 9(5) on the foods supplied through it; and
- GST on convenience fee, Commission etc. charged by the Zomato from the restaurant owners.
- For the main service, i.e., commission fee, convenience fee etc, the ECO procures inputs as well as input services for which he avails Input Tax Credit.
- CBIC has clarified vide question no. 6 of Circular No. 167/23/2021 – GST dated 17.12.2021 that the ECO shall not be required to reverse ITC on account of restaurant services on which GST is payable under section 9(5) of the CGST Act.
- Now the CBIC has clarified that ITC will not be allowed to be utilized for payment of tax liability under section 9(5) and the whole of the tax liability under section 9(5) will be required to be paid in cash.
- The principle outlined in the circular dated 17.12.2021, also applies to the supplies made in respect of other services specified under section 9(5) of CGST Act.
- Therefore, ECO is not required to reverse ITC on his inputs and input services proportionately under section 17(1) or section 17(2) of CGST Act to the extent of supplies made under section 9(5) of the CGST Act.
- Entire tax liability under section 9(5) shall be discharged through electronic cash ledger only. The credit availed by him in relation to the inputs and input services used to facilitate such supplies cannot be used for discharge of such tax liability under section 9(5) of the CGST Act. However, such credit can be utilized by him for discharge of tax liability in respect of supply of services on his own account.
