Under the “inventory model”, the seller has its own platform where its goods / services are listed. Buyers search for the goods /services on the seller’s platform. Under this model, supply of goods / services is by the E-commerce Operator.

(Example: Croma.com, Westside.com)

The aggregator model is similar to the marketplace model i.e., sellers can provide goods / services to the buyers using the platform of the e-commerce operator. However, under the GST law, on certain specified services, the liability to pay GST is on the e-commerce operator, provided certain conditions are met. In business parlance, these service providers are referred to as aggregators.

(Example: Zomato, Uber, Urban Company)

The following services are covered under the aggregator model when provided through the E-Commerce Operator:

• Transportation of passenger services by a radio-taxi, motorcab, maxicab, motor cycle, omnibus or any other motor vehicle (Example: Uber, Ola)
• Accommodation services in hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes. except where the service provider is a registered person under GST (Example: Oyo Rooms)
• Housekeeping services except where the service provider is a registered person under GST (Example: Urban Company)
• Restaurant services other than the services supplied by restaurant, eating joints etc. located at specified premises i.e. at premises providing hotel accommodation service having declared tariff of any unit of accommodation above INR 7500 per unit per day or equivalent (Example: Zomato, Swiggy)

E-commerce operator is required to deduct TDS under Section 194-O.

TDS under Section 194-O is required to be deducted in the name of the e-commerce participant i.e. the seller of the goods or services.

Rate of TDS prescribed under Section 194-O is 1%. The rate of TDS increases to 5% where the e-commerce participant (i.e. seller) does not furnish a valid Aadhar linked PAN[1] to the e-commerce operator (deductor), as per Section 206AA of the Act.

Under the Income-tax Act, the PAN has to be linked to Aadhaar by 31st March 2023, otherwise the PAN shall become inoperative

Section 194-O requires TDS to be deducted on the gross amount of sales or services of the e-commerce participant, facilitated by the e-commerce operator.

No specific guidance under the law has been provided on the deduction(s) [GST, sales return, refunds etc.], if any to be considered while computing the ‘gross amount sales or services’ on which TDS is required to be deducted. Accordingly, guidance in this regard may be sought from your tax advisor.

Section 194-O (2) provides for de-minimus revenue threshold of INR 5 Lakhs in a financial year, where the e-commerce participant is an individual or Hindu undivided family(ies) who provide their PAN/ Aadhaar to e-commerce operator. No de minimus threshold exists for non-individual/ HUF.

TDS under Section 194-O is required to be deducted at the time of credit of the amount of sale or services to the account of an e-commerce participant by the e-commerce operator or at the time of payment thereof by any mode to such e-commerce participant by the e-commerce operator, whichever is earlier.

Yes. As per the Explanation to Section 194-O(1), any payment made by a buyer directly to an e-commerce participant for the sale of goods or provision of services or both, facilitated by an e-commerce operator, shall be deemed to be the amount credited or paid by the e-commerce operator to the e-commerce participant. Therefore, TDS will apply even where the e-commerce operator is not collecting payments directly from the buyer.

Section 194-O requires the ‘e-commerce operator’ to deduct TDS under Section 194-O.

On the ONDC network, where the buyer app and / or seller app are facilitating the seller’s transaction sale of good/ provision of service, the buyer app and/ or seller app may qualify as an e-commerce operator and may have the liability to deduct TDS under section 194-O of the Act.

Where both buyer app and seller app qualify as e-commerce operator in respect of a particular transaction, the party responsible for complying with TDS provisions under Section 194-O may need to be determined in consultation with their tax advisors.

ONDC is in the process of making a representation to appropriate authorities to obtain clarity on who should undertake the TDS obligation(s), when there are more than 1 e-commerce operators involved in a transaction.

Transaction Level Contract digitally executed between the buyer app and seller app on ONDC network will explicitly state if Seller app itself is the seller of the goods or services. This is enabled through the ONDC Protocol.

E-commerce operator will need to collect the PAN of the e-commerce participant (i.e. seller). The ONDC Protocol will require the seller app or seller to provide PAN/ Aadhar.

Yes, credit of TDS deducted and deposited by the e-commerce operator into the Indian government treasury under Section 194-O will be available to the seller.

Yes, TDS is applicable on the logistic services provided by LOGISTICS SERVICE PROVIDERs. The applicable TDS provision in such case would need to be analysed separately on case-to-case basis.

The Buyer App will provide services of connecting the Buyer and the Seller on ONDC network and may charge a buyer finder fee to seller app. In this respect, Network Participants are advised to consult their tax advisors to ascertain their TDS obligation.

Any person owns, operates, or manages digital or electronic facility or platform for electronic commerce qualifies as an E-Commerce operator under GST. Accordingly, both buyer app and the seller app qualify as E-Commerce operator under GST.

If the seller is supplying notified services under Section 9(5) of the CGST Act, only then GST shall have to be collected by ECO. In case where seller is not GST registered or is a composite dealer, no GST is to be collected.

List of notified services under section 9(5) of the CGST Act as follows:

• Passenger transport services excluding omnibus services provided by Company
• .Accomodation services except where the seller supplying through ECO is liable for registration.
• Housekeeping services except where the seller supplying through ECO is liable for registration.
• Restaurant services other than restaurants located at specified premises

We have updated the list of services as on date and these notifications can be viewed from https://www.cbic.gov.in/entities/gst

However, TCS obligations under GST and TDS obligations under Income Tax Act,1961 shall still have to be done in certain scenarios.

E-commerce Operator is liable to collect GST TCS where the consideration with respect to such supplies is received by the E-commerce Operator. GST TCS Implication under various models:

Marketplace model - Seller app is liable to deduct GST TCS, except when consideration is collected by the seller himself. FAQs issued by Law Committee of GST Council has clarified that under multiple e-commerce model, E-commerce Operator making payment to the seller is required to deduct GST TCS. If the buyer app and seller app are same, GST TCS will be deducted by seller app.

Aggregator model - No GST TCS is deductible as liability of GST is required to be discharged by E-commerce Operator.

Inventory model - Buyer app is liable to deduct GST TCS, if consideration is collected by buyer app / LOGISTICS SERVICE PROVIDER appointed by buyer app. No GST TCS is deductible, if consideration is collected by the seller i.e. seller app / LOGISTICS SERVICE PROVIDER appointed by seller. If buyer app and seller app are the same and the inventory is owned by it, no GST TCS is deductible.

GST TCS is to be collected by the E-commerce Operator’s @ 1% (IGST) or @ 0.5% each of CGST and SGST.

Please note the following for supplies other than where the ECO is required to pay tax:

Unregistered person – With effect from 1st October 2023, no TCS is required to be collected.

Please note that GST TCS (wherever applicable) is to be collected at the rate of 1% (IGST) or 0.5% (CGST and SGST each)

Please refer guidance note for details on TCS applicability

TCS is to be collected on the net value of taxable supplies made by the seller. For more clarity refer guidance notes.

For example: If a particular product is being sold at Rs. 100 with 18% GST applicable, then 1% TCS shall be calculated on Rs. 100 (i.e., on product cost) and not on Rs. 118 (i.e., product cost + GST). Hence, Rs. 1 TCS shall be collected i.e. 1% of Rs. 100

No, the E-commerce Operator cannot pay the GST TCS utilizing its ITC balance in the electronic credit ledger. GST TCS liability has to be mandatorily paid in cash.

E-commerce Operator has to deposit the GST TCS collected in a month by the 10th of the following month. Also, return in Form GSTR-8 has to be filed by the E-commerce Operator by the 10th of the following month.

No, there is no threshold limits for registration as tax collector. E-commerce Operator is required to collect GST TCS on the taxable supplies made through it by sellers. Every E-commerce Operator who is required to collect GST TCS must be compulsorily registered in the State of the seller.

Yes, every E-commerce Operator is required be required to register in every State where the concerned suppliers are located to comply with the GST TCS provisions.

No GST TCS is required to be deducted on exempt supplies.

Such classification will depend on the HSN for supply used by the restaurants.

Where ice cream parlors sell already ready made ice- cream which they do not cook/prepare . Such transaction will be considered as supply of goods and not service. In such case ECO shall continue to collect TCS on such supplies. GST on such supply is required to be paid by the seller.

However, in a case where food is ordered from restaurant, ECO is required to pay GST on such services. In such cases, HSN would be of restaurant services. TCS will not be applicable and seller is not required to pay GST provided restaurant is not located at specified premises.

With effect from 1 October 2023, sellers without a GST registration can sell online as long as (GST unregistered seller)

• Seller does not engage in interstate supplies or supply from more than one state
• Threshold - Aggregate turnover should be below threshold
• PAN - Should have PAN under Income Tax Act, 1961
• Declaration - Should declare PAN, address and state for where supply will be made
• Enrolment Number - Should obtain enrolment number from GSTN portal and share it with ECO. Refer detailed guidance note for procedure to obtain enrolment number.
• Reporting - ECO shall report such supplies in GSTR-8

For unregistered seller, ECO should collect enrolment number. Details of enrolment numbers could be maintained at a seller level in the ERP/system. ECO could also evaluate mentioning the Enrolment numbers instead of GST numbers in the seller / customer masters.

Please note that enrolment number wise details are required to be reported in the GSTR-8 to be filed by the ECOs. Hence, system should be configured to provide reports to undertake compliances.

‘For details, please refer to the guidance note for ECOs.’

Yes, it is advisable for the ECO to collect enrolment number and the certificate. Such enrolment number can be validated on the GSTN portal one by one () or through GSPs in bulk.

Enrolment Number / ID is allotted after PAN verification. Thus, verified Enrolment number could be considered as a part of KYC document.

Seller NPs are expected to ensure that area of sale i.e. serviceability provided to buyer apps on the ONDC network is in conformity with restrictions under GST Act for a seller who obtains only the enrolment no. or is a composition taxable person.

Further, if seller NP has information of breach in turnover limits of such persons then it must ensure that further sale by the seller on the Network is with normal GST Registration No.

In addition, Seller NP may be required to provide Enrolment No. or GST No. to buyer NPs, as and when required as per API Specs or transaction flows.

Enrolment numbers incorporate the state code used in which the seller is located. Depending on the ‘place of supply’ of the transaction, it can be determined whether the supply could be intra state or interstate.

Accordingly, validations could be put in the ERP / Systems.

It is anticipated that the GSTN portal will notify the seller and the ECO if the turnover of unregistered persons exceeds the threshold limit.

Primarily, it is the seller's responsibility to monitor their turnover limit and to obtain GST registration. Considering penal implications on ECO, it is important for ECO to ensure that only eligible supplies are made through ECO where such consideration is to be collected by ECO. As a practice, ECO may consider collecting declarations from sellers at the time of onboarding.

GSTIN of seller (for registered and composition taxpayer) will have to be reported in GSTR-8 to be filed by the ECOs.

It may be noted that from the date of grant of GST registration number, enrolment number will cease to exist.

Hence, ECO will have to update the database to capture GST registration number. Also, once the supplier is registered, the TCS obligations on the ECO shall change.

No separate registration is required to be taken on account of ONDC.

In addition to normal registration, ECOs who are liable to collect TCS, shall be required to register in every State where the sellers are located to comply with the TCS provisions. Such registration is in addition to the normal GST registration.

For e.g. 1. ECO is located in Delhi having its normal registration in Delhi and the seller supplying goods are located in Maharashtra then the ECO is required to obtain TCS registration in the state of Maharashtra if payment for such supply is collected by the ECO

2. ECO is located in Delhi having its normal registration, seller providing restaurant service is located in Maharashtra then ECO is required to obtain normal registration in the state of Maharashtra for discharge of GST liability.

ECOs for TCS registration can register their head office as the place of business where they do not have a physical presence. Physical presence is not required to obtain TCS registration.

Under the CGST Act and state SGST Acts, ECOs are liable to penalty amounting to INR 10,000 or amount of tax involved, whichever is higher. Penalty on ECO can be levied only on below scenarios

- Allows supply of goods / services by unregistered persons other than persons exempted from registration by a notification

- Allow inter-state supply of goods or services by a person who is not eligible to make such supplies

-Fails to furnish correct details in the TCS return of any outward supplies effected through it by person exempted from obtaining registration

Please note that ECO is not responsible for compliances not undertaken by the seller like filing of GSTR-1 and GSTR-3B

In case ECO discovers any discrepancy or omission then it should be rectified in GSTR-8 to be filed for the month during which such discrepancy is noticed subject to payment of interest at 18%.

GST Law also provides levy of general penalty amounting to INR 10,000 under CGST and SGST each or amount of tax not collected whichever is higher

For supplies where ECO is required to pay tax ( For e.g. Food Delivery Orders), ECO is required to raise invoice on the customer. For other supplies, the seller is required to raise the invoice. Practically, it may be agreed between the NP and the seller on who can generate the invoice on behalf of the invoice raising party.

A registered person is required to comply with the provisions of the GST Law and is therefore required to issue a Tax Invoice containing all the fields and information as prescribed under the GST Law.

On the other hand, an unregistered person is not bound by the provisions of the GST Law and can issue a bill / invoice as per the format suitable to its business.

For a registered person, it is mandatory to issue a tax invoice as it is governed by the GST provisions. However, unregistered persons have no such mandate and hence can raise a bill or any document as per their requirement.

Enrolment no is valid till the time the person has obtained GST registration or is required to obtain GST registration

Enrolment number will be generated by the GSTN portal promptly after verification of the details filled on the GSTN portal.

Enrolment number is required in case of unregistered sellers. Seller is required to obtain GST registration number in case the turnover exceeds the threshold limit or compulsory registration is required in certain cases

No, unregistered person does not have to file returns under GST. ECO must report enrolment number of the unregistered seller in its GST returns

Prima facie, sellers engaged in exclusive supply of exempted goods are not required to obtain enrolment number.

Exempted goods include vegetables, fruits, milk, food grains etc. Detailed list is available under exemption notification. We have provided the links in the guidance notes

For GST registration, Section 23 of CGST Act exempts the sellers engaged in exclusive supply of exempted goods from taking GST registration. However, Section 24 of CGST Act mandates sellers supplying through ECOs (who are required to collect TCS) to take GST registration, and therefore technical evaluation will be required to determine registration requirement for sellers engaged in exclusive supply of exempted goods.

For the purposes of restaurant services, the restaurant does not need an enrolment or GST registration number. However, the restaurant will need the enrolment number/GST registration number for the sale/purchase of other goods/services.

ECOs shall be liable to pay GST on restaurant service supplied through them. Such liability is irrespective of whether the restaurant is registered or not.

Seller is required to obtain GST registration number and charge GST as a normal taxpayer in case the turnover exceeds the threshold limit.

Post obtaining GST number, enrolment will cease to be valid. Such GST number should be communicated by the seller to the ECO.

Seller has to discharge GST basis the rate applicable to the goods or services supplied by them. The GST rate ranges from 0% to 28%. The rates depend on the HSN or SAC code available to a particular goods or service. The seller should also check the exemption notification to check in case there any exemptions available for certain type of supplies to arrive at the final rate.

Link to search HSN (https://services.gst.gov.in/services/searchhsnsac)

No – unregistered person or composite taxable person cannot make inter-state supplies.

In case of sellers falling under composition scheme, a GST certificate needs to be collected along with other requisite details. Status of such customer should be verified for each financial year

Only composition taxpayers providing intra state supply of goods can supply goods through ECO. Hence no composition taxpayers providing services (except restaurant) can supply through ECO and ECO is required to collect TCS.

In case seller is under Composition scheme, the taxpayer cannot recover tax from the customer

A composition taxable person can only make intra state supply of goods and intra state supply of restaurant services. However, TCS is only applicablle on the intra state supply of goods and the Seller App (ECO) is required to collect TCS.