JANUARY 2021

GST Updates

1. Penalty waived for non-compliance to QR code provisions in B2C GST Invoice till 31 March 2021

2. Communication between recipients and supplier

A facility of ‘Communication Between Taxpayers’ has been provided on the GST Portal, for sending a notification by recipient (or supplier) taxpayers to their supplier (or recipient) taxpayers, regarding missing documents or any shortcomings in the documents or any other issue related to it. This facility is available to all registered persons, except those registered as TDS, TCS or NRTP.

For UM and FAQs, click links below

a.click here
b.click here

3. Invoice Furnishing Facility (IFF) for taxpayers under QRMP Scheme:

This facility is available to taxpayers who have opted quarterly filing frequency under the scheme can file the details of outward supplies (B2B invoices only) for first 2 months of the quarter in IFF. This facility is similar to Form GSTR – 1 and allows filing of the details of B2B invoices in the following tables only:

• • 4A, 4B, 4C, 6B, 6C – B2B Invoices
• • 9B – Credit/Debit notes (Registered) – CDNR
• • 9A – Amended B2B invoices
• • 9C – amended Credit/Debit notes (Registered) – CDNRA

Option to upload of the document in IFF is available till 13th of subsequent month. Any IFF which is not filed within 13th of the subsequent month will expire.

IFF is an optional facility provided to taxpayers under QRMP scheme to pass on the ITC to their recipient for month 1 and 2 of a quarter. However filing of GSTR-1 for month 3 is mandatory. Records uploaded in IFF will reflect in GSTR – 2A/2B of the recipient. Records filed in IFF need not to be filed again in Form GSTR – 1 of that quarter. Only the details saved in IFF can be deleted/ edited using RESET button. Once submitted or filed, these cannot be deleted.

For UM, click on here

For FAQs, click on here

4. Aadhaar authentication / e – KYC for existing taxpayers on GST Portal

Functionality for Aadhaar Authentication and e-KYC where Aadhaar is not available, has been deployed on GST Common Portal w.e.f. 6th January, 2021, for existing taxpayers. All taxpayers registered as Regular Taxpayers (including Casual Taxable person, SEZ Units/Developers), ISD and Composition taxpayers can do their Aadhaar Authentication or e-KYC on GST Portal. This is not applicable for Government Departments, Public Sector Undertakings, Local Authorities and Statutory Bodies.

Click on here – For UM

Click on here – For FAQs

5. Late fee in case of delay filing of GSTR – 9

• • Rs. 100 per day or
• • .25% of turnover of that specified state
• Whichever is lower. The late fee is per GSTR – 9 in case of multiple registration.

Income Tax Updates

1. Extension of time limit for filing of returns:

With the view of challenges faced by taxpayers, CBDT has extended the various time limits of filing return for the FY 2019-2020 (AY 2020-21). The extended notification is as below:

• • Due date for furnishing of Income Tax Return for taxpayers (including their partner) who are required to get their accounts audited was further extended to 15 February, 2021.
• • Due date for furnishing of Income Tax Return for taxpayers who are required to furnish report in respect of international/specified domestic transaction was further extended 15 January 2021.
• • Due date for furnishing of Income Tax Return for AY 2020-21 for other taxpayer was further extended to 10 January 2021.
• • Date of furnishing of various audit report under the Act including tax audit report and report in respect of international/ specified transaction for AY 2020-21 has been extended to 15 January 2021.
• • Last date of making a declaration under Vivad Se Vishwas Scheme has been extended to 31 January 2021.
• • Date of passing order under Vivad Se Vishwas Scheme has been extended to 31 January 2021.
• • Date of passing or issuance of notice by authorities under the Direct Taxes &Benami Acts has been further extended to 31 March 2021.
• • Extension of time limit has also been provided to Furnishing of annual return u/s 44 of CGST Act, 2017 for financial year 2019-20 to 28 February 2021.

2. General CBDT updates

• • Timeline before which UDIN are to updated with respect to audit report and certificate uploaded from 27 April 2020 extended to 15 February 2021.
• • Late fee in case of belated ITR’s –
  • a. Rs. 1000 in case total income upto 5 lakhs, even if tax not payable.
  • b. Rs. 10000 in case of total income above 5 lakhs.

MCA Updates

1. Due date extension

• MCA has levied additional fee of Rs. 100 per day per form for filing of AOC-4 and MGT-7 after the expiry of 30/60 day as the case may be from the date of AGM.
• Time limit for conduct of Board meeting on matter of financial statement approval, board’s report approval, etc through video conferencing or audio – visual means till 30 June 2021.

Upcoming Due date

ANGEL FUNDS – AN INTRODUCTION

Angel investors are an important source of financing that start-ups raise capital form. Start-ups prefer to raise funds from Angel Investors than bankers as the first source of external capital, next to founders and members of families and friends. Angel Investors are individuals who are experienced and interested to invest on promising ideas of start-ups in the form of equity or debt and earn returns from such investments as the start-up grows.

Angel Investors are recognized as a Sub Category of Venture Capital Fund under Category-I Alternative Investment Fund by SEBI (Securities Exchange Board of India) that raises funds from angel investors and invests in accordance with SEBI guidelines.

GOVERNING REGULATION:

Angel Investments are governed by Chapter III-A of Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012 as amended from time to time.

CRITERIA FOR BEING AN ANGEL INVESTOR:

Angel Investors are any person who proposes to invest in an angel fund and satisfies one of the following conditions:

• 1) An individual investor whose net tangible asset is at leasttwo crore rupees excluding value of his principle residence AND
  • a) Has early stage investment experience (means prior experience in investing in start-up or emerging or early stage ventures)
  • b) Has experience as a serial entrepreneur (means a person who has promoted or co-promoted more than one start-up venture)
  • c) Is a senior management professional with at least ten years of experience
• 2) A body corporate with a net worth of at least ten crore rupees
• 3) An Alternative Investment Fund registered under these regulations or a venture capital fund registered under the SEBI Venture Capital Funds Regulations, 1996.

REGISTRATION OF ANGEL FUNDS:

Registration of Angel Funds are governed by Chapter II of the Securities and Exchange Board of India (Alternative Investment Funds) Regulations.

• a) An application for grant of certificate shall be made for any of the categories as specified in sub-regulation (4) in Form A as specified in the First Schedule to these regulations and shall be accompanied by a non-refundable application fee as specified in Part A of the Second Schedule to these regulations.
• b) The Board shall take into account requirements as specified in these regulations for the purpose of considering grant of registration.
• c) Without prejudice to the powers of the Board to take any action under the Act or regulations made there under, the Certificate of registration shall be valid till the Alternative Investment Fund is wound up.

ELIGIBILITY CRITERIA FOR ANGEL FUNDS:

• a) Memorandum of association in case of a company, or trust deed in case of a trust, or the Partnership Deed in case of a Limited Liability Partnership permits it to carry on the activity of an Alternative Investment Fund
• b) The applicant is prohibited by its memorandum and articles of association or trust deed or partnership deed from making an invitation to the public to subscribe to its securities.
• c) In case the applicant is a trust, the instrument of trust is in the form of a deed and has been duly registered under the provisions of the Regulation Act 1908
• d) In case of an LLP, its duly registered under the LLP Act 2008
• e) In case of a body corporate, it is established under the laws of central or state legislature and is permitted to carry on the activities of an Alternative Investment Fund.
• f) The applicant, sponsor and Manager are fit and proper persons based on the criteria specified in schedule II of SEBI Intermediaries Regulations 2008

GRANT OF CERTIFICATE:

• 1) The Board may grant certificate under any specific category of Alternative Investment Fund, if it is satisfied that applicant fulfills all the requirements of the regulations.
• 2) The Board on receipt of the application fee, grant a certificate in Form B.
• 3) The registration may be granted with such conditions as may be felt appropriate by the Board.
• 4) In cases where in-principle approval is granted by the Board (in cases where the applicant has complied with all clauses of regulation 4 except clauses c or d), the applicant shall comply with those clauses within 6 months from the date of grant of such in-principle approval and upon compliance of the same, the Board may grant a certificate of registration.
• 5) An AIF that has been granted in-principle approval may accept commitments from investors but shall not accept any monies till it is granted registration under this regulation.

INVESTMENT IN ANGEL FUNDS:

• a) Angel funds shall raise funds only by way of issuing units to angel investors
• b) The minimum corpus shall be FIVE Crore Rupees
• c) The maximum tenure of investments accepted by Angel funds shall not exceed five years from angel investors and the minimum investment taken from an investor shall be Twenty-Five Lakhs Rupees
• d) Angel funds shall raise funds through private placement by issue of information memorandum or placement memorandum by whatever name called.

RESERVATION OF NAME OF A COMPANY/LLP

The first step to incorporate a business in India, either as a Company or as an LLP is by filing for reservation of the Name of the Company/LLP. Before anyone makes an application for reservation of name, the following three things must be considered to avoid any possible rejection by the MCA.

• 1. Whether the proposed name resembles the name of any existing company.
• 2. Whether the proposed name will be considered undesirable
• 3. Whether the proposed name contains words which will require prior approval from the Central Government

1. Names which resemble too nearly with name of existing company.

• (a) the words like Private, Pvt, Pvt., (P), OPC Pvt. Ltd., IFSC Limited, IFSC Pvt. Limited, Producer Limited, Limited, Unlimited, Ltd, Ltd., LLP, Limited Liability Partnership, company, and company, & co, & co., co., co, corporation, corp, corpn, corp or group;
• b) The plural or singular form of words;
• (c) Type and case of letters, spacing between letters, punctuation marks and special characters used in one or both names
• (d) Use of different tenses in one or both names;
• (e) Use of different phonetic spellings including use of misspelled words of an expression;
• (f) Use of host name such as ‘www’ or a domain extension such as ‘net’, ‘org’, ‘dot’ or ‘com’ in one or both names;
• (g) The order of words in the names
• (h) Use of the definite or indefinite article in one or both names
• (i) A slight variation in the spelling of the two names including a grammatical variation thereof;
• (j) Complete translation or transliteration, and not part thereof, of an existing name, in Hindi or in Englis
• (k) Addition of the name of a place to an existing name, which does not contain the name of any place
• (l) Addition, deletion, or modification of numerals or expressions denoting numerals in an existing name, unless the numeral represents any brand;

Clauses (f) to (h) and clauses (k) and (l) will be allowed, if a no objection by way of a Board resolution has been provided by the existing company

2.Undesirable names.

The name shall be considered undesirable, if-

• (a) It is prohibited under the provisions of section 3 of the Emblems and Names (Prevention and Improper Use) Act, 1950 (12 of 1950), unless a previous permission has been obtained under that Act;
• (b) The name includes a trade mark registered under the Trade Marks Act, 1999 in the same class of goods or services in which the activity of the company is being carried out or is proposed to be carried out, unless the consent of the owner of the trade mark, has been obtained;
• (c) It includes any word or words which are offensive to any section of the people;
• (d) The proposed name is identical with or too nearly resembles the name of an LLP.
• (e) The proposed name is identical with or too nearly resembles with a name which is for the time being reserved for Incorporation.
• (f) The company’s main business is financing, leasing, chit fund, investments, securities or combination thereof, but the proposed name is not indicative of such related financial activities, viz., Chit Fund or Investment or Loan, etc.;
• (g) The company’s name is indicative of activities financing, leasing, chit fund, investments, securities or combination thereof, but the company’s main business is not related to such activities;
• (h) It resembles closely the popular or abbreviated description of an existing company or limited liability partnership;
• (i) The proposed name is identical with or too nearly resembles the name of a company or limited liability partnership incorporated outside India and reserved by such company or limited liability partnership with the Registrar:
  Provided that if a foreign company is incorporating its subsidiary company in India, then the original name of the holding company as it is may be allowed with the addition of word India or name of any Indian State or city.
• (j) any part of the proposed name includes the words indicative of a separate type of business constitution or legal person or any connotation thereof e.g. co-operative, sehkari, trust, LLP, partnership, society, proprietor, HUF, firm, Inc., PLC, GmbH, SA, PTE, Sdn, AG, etc.;
  ‘Electoral Trust’ may be allowed for registration of companies to be formed under section 8 of the Act, in accordance with the Electoral Trusts Scheme, 2013 notified by the (CBDT):
• (k) The proposed name contains the words ‘British India’;
• (l) The proposed name implies association or connection with an embassy or consulate of a foreign government;
• (m) The proposed name includes or implies association or connection with or patronage of a national hero or any person held in high esteem or important personages who occupied or are occupying important positions in the Government;
• (n) The proposed name is identical to the name of a company dissolved as a result of liquidation proceeding and a period of two years has not elapsed from the date of such dissolution:
  Provided that if the proposed name is identical with the name of a company which is struck off, then the same shall not be allowed before the expiry of twenty years from the date of publication in the Official Gazette being so struck off;
• (o) It is identical with the name of a LLP in liquidation or the name of a LLP which is struck off up to a period of five years;
• (p) The proposed name include words such as ‘Insurance’, ‘Bank’, ‘Stock Exchange’, ‘Venture Capital’, ‘Asset Management’, ‘Nidhi’, ‘Mutual Fund’, etc., unless a declaration is submitted that the requirements mandated by the respective regulator, such as IRDA, RBI, SEBI, MCA, etc. have been complied with;
• (q) The proposed name includes the word "State", in case the company is not a Government company;
• (r) The proposed name is containing only the name of a continent, country, State, city such as Asia limited, Germany Limited, Haryana Limited or Mysore Limited;
• (s) Use of descriptive names, where the name merely consists of commonly used words to describe an activity.
  • (A) The term “commonly used words” refers to use of generic expressions which may be used by any other company to describe its trade;
  • (B) while determining whether a name is descriptive or not, the objects of the proposed company or the order of words appearing in a name shall not be relevant;
  • (C) The name shall not be deemed to be descriptive where “commonly used words” are used in addition to other words in the name;
    For eg., The name Drinking Water Plant Ltd. is a descriptive name, even if the object of the company is related to making drinking water plant as it consists of commonly used words and objects of the proposed company is not relevant while determining whether a name is descriptive.
• (t) The proposed name includes name of any foreign country or any city in a foreign country, the same shall be allowed if the applicant produces any proof of significance of business relations with such foreign country like memorandum of understanding with a company of such country:
  Provided that the name combining the name of a foreign country with the use of India like India Japan or Japan India shall be allowed if, there is a government to government participation or patronage and no company shall be incorporated using the name of an enemy country.4
  ‘Enemy country’ means so declared by the Government of India from time to time.
• (u) The proposed name of a section 8 company under the Act does not include the words Foundation, Forum, Association, Federation, Chambers, Confederation, Council, Electoral Trust and the like, etc.
• (v) The proposed name of a Nidhi company under the Act does not have the last words “Nidhi Limited” as a part of its name.
• (w) The proposed name has been released from the register of companies upon change of name of a company and three years have not elapsed since the date of change unless a specific direction has been received from the competent authority in the course of compromise, arrangement or amalgamation.

2.Word or expression which can be used only after obtaining previous approval of Central Government.

The following words and combinations thereof shall not be used in the name of a company in English or any of the languages depicting the same meaning unless the previous approval of the Central Government has been obtained for the use of any such word or expression:-

• (a) Board;
• (b) Commission;
• (c) Authority;
• (d) Undertaking;
• (e) National;
• (f) Union;
• (g) Central;
• (h) Federal;
• (i) Republic;
• (j) President;
• (k) Rashtrapati;
• (l) Small Scale Industries;
• (m) Khadi and Village Industries Corporation;
• (n) Financial Corporation and the like;
• (o) Municipal;
• (p) Panchayat;
• (q) Development Authority;
• (r) Prime Minister or Chief Minister;
• (s) Minister;
• (t) Nation;
• (u) Forest corporation;
• (v) Development Scheme;
• (w) Statute or Statutory;
• (x) Court or Judiciary;
• (y) Governor;
• (z) the use of word Scheme with the name of Government (s), State, India, Bharat or any Government authority or in any manner resembling with the schemes launched by Central, State or local Governments and authorities; and
• (za) Bureau.

How to reserve the Name for A Company

An application for reserving a name of a Company shall be made using the SPICe+ form available at the MCA portal for new Companies to be incorporated and by using RUN form for change of name of an existing company. It is advised to use the Name search option available in the MCA portal keeping in mind, the above matters to avoid any rejection of the name that is being applied for. On perusal of the application, the registrar may approve or reject the application after allowing 15 days of time to resubmit the form rectifying defects, if any.

When the application for Name reservation is approved, it is valid for:

• 1. 20 days from the date of approval for new companies to be incorporated, within which the application for Incorporation must be filed.
• 2. 60 days from the date of approval for change of name of an existing company, within which the necessary forms must be filed by the company to give effect to the change of the name.

With effect from 26th of January, 2021, the registrar shall extend the timeline for reserving the name as follows:

• 1. For additional 20 days, if an application with payment of Rs.1000 is made before the expiry of the 20 days from the original date of approval.
• 2. For additional 40 days, if an application with payment of Rs.3000 is made before the expiry of the 20 days from the original date of approval.
• 3. After the application with payment of Rs.1000 is made for extending the total number of days to 40, further application with payment of Rs.2000 shall be made for reserving the name for additional 20 days, if the application is made before the expiry of 40 days.

Illustration

• 1. For name Approval received on 31st Jan, 2021, the name will be reserved up to 20th Feb’2021.
• 2. If an application with payment of Rs.1000 is made before 20th Feb, 2021, the name shall be reserved up to 12th Mar, 2021.
• 3. In case, the incorporation forms are not filed before 12th of Mar,2021, another application with payment of Rs.2000 shall be made before 12th of Mar, 2021 for reserving the name up to 01st April, 2021.
• 4. If an application with payment of Rs.3000 is made before 20th Feb, 2021, the name shall be reserved up to 01st Apr, 2021.

GST on real estate sector

Types of Real Estate Transactions: These are the following types of transactions which can take place in Real Estate Sector:

• 1. Supply of immovable properties (Commercial/ Residential) before completion.
• 2. Supply of immovable properties (Commercial/ Residential) after completion.
• 3. Sale of Land (Agricultural/ Commercial/ Residential).
• 4. Sale of rights arising out of land (e.g. TDR, FSI)

GST Rates on Real Estate on or after 01st April 2019

In the 33rd GST Council meeting dated 24.02.2019 following rates revision for residential apartments was recommended and got finalized in 34th GST Council meeting dated 19.03.19 applicable from 01.04.2019 :

• 1. GST @ 1.5% (Effective rate 1% after deducting Land Cost) without ITC for affordable residential apartments.
• 2. GST @ 7.5% (Effective rate 5% after deducting Land Cost) without ITC for residential apartments other than affordable residential apartments.
• 3. GST @ 12% with ITC for commercial properties (other than specified ones which will attract GST @ 5%).

Definition of affordable residential apartment:

• • A residential house/flat of carpet area of up to 90 sqm in non metropolitan cities/towns and 60 sqm in metropolitan cities having value up to Rs. 45 lacs (both for metropolitan and non metropolitan cities).
• • Metropolitan Cities are Bengaluru, Chennai, Delhi NCR (limited to Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon, Faridabad), Hyderabad, Kolkata and Mumbai (whole of MMR) with their geographical limits prescribed by Government.

*In case of ongoing projects new rates will be optional.

*As far as new projects are concerned, new proposed rates will be applicable thereon. New Projects means which commences after 31.03.2019.

For E.g. Mr. A is a beneficiary of PMAY CLSS and the carpet area of his house being constructed is 150 square meter. Is he eligible for a new tax rate of 1%?
Yes, only if the developer has not exercised the option to pay tax at old rates. Here, the area in the square meter is greater than the prescribed limits but it is still considered as an affordable residential apartment because Mr. A is a beneficiary of PMAY CLSS.

Meaning of ongoing projects

A project is considered as an ongoing project if the following conditions are satisfied:

• 1. Where Commencement Certificate is required and has been issued by the competent authority on or before 31st March 2019 and the same is certified by a registered architect, chartered engineer or a licensed surveyor that the construction of the project started on or before 31st March 2019.
  E.gIn case of a single tower comprising of 50 floors and registered as a single project, separate commencement certificates may be issued by the competent authority. If one or two certificates are received on or before 31st March 2019 and some later, the same is still considered as an ongoing project.
• 2. A Commencement Certificate where not required to be issued by the competent authority, then the same shall be issued by a registered architect, chartered engineer or a licensed surveyor that the construction of the project started on or before 31st March 2019.
• 3. Completion Certificate is not issued on or before 31st March 2019.
  For instance, if a project has three blocks and completion certificate is received for one block prior to 1st April 2019 and the rest are received after this date. In such a case, the project is considered as an ongoing project because as per Notification issued by Government, a project is considered complete only if the Completion Certificate is issued for the entire project and not a part thereof.
• 4. The first occupation of the project has not taken place before 31st March 2019.
  For instance, if occupation certificate is received only for a part of the premises (up to 31st March 2019) in a huge project and not the entire project, the same is considered as an ongoing project.
• 5. Apartments are partly or wholly booked on or before 31st March 2019.
  E.g 1. This condition is not applicable for redevelopment of slum rehabilitation projects as the beneficiaries, in this case, are not required to pay any monetary consideration for flats allotted to them.
  Note: A project where bookings have not started but the construction has started before 31st March 2019, the same will not be considered as ‘ongoing project’. It will be treated as a new project and the new tax rates will apply.
  New rate of GST @ 1.5% (Effective rate 1% after deducting Land Cost) without input tax credit (ITC) on construction of affordable houses shall be available for:
  • • all houses which meet the definition of affordable houses as decided by GSTC (area 90 sqm in non- metros /60 sqm in metros and value upto RS. 45 lakhs), and
  • • affordable houses being constructed in ongoing projects under the existing central and state housing schemes (such as Pradhan Mantri Awaas Yojana or Housing for All etc.) presently eligible for concessional rate of 8% GST (after 1/3rd land abatement).
• New rate of GST @ 7.5% (Effective rate 5% after deducting Land Cost) without input tax credit shall be applicable on construction of :
  • • All houses other than affordable houses in ongoing projects whether booked prior to or after 01.04.2019. In case of houses booked prior to 01.04.2019, new rate shall be available on instalments payable on or after 01.04.2019.
  • • All houses other than affordable houses in new projects.
  • • Commercial apartments such as shops, offices etc. in a residential real estate project (RREP) in which the carpet area of commercial apartments is not more than 15% of total carpet area of all apartments.

Conditions for new tax rates:

The new tax rates of 1% (on construction of affordable) and 5% (on other than affordable houses) shall be available subject to following conditions :

• • Input tax credit shall not be available,
• • Atleast 80% of inputs and input services shall be purchased from registered persons. For calculating this threshold, the value of services by way of grant of development rights, long term lease of land, floor space index, or the value of electricity, high speed diesel, motor spirit and natural gas used in construction of residential apartments in a project shall be excluded.

On shortfall of purchases from 80%, tax shall be paid on input and input services by the builder @ 18% on RCM basis. However, Tax on cement purchased from unregistered person shall be paid @ 28% under RCM, and on capital goods under RCM at applicable rates.

Treatment of TDR/ FSI and Long term lease for projects commencing after 01.04.2019:

Transfer of development rights or FSI by way of an agreement on or before 31st March 2019 is exempted from tax even if the consideration for the same is paid (cash or kind) in part or full on or after 1st April 2019. Below are the tax rates:

• a. If the supply of TDR, FSI or long term lease of land is used for the construction of residential apartments, Tax on TDR is to be computed on the basis of the following formula: GST is applicable on such value which is proportionate to the construction of residential apartments that remain un-booked on the date of issue of Completion Certificate/first occupation. The rate of tax is 18% subject to a tax amount which is limited to 1% or 5% of the value of apartment depending upon whether the TDR/FSI is used for an affordable residential apartment or other than an affordable residential apartment.
• b. If the supply of TDR, FSI or long term lease of land is used for the construction of commercial space: GST at 18%.

The promoter is liable to pay GST on reverse charge basis on TDR or floor space index supplied on or after 1st April 2019. Even if a landowner is not engaged in a regular business of land-related activities, transfer of development rights by such an individual to the promoter is liable to GST as it is considered as supply of service under section 7 of CGST Act.
Also, in case of outward supply of TDR by one developer to another, GST is applicable at 18% on reverse charge.

The following is the point of time when the promoter should discharge tax liability on the supply of TDR/FSI and long term lease:

The classification and rate of tax on works contract service provided by a contractor to a developer or promoter under the new scheme is as below:

• • Affordable Housing Project – 12%, provided affordable housing space is more than 50% of the total carpet area.
• • Residential housing project Other than Affordable housing – 18%
• • Commercial Housing -18%

Sale through E-Commerce – GST Synopsis

E-Commerce has grown tremendously in India as more users are buying and selling items online, thanks to smartphones and internet connectivity. Under earlier tax laws, there was no clear treatment of online sales. GST has proper rules in place for e-commerce portals like Amazon and its sellers.

In this article let us discuss on GST applicability on E-Commerce sales.

Electronic Commerce has been defined in Sec. 2(44)of the CGST Act, 2017 to mean the supply of goods or servicesor both, including digital products over digital or electronicnetwork.

Electronic Commerce Operator has been definedin Sec. 2(45) of the CGST Act, 2017 to mean any person whoowns, operates or manages digital or electronic facility orplatform for electronic commerce.

Registration

As per Section 24(x) of the CGST Act, 2017 thebenefit of threshold exemption is not available to e-commerceoperators and they are liable to be registered irrespective ofthe value of supply made by them.

•  Whether a person supplying goods or servicesthrough e-commerce operator would be entitled to thresholdexemption?
  No, Section 24(ix) of the CGST Act, 2017 lays downthat the threshold exemption is not available to such personsand they would be liable to be registered irrespective of the value of supply made by them. This requirement is, however,applicable only if the supply is made through such electroniccommerce operator who is required to collect tax at sourceunder section 52 of the CGST Act, 2017.However, where thee-commerce operators are liable to pay tax on behalf of thesuppliers under a notification issued under section 9 (5) of theCGST Act, 2017, the suppliers of such services are entitled for threshold exemption.

Place of Supply

GST is a destination based tax , i.e., the goods/services will be taxed at the place where they are consumed/used and not at the origin. So, the state where they are consumed will have the right to collect GST.

Treatment of Digital goods such as eBooks

Selling digital goods like eBooks will be treated as services.

Tax Collection at Source

The e-commerce operator is required to collect anamount at the rate of one percent (0.5% CGST + 0.5% SGST) ofthe net value of taxable supplies made through it, where theconsideration with respect to such supplies is to be collectedby such operator. The amount so collected is called as TaxCollection at Source (TCS).

•  How does E-Commerce companies handle the return of goods?
  An e-commerce company is required to collect taxonly on the net value of taxable supplies. In other words,the value of supplies which are returned are adjusted in the aggregate value of taxable supplies.

The amount collected by the operator is to be paidto the government within 10 days after the end of the monthin which amount was so collected.

•  How can actual suppliers claim credit of this TCS?
  The amount of TCS paid by the operator to thegovernment will be reflected in the GSTR-2 of the actualregistered supplier (on whose account such collectionhas been made) on the basis of the statement filed by theoperator. The same can be used at the time of discharge of taxliability in respect of the supplies made by the actual supplier.

Every E-Commerce operator is required to furnish astatement, electronically, containing the details of outwardsupplies of goods or services effected through it, includingthe supplies of goods or services returned through it, and theamount collected by it as TCS during a month within ten daysafter the end of such month. The statement will be filed inFORM GSTR-8. The operator is also required to file an annualstatement by 31st day of December following the end of thefinancial year in which the tax was collected.

Practical questions on E-Commerce Sales

• 1. The sellers supplying goods through e-Commerceoperators (ECO) may have common places of business,especially if their goods are stored in a shared facility operatedby the ECO. This will result in the same additional place ofbusiness being registered by multiple suppliers. Is this allowed?
  Yes, this is allowed. Any registered person candeclare a premise as a place of business if he has requisitedocuments for use of the premises as his place of business(like ownership document, agreement with the owner etc.)and there is no restriction about use of a premises by multiplepersons. The registered person shall have to comply with therequirements of maintaining records as per section 35 of theCGST Act, 2017 and Rules 56 to 58 of the CGST Rules, 2017.
• 2. Do travel agents providing services throughdigital or electronic platform qualify as ECOs? Will they berequired to collect tax at source as per the provisions of Section52 of the GST Act?
  Online travel agents providing services throughdigital or electronic platform will fall under the category ofECOs liable to deduct TCS under Section 52 of the CGST Act, 2017.
• 3. There are transactions in which two or moreECOs are involved. In such cases who would deduct the TCS?
  In such cases, each transaction needs to be treatedseparately and examined according to the provisions of Section52 of the CGST Act, 2017. The TCS will be deducted accordingly.
• 4. There are cases in which the ECO does notprovide invoicing solution to the seller. In such cases, invoiceis generated by the seller and received by the buyer withoutECO getting to know about it. The payment flows through theECO. In such cases, on what value is TCS to be collected? CanTCS be collected on the entire value of the transaction?
  Section 52(1) of the CGST Act, 2017 mandates thatTCS is to be collected on the net taxable value of such suppliesin respect of which the ECO collects the consideration. Theamount collected should be duly reported in GSTR-8 andremitted to the Government. Any such amount collectedwill be available to the concerned supplier as credit in hiselectronic cash ledger.
• 5. I am a supplier selling my own products througha web site hosted by me. Do I fall under the definition of an“electronic commerce operator”? Am I required to collect TCSon such supplies?
  As per the definitions in Section 2 (44) and 2(45)of the CGST Act, 2017, you will come under the definition ofan “electronic commerce operator”. However, according toSection 52 of the Act ibid, TCS is required to be collected onthe net value of taxable supplies made through it by othersuppliers where the consideration is to be collected by theECO. In cases where someone is selling their own productsthrough a website, there is no requirement to collect tax atsource as per the provisions of this Section. These transactionswill be liable to GST at the prevailing rates.
• 6. We purchase goods from different vendors andare selling them on our website under our own billing. Is TCSrequired to be collected on such supplies?
  No. According to Section 52 of the CGST Act, 2017,TCS is required to be collected on the net value of taxablesupplies made through it by other suppliers where the consideration is to be collected by the ECO. In this case, thereare two transactions - where you purchase the goods fromthe vendors, and where you sell it through your website. Forthe first transaction, GST is leviable, and will need to be paid toyour vendor, on which credit is available for you. The secondtransaction is a supply on your own account, and not by othersuppliers and there is no requirement to collect tax at source.The transaction will attract GST at the prevailing rates.

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