GST on notified services by e-commerce operators u/s 9(5)

Section 9 (5) of the CGST Act is a special case focusing on e-commerce operators. For service-oriented businesses operating through an e-commerce operator, such as restaurant services, including cloud kitchens, housekeeping and accommodation services, and motor cabs, the liability of tax falls on the e-commerce operator.

Latest Updates

23rd July 2024
In the Union Budget 2024, the Finance Minister proposed an amendment to Sub-section (1B) of section 122 of the CGST Act, so as to restrict the applicability of the said sub-section to electronic commerce operators, who are required to collect tax at source under section 52 of the said Act. The said amendment is made effective retrospectively from the 1st day of October, 2023 when the said sub-section had come into force
*This will come into force once notified by the CBIC.

The Act’s provisions will apply in such a manner that the e-commerce operator, as if he is the supplier liable to pay tax on the application of those services.

Applicability of Section 9(5) of CGST Act

This section focuses on certain categories of services for which the tax is levied and paid by the e-commerce operator if the services were rendered through them. This includes-

• Passenger transport services
• Housekeeping services
• Restaurant services (includes cloud kitchens)
• Accommodation services

Irrespective of whether the supplier is registered under GST, the e-commerce operators will be liable to pay tax as if it were the supplier per the reverse charge mechanism. The supplies under this section will be mainly intra-state supplies. 

Earlier, for restaurants and cloud kitchens providing services through e-commerce operators such as Zomato, Swiggy, etc., the restaurant was liable to pay the GST on its services.

However, w.e.f. On January 1st, 2022, the e-commerce operators (Zomato and Swiggy) are liable to pay tax under the reverse charge mechanism. It has to be paid via the electronic cash ledger at a rate of 5% whether or not the restaurant (actual supplier) is registered under GST or not. Moreover, there can be no claim for Input Tax Credit in this case.

The invoice for any of the services notified under Sec 9 (5) will be issued by the e-commerce operator themselves.

Suppose, under one order, the e-commerce operator provides a combination of services under notified services [Sec 9 (5)]. In that case, a separate bill should be raised by the e-commerce operator for the component under notified services. 

Suppose the e-commerce operator has no physical presence in the taxable territory. In that case, the tax liability will fall on anyone representing the e-commerce operator for any purpose in that territory.

However, suppose the e-commerce operator does not have a physical presence nor a representative in the taxable territory. In that case, the e-commerce operator will appoint the person liable to pay the tax. 

How is Section 9(5) different from Section 52 of the CGST Act?

GST registration for e-commerce operators falling under Section 9(5)

Irrespective of the turnover earned during the financial year by e-commerce operators, they have to obtain a registration under GST as per the CGST rules. However, the actual supplier of those services under this section is entitled to a threshold exemption. This means they are not required to register even if their turnover exceeds the threshold limit.

Compliance and return filing for e-commerce operators under Section 9(5)

Where services, including housekeeping, accommodation, restaurant and passenger transport services, are supplied through an e-commerce operator, the GST liability is to be borne by the e-commerce operator.

GSTR-3B has a new table (Table 3.1.1) being introduced where all supplies made under Section 9(5) are to be reported by the supplier and the e-commerce operator. This table will go live on 1st August 2022.
 

For the e-commerce operator

The supplies that attract Section 9 (5) shall be reported in Table 3.1.1 (i). The payment of tax has to be made by the e-commerce operator in cash. Payment via ITC is not permitted. Additionally, these supplies should not be included in Table 3.1. (a) of the GSTR-3B.

For the supplier of services (registered person)

The supplies that attract Section 9(5) shall be reported in Table 3.1.1 (ii) by the supplier of services. Additionally, these supplies should not be included in Table 3.1. (a) of the GSTR-3B. Since the e-commerce operator bears the tax liability, the supplier need not make any payment for taxes.

Section 122(IB) applicability

As per the update from 53rd GST Council meeting, the penalty for defaulting TCS compliance as per Section 122(1B) by the e-commerce operators will not apply to other e-commerce operators, except for e-commerce operators liable to TCS u/s 52. Accordingly, e-commerce operators of Section 9(5) will be subject to general penalty for non-compliance.