The Central Board of Indirect Taxes and Customs (CBIC) via Circular No. 240/34/2024-GST mentioned that electronic commerce operators (“ECOs”) are mandated to pay tax u/s 9(5) of the Central Goods and Services Tax Act, 2017 (“CGST Act”) are not needed to reverse input tax credit (ITC) concerning the supply of restaurant services through their platform.
The clarification is towards the ITC taken via the electronic commerce operators where the services cited u/s 9(5) of Central Goods and Services Tax Act, 2017 are supplied via their platform. The reference is invited to Circular No. 167/23/2021 – GST dated 17.12.2021 which explains that electronic commerce operators (“ECOs”) are directed to pay tax u/s 9(5) of the Central Goods and Services Tax Act, 2017 (“CGST Act”) are not needed to reverse GST input tax credit (ITC) concerning the supply of restaurant services via their platform (notified services u/s 9(5)).
Concerning the ITC reversing obligation if any for the provisions of services apart from the restaurant services u/s 9(5) of the CGST Act, various representations have been obtained that seek clarity. The case has been scrutinized and to ensure consistency in the legislation application throughout the field formations, the board mentioned the same.
The problem was that an operator of an electronic commerce business who is liable to file the taxes under section 9(5) of the CGST Act is qualified for a reverse proportional ITC on his inputs and input services to the scope that he makes supplies as per that provision.
In circular, ECO who is payable to tax u/s 9(5) of the CGST Act, is making supplies under two counts. One of the supplies is stated u/s 9(5) of the CGST Act to which he is obligated to file the tax as if he were the provider of service. He furnishes his own services by proposing his electronic platform for which he gets the fees via the platform users like commissions.
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ECO does not need to reverse the ITC for the restaurant services where he files the taxes u/s 9(5) of the CGST Act as cited via question no. 6 of Circular No. 167/23/2021-GST dated 17.12.2021. The ITC could not be utilised to fulfil the whole tax debt u/s 9(5) instead the whole amount due should get filed in cash.
An electronic commerce operator as per section 17(1) or section 17(2) of the CGST Act, is needed to file the tax u/s 9(5) of the CGST Act towards the particular services waived to have the reverse ITC on his inputs and the input services to the scope of supplies made u/s 9(5) of the CGST Act.
ECO can use an electronic cash ledger to file the whole tax due owed on account of supplies under section 9(5) of the CGST Act. As per section 9(5) of the CGST Act, he could not use the credit he got for the inputs and input services required to allow the shipments to fulfil his tax liability.
The same credit could be used by him to release the tax liability concerning the supply of services on his account. It is urged that effective trade notices be provided to publicize the Circular contents.
