The model goods and services tax ( GST) legislation includes a whole chapter on e- commerce and has prescribed strict information- disclosure requirements plus a tax collection at source model for both goods and services. This is a refinement to what the Karnataka government sought to do after the Amazon fiasco.
E- commerce operators have been made liable not only for paying the GST on their facilitation services, but also GST collection at source that individual suppliers would have ordinarily been liable for. The consequent compliance hazards have already been widely commented upon.
Ideally, e- commerce operators should only be responsible for the GST on their facilitation services. Ecommerce is quite transparent, where revenue officials can easily verify the suppliers and customers. Casting responsibility of collection at source when tracking or taxing individual suppliers is not difficult.
What is praiseworthy is that a clear distinction has been made between assessees actually supplying goods and services, whether through their own electronic platform or otherwise, and assessees merely providing the electronic platform to facilitate such suppliers –an oft- forgotten distinction under extant state value- added tax (VAT) and entry tax laws. This is consonant with conditions under Press Note 3 for e- commerce marketplace players, ensuring that marketplace players remain marketplaces in the true sense. The following litigation impact of this can be foreseen: In the litigation before the Delhi High Court against e- commerce marketplace players, the petitioners alluded to the fact that sales through such players were treated as retail sales by state governments. This argument will stand significantly diluted.
The Kerala government tried to —unsuccessfully, so far — fasten liability on a renowned marketplace player by arguing that even if that player was not a seller, it would still be liable to the VAT since its online portal could be treated as an intangible shop. Such attempts will become baseless and irrelevant under the GST.
However, this may not have any direct impact on litigation under state entry tax laws, as the main challenge there is relating to the constitutional validity of entry tax provisions.
In the specific context of aggregators of services, like aggregators of taxi services, doubts had been expressed by experts vis- a- vis the constitutional validity of current service tax provisions dealing with payment of service tax by such aggregators on behalf of drivers, since the concept of aggregators was not included in the main service tax legislation.
This aspect has been dealt with by the model law by incorporating the concept of aggregator in the legislation itself, thus preempting any such litigation.
Business Standard New Delhi, 20th June 2016
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