CBIC issued Clarification on ITC availed by E-Commerce Operators u/s 9(5) of CGST Act

The Central Board of Indirect Taxes and Customs (CBIC) issued a circular to notified an important upgrade for e-commerce firms. The circular clarifies the input tax credit (ITC) obtained by electronic commerce operators (ECOs) when services mentioned in Section 9(5) of the Central Goods and Services Tax (CGST) Act, 2017, are offered through their platform.

Reference is invited to Circular No.167/23/2021 – GST dated 17.12.2021 which clarified that electronic commerce operators (hereinafter referred to as “ECOs”) required to pay tax under section 9(5) of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as “CGST Act”) are not required to reverse input tax credit (ITC) in respect of supply of restaurant services through their platform (notified services under section 9(5)). In this regard, representations have been received seeking clarification regarding requirement of reversal of ITC, if any, in respect of supply of services, other than restaurant services, under section 9(5) of CGST Act.

The issue has been examined and to ensure uniformity in the implementation of the law across the field formations, the Board, in exercise of its powers conferred under section 168(1) of the CGST Act, hereby clarifies the issue as below.

ISSUE

Whether electronic commerce operator, required to pay tax under section 9(5) of CGST Act, is liable to reverse proportionate input tax credit on his inputs and input services to the extent of supplies made under section 9(5) of the CGST Act.

CLARIFICATION

1. ECO, required to pay tax under section 9(5) of CGST Act, is making supplies under two counts:

• i. Supplies notified under section 9(5) of CGST Act for which he is liable to pay tax as if he is the supplier of the said services.
• ii. Supply of his own services by providing his electronic platform for which he charges platform fee/commission etc. from the platform users.

2. For providing the services mentioned at 1(ii) above, the ECO procures inputs as well as input services for which he avails Input Tax Credit.

3. It has been clarified vide question no. 6 of Circular No. 167/23/2021 – GST dated 17.12.2021 that the ECO shall not be required to reverse input tax credit on account of restaurant services on which he pays tax under section 9(5) of the CGST Act. It has also been clarified that the input tax credit will not be allowed to be utilized for payment of tax liability under section 9(5) and whole of the tax liability under section 9(5) will be required to be paid in cash.

4. The principle, which has been outlined in question no.6 of Circular No.167/23/2021 – GST dated 17.12.2021, also applies to the supplies made in respect of other services specified under section 9(5) of CGST Act.

5. In light of this, it is clarified that an Electronic Commerce Operator who is required to pay tax under section 9(5) of the CGST Act in respect of specified services is not required to reverse the input tax credit on his inputs and input services proportionally under section 17(1) or section 17(2) of the CGST Act to the extent of supplies made under section 9(5) of the CGST Act.

6. It is further emphasised that ECO will be required to pay the whole tax burden for supplies under Section 9(5) of the CGST Act only using an electronic cash ledger.

It is requested that suitable trade notices may be issued to publicize the contents of this Circular.

For Official Circular Download PDF Given Below: