GST Applicable on Success Fee Charged by E-Commerce Platform Promoting Offline Deals: AAR

The applicant, M/s. DSoft Innovations LLP provides services through their Freedeem app to help businesses in promoting their store on the applicant’s digital platform at zero investment by creating offers or deals offered by merchants. Any merchant can register on the Freedeem App by just making an online application.

The Freedeem app charges a success fee (commission) only on successful transactions. The applicant pays a GST at 18% on the success fee. Consumers view offers on the app, visit the merchant’s physical store, and avail the offer.

Questions Asked by Applicant

The applicant sought an advance ruling for the following questions:

“(a) Whether the applicant is considered as E Commerce operator under the not? If yes, then is the applicant required to take compulsory registration or not?

(b)Applicant is liable to pay RCM u/s. 9(5) of the GST being E Commerce Operator though applicant not providing food delivery service through its freedeem platform to the recipient of services?

(c)If answer of question a & b is in yes, then as to whether applicant is required to deduct TCS under the GST Act while making payment to merchants registered under the GST Act and not registered merchants under the GST Act or not?

(d) If Freedeem get exemption from RCM for Restaurant service, will the TCS be applicable to the Restaurant Service in that case?

(e)For TCS Collection, state wise registration is compulsory as e commerce operator even if centralized management systems are followed. If the answer of the question is no then whether Freedeem should deduct 1% ITCS or 0.5% CTCS and 0.5% STCS for supply at state other than state of Gujarat as applicant is following centralized management & operation system?

(f) Separate GST Number as regular Taxpayer: In case Freedeem follows provision of sec.9(5), is it mandatory to register as a separate regular taxpayer state wise for discharging Sec.9(5) liability by charging CGST and SGST or it can be discharged by charging IGST for other than principal place of business as all other regular supply will be reported under same GSTIN for principal place of business?”

Advance Ruling

As per the Gujarat Authority for Advance Ruling:

• Freedeem is considered an E-Commerce Operator under GST provisions and is mandatorily required to get GST Registration.
• Section 9(5) of the CGST Act does not apply to the applicant’s services.
• The applicant is liable to collect TCS (Tax Collected at Source) under Section 52 of the CGST Act.
• The applicant is required to take State-wise registration for TCS for each state, even if centralised operations are followed.
• For question (f), it has already been held that the applicant is outside the scope of Section 9(5) of the CGST Act, which makes this question pointless.