GST And E-Commerce In India - A Regulatory Overview

Author: LawSphereX

Category: Taxation

Published: 2026-08-23T20:07:33.30369+00:00

Updated: 2026-08-30T07:12:28.829Z

GST AND E-COMMERCE IN INDIA: A REGULATORY

OVERVIEW Madhumitha P.D., School of Excellence in Law, The Tamil Nadu Dr. Ambedkar Law University, Chennai

ABSTRACT

With the introduction of the Goods and Services Tax on July 1, 2017, India’s taxation framework has undergone a significant transformation. GST replaced the earlier fragmented system of indirect taxation, which was characterized by multiple taxes such as excise duty, service tax and entry tax, etc. By subsuming these diverse taxes into a unified regime, GST has created a more simplified and efficient structure. As the Indian economy gradually shifted towards digitization, a new form of trade began to emerge in the form of e-commerce. The E-commerce sector in India has undergone a major transformation after COVID-19 pandemic. The widespread disruptions caused by the pandemic accelerated the adoption of digital platforms as consumers and businesses increasingly turned to online modes of transaction.

Consequently, there is need for the GST framework to constantly evolve to keep pace with the rapid developments in e-commerce. This article provides a regulatory overview of GST in the context of e-commerce, with particular emphasis on statutory provisions and compliance requirements. Further, it explores the recent notifications relating to e commerce. Keywords: E-Commerce, GST, TCS, RCM, Compliance

Introduction

The Goods and Services Tax is levied on the supply of goods and services. Under GST, both the Centre and the States have the power to levy taxes concurrently. The structure includes the Central Goods and Services Tax, levied by the central government on intra-state supplies, and the State Goods and Services Tax, levied by the state governments on the same transaction. For transactions occurring within Union Territories, the Union Territory Goods and Services Tax is applied. In the case of inter-state transactions or imports, the Integrated Goods and Services Tax is levied by the Centre and subsequently apportioned between the Central Government and the Destination State.

An intra-state supply refers to a transaction where the location of the supplier and the place of supply are within the same state or Union Territory, whereas an interstate supply occurs when the location of the supplier and the place of supply are in different states or Union Territories, or when goods or services are imported. As the Indian economy transitioned towards digital platforms, e-commerce developed into a major platform for the exchange of goods and services. E-commerce refers to the buying and selling of goods and services using electronic platforms, primarily the internet. In India, the ecommerce sector has been driven by widespread smartphone usage and further accelerated by the advent of digital wallets and secure electronic payment methods.

To address E-Commerce, the GST framework under the CGST Act, 2017, has specific provisions aimed at regulating ecommerce activities. This article examines the key statutory provisions governing e-commerce under the CGST Act, with a focus on how the law defines e-commerce and e-commerce operators, mandates registration, regulates GST liability for notified services, TCS mechanism and penal provisions. Models of E-Commerce E-commerce businesses operate under various models, some of which are traditional while others are newly developed. The following e-commerce models are significant from a taxation perspective: A. Marketplace Model In marketplace model, there are three parties: seller, buyer and e commerce operator. Suppliers usually register on the platform or website and list their goods and services for sale.

In this case, the platform owner develops, oversees, or manages the online platform. He doesn’t sell products or services. In other words, the e-commerce operator itself does not make the supply under the Marketplace model. In this model, the same product may be offered by multiple sellers. B. Inventory Model In inventory model, the e-commerce operator owns the inventory. The e-commerce operator itself is the seller. No product is sold by more than one seller. C. Aggregators Model An aggregator means a person who owns or manages an online platform that allows buyers and suppliers to communicate under the aggregator’s brand1. Notably, an aggregator that links suppliers and customers would also fall under the purview of an e-commerce operator.

Definition of E-Commerce According to Section 2(44) of Central Goods And Services Tax Act, 2017, “Electronic Commerce means the supply of goods or services or both, including digital products over digital or electronic network. ” Definition of E-Commerce Operator According to Section 2(45) of Central Goods And Services Tax Act, 2017, “Electronic Commerce Operator means any person who owns, operates, or manages digital or electronic facility or platform for electronic commerce”. Compulsory GST Registration under Section 24 Under the Central Goods and Services Tax Act (CGST), 2017, a person is generally required to obtain registration only if their aggregate turnover exceeds the prescribed threshold limit. However, Section 24 of the CGST Act, 2017, outlines certain exceptions where registration is mandatory, regardless of turnover.

For E-commerce Transactions the following persons are 1 CA. Ram Akshya, E-Commerce Operators (Law, Practice & Procedure) 18 (Bharat Law House Pvt. Ltd, 2022). required to take registration irrespective of their turnover: Section 24 of the CGST Act, 2017 talks about compulsory registration in certain cases. The provisions relating to E-Commerce are as follows:- i. Section 24(iv) Section 24(iv) states that person liable to pay tax under Section 9(5) must be compulsorily registered. This provision primarily applies to services notified under Section 9(5) when supplied through an e-commerce operator. For all such notified services, the e-commerce operator is responsible for paying the tax, regardless of the actual service provider’s turnover. ii.

Section 24 (ix) Section 24 (ix) states that “persons who supply goods or services or both, other than supplies specified under sub-section (5) of section 9, through such electronic commerce operator who is required to collect tax at source under section 52”. Accordingly, any supplier providing goods or services through an E-Commerce Operator is mandatorily required to obtain GST registration, regardless of their turnover. However, the Central Government, based on the recommendation of the Council, issued Notification No. 65/2017-CT dated 15th November 2017, which exempts service providers from compulsory registration if they supply services through an ECO and their aggregate turnover on an all India basis does not exceed twenty lakh rupees or ten lakh rupees in the case of special category states. As mentioned, this exemption does not extend to suppliers of goods.

However, the Government, through Notification No. 34/2023-CT dated 31st July 2023, effective from 1st October 2023, introduces certain relaxations for supplier of goods through e-commerce operators, whose aggregate turnover in the preceding and current financial year does not exceed the threshold limit specified under Section 22(1), by exempting them from obtaining registration, provided the following conditions are fulfilled: i. The supplier shall not make any inter-State supply of goods. ii. The supplier shall not supply goods through an e-commerce operator in more than one State or Union Territory. iii. The supplier must possess a valid Permanent Account Number (PAN) issued under the Income Tax Act, 1961. iv.

Before making any supply through an e-commerce operator, the supplier must declare their PAN, the address of their place of business and the State or Union Territory in which they intend to supply, on the common portal. This information will be subject to validation. v. Upon successful validation of the declared PAN, an enrolment number will be granted on the common portal. vi. A supplier shall not be granted more than one enrolment number in a State or Union Territory. vii. No supply of goods shall be made through an e-commerce operator unless the enrolment number has been granted. viii. If the supplier is subsequently granted GST registration under Section 25 of the CGST Act, the enrolment number shall cease to be valid from the effective date of such registration.

These conditions ensure that suppliers of goods through e-commerce operators comply with regulatory requirements while benefiting from the prescribed relaxations. Where an e-commerce operator facilitates the supply of goods by unregistered persons under the said notification2, the Government prescribes, a special procedure through Notification No. 37/2023-CT dated 4th August 2023, effective from 1st October 2023, as follows: i. The e-commerce operator shall allow the supply of goods by an unregistered person only if that person has been allotted an enrolment number on the common portal. ii. The e-commerce operator shall not permit any inter-State supply of goods by such

2 Notification No. 34/2023-Central Tax dated 31.07.2023, w.e.f. 01.10.2023.

unregistered persons. iii. The e-commerce operator shall not collect TCS under Section 52(1) for supplies made by such unregistered persons. iv. The e-commerce operator shall furnish the details of supplies made by the unregistered person in FORM GSTR-8 electronically on the common portal. In instances where multiple e-commerce operators are involved in a single supply of goods through an ECO platform, the term ‘electronic commerce operator’ shall refer to the ECO who ultimately releases the payment to the supplier for the goods supplied through him. iii. Section 24(x) Section 24(x) states that every electronic commerce operator who is required to collect tax at source under Section 52, irrespective of his turnover, must obtain compulsory registration. This ensures that all ECO collecting TCS are registered, thereby facilitating effective tax compliance.

Liability of E-Commerce Operators for Notified Services As per Section 9(5) of the CGST Act for intra-State supplies and the corresponding Section 5(5) of the IGST Act, 2017, for inter-State supplies, when certain notified categories of services are supplied through an electronic commerce platform, the ECO is deemed to be the supplier for the purpose of tax payment. In such cases, the ECO is required to discharge the GST liability instead of the actual service provider. All applicable provisions of the Act shall apply to the Electronic Commerce Operator as if they were the person liable to pay the tax. Furthermore, if the ECO does not have a physical presence in the taxable territory, any person representing the ECO in such territory shall be liable to pay tax.

In cases where the Electronic Commerce Operator has no physical presence or representative in India, the ECO must appoint a person within the taxable territory to fulfill the tax obligations, and that person will be held responsible for paying GST. This mechanism transfers the tax liability from small and unregistered service providers to more accountable and better-equipped digital platforms, thereby simplifying compliance and enhancing effective tax collection in the e-commerce sector. Services Notified Under Section 9(5) The Government has notified that in case of the following categories of services, the tax shall be paid by the electronic commerce operator. They are: i Services by way of transportation of passengers by a radio-taxi, motorcab, maxicab, motor cycle3, or any other motor vehicle except omnibus4.

ii Services by way of transportation of passengers by an omnibus except where the person supplying such service through electronic commerce operator is a company5. iii Services by way of providing accommodation in hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes, except where the person supplying such service through electronic commerce operator is liable for registration under section 22(1) of CGST Act, 2017. 6 iv Services by way of house-keeping, such as plumbing, carpentering etc, where the person supplying such service through electronic commerce operator is not liable for registration under section 22(1) of CGST Act, 2017. 7 v Supply of restaurant service other than the services supplied by restaurant, eating joints etc. located at specified premises8.

This mechanism effectively transfers the GST liability from the supplier to the e-commerce operator, thereby enhancing accountability and compliance. Composition Scheme under Section 10 The composition levy, as outlined in Section 10 of the CGST Act, provides a simplified tax

3 Notification No. 17/2017- Central Tax (Rate) dated 28.06.2017, w.e.f 01.07.2017.

4Notification No. 16/2023-Central Tax (Rate) dated 19. 10. 2023, w. e. f 20. 10. 2023. 5Id. 6Supra note 3. 7Notification No. 23/2017-Central Tax (Rate) dated 22. 08. 2017, w. e. f 22. 08. 2017. 8Notification No. 17/2021-Central Tax (Rate) dated 18. 09. 2021, w. e. f 01. 01. 2022. payment mechanism for small taxpayers whose turnover falls within a prescribed threshold. Under the composition scheme, suppliers are not required to determine the applicable GST rates for their goods or services and are not obligated to issue tax invoices, instead, they issue a Bill of Supply9. In such cases, no tax is charged from the recipient10. A composition dealer pays tax at a prescribed percentage of their turnover, rather than applying GST on every invoice at specified rates.

However, as per Section 10(2)(d) and Section 10(2A)(c) of the CGST Act, persons supplying goods or services through electronic commerce operators who are required to collect tax at source under Section 52 are not eligible to opt for the composition scheme. This restriction has been removed through an amendment11, allowing registered persons supplying goods through ECOs to opt for the composition scheme. To facilitate this change, Notification No. 36/2023-CT dated 4th August 2023, effective from 1st October 2023 prescribes a special procedure has been prescribed for e-commerce operators dealing with goods supplied by composition taxpayers as follows:

1 The e-commerce operator shall not allow inter-State supplies of goods by persons

registered under the composition scheme.

2 The e-commerce operator is required to collect TCS under Section 52(1) in respect

of such supplies and remit the same to the government in accordance with Section 52(3).

3 The operator must furnish the details of supplies made through it by such

composition taxpayers in FORM GSTR-8 on the common portal. Accordingly, composition taxpayers may supply goods through ECOs, while ECOs are required to collect TCS for such supplies. Tax Collection at Source under Section 52 Section 52 of the Central Goods and Services Tax Act, 2017, pertains to the collection of tax at source by e-commerce operators. The TCS mechanism serves primarily a control function, as 9The Central Goods and Services Act, 2017, s. 31(3)(c), No 12, Acts of Parliament, 2017 (India). 10The Central Goods and Services Act, 2017, s. 10(4), No 12, Acts of Parliament, 2017 (India).

11 The Finance Act, 2023, s.137, No.8, Acts of Parliament, 2023 (India).

the balance GST is payable by the actual suppliers of goods or services. According to Section 52(1), every e-commerce operator is required to collect an amount not exceeding 1% of the net value of taxable supplies made through it by other suppliers, where the consideration for such supplies is to be collected by the operator. The net value of taxable supplies shall mean the aggregate value of taxable supplies of goods or services or both, other than services notified under 9(5), made during any month by all registered persons through the operator reduced by the aggregate value of taxable supplies returned to the suppliers during the said month. The liability to collect tax at source is on the e-commerce operator and the operator should not be an agent of the supplier. The tax shall be collected at the time when consideration of goods or services is collected by the e-commerce operator.

TCS provisions came into force on 1st October 201812. It is noteworthy that Section 52 stipulates a statutory upper limit of 1% for TCS. For inter-State supplies, the maximum rate is capped at 2%13. The government notifies the applicable rate based on the recommendations of the Council. The TCS rate is 0. 5 percent for intra-State supplies14 i. e 0. 25 percent under CGST and 0. 25 percent under SGST and 0. 5 percent for inter- State supplies15. The power of the ECO to collect tax at source is without prejudice to any other mode of recovery. The e-commerce operator must remit the amount of TCS collected to the government within 10 days from the end of the month in which such collection is made.

As per Section 52(4) read with Rule 67(1) of the CGST Rules, every e-commerce operator is required to furnish a statement in FORM GSTR 8 electronically on the common portal, either directly or through a Facilitation Centre notified by the Commissioner. Thus, the ECO must submit a monthly statement containing the details of outward supplies of goods or services or both made through it, including supplies of goods or services or both returned through it, and the amount of TCS collected during the month within ten days after the end of such month.

12 Notification No. 51/2018-Central Tax dated 13.09.2018 w.e.f. 01.10.2018.

13The Integrated Goods and Services Act, 2017, s. 20, No.13, Acts of Parliament, 2017 (India).

14 Notification No. 15/2024-Central Tax dated 10.07.2024.

15 Notification No. 01/2024-Integrated Tax dated 10.07.2024.

As per Section 52(5) of the Act, the ECO shall furnish an annual statement electronically, containing the details of outward supplies of goods or services or both effected through it, including the supplies of goods or services or both returned through it, and the amount of TCS collected during the financial year, before the thirty-first day of December following the end of such financial year. As per Rule 80(2), the ECO shall furnish the annual statement in FORM GSTR-9B.

The Commissioner may extend the due date for furnishing the statement for such class of registered persons through a notification. Any extension granted by a State or Union Territory Commissioner shall be deemed to be an extension notified by the Commissioner as well. If the e-commerce operator discovers any omission or incorrect particulars in a previously filed FORM GSTR-8, other than those identified during scrutiny, audit, inspection, or enforcement by tax authorities, they may rectify it in the statement for the month in which such error is noticed. However, no rectification is allowed after the 30th of November following the end of the financial year or the actual date of furnishing of the annual statement, whichever is earlier. Interest under Section 50(1) is payable on such rectification.

The supplier who has supplied goods or services or both through the e-commerce operator can claim credit in his electronic cash ledger of the amount collected and reflected in the statement filed by the operator under Section 52(4). The supplier can utilize that credit for payment of his tax dues. He can also claim refund of that amount. The details of supplies furnished by the e-commerce operator in FORM GSTR-8 are required to be matched with the corresponding details submitted by the suppliers in their respective returns. In case of any discrepancy, such discrepancy shall be communicated to both the operator and the concerned supplier. If the discrepancy is not rectified within the prescribed time, the differential amount shall be added to the supplier’s output tax liability.

The concerned supplier shall be liable to pay the tax on such added amount along with interest, as specified under Section 50(1). Any officer not below the rank of Deputy Commissioner is empowered to issue a notice, either before or during the course of any proceedings under the Act, requiring the e-commerce operator to furnish such details relating to-: i. The supplies of goods or services or both made through the operator during any period; or ii. The stock of goods belonging to suppliers who make supplies through the operator and which are held in godowns or warehouses (irrespective of the name by which such premises are called) that are managed by the operator and declared by such suppliers as additional places of business. The ECO who receives such a notice is required to furnish the requested information within fifteen working days from the date of service of the notice.

Failure to comply with the notice, without prejudice to any other action that may be initiated under Section 122 of the CGST Act, shall render the ECO liable to a penalty not exceeding twenty-five thousand rupees. The operator shall not be allowed to furnish a statement under Section 52(4) after the expiry of three years from the due date of furnishing the said statement. However, the Government may, based on the recommendation of the Council and subject to specified conditions, allow an operator or class of operators to furnish such statement even after the expiry of the three-year period from the due date of furnishing the said statement.

Penalty For Certain Offences Under Section 122(vi) of the CGST Act, an e-commerce operator who fails to collect tax in accordance with the provisions of section 52(1), or collects an amount which is less than the amount required to be collected under the said sub-section or where he fails to pay to the Government the amount collected as tax under section 52(3), shall be liable to a penalty. The penalty imposed will be the higher of ₹10,000 or the amount of tax not collected, shortcollected, or collected but not paid to the government.

Under Section 122(1B) of the CGST Act, any electronic commerce operators who allow supplies through their platform by unregistered persons, unless exempted under a notification or permit inter-State supplies by persons not eligible to make such supplies or fail to furnish correct details of outward supplies made by exempt persons in the statement required under Section 52(4), shall be liable to a penalty of ₹10,000 or an amount equivalent to the tax that would have been payable had such supply been made by a registered person other than a person paying tax under Section 10, whichever is higher.

Conclusion

The GST framework has clearly defined key aspects of e-commerce while evolving through timely notifications to meet the needs of the society. Notably, it now permits even unregistered suppliers to make supplies through e-commerce platforms, subject to specified conditions. Furthermore, it prescribes a special procedure that e-commerce operators must follow in such cases. These special procedures increase the compliance and regulate e-commerce more effectively, resulting in better compliance and, in turn, more revenue to the government. This comprehensive approach reflects the rapid growth and increasing inclusiveness of the ecommerce sector under the GST regime.

References

1. The Central Goods And Services Tax Act, 2017.

2. The Central Goods And Services Tax Rules, 2017.

3. The Integrated Goods And Services Tax Act, 2017.

4. The Integrated Goods And Services Tax Rules, 2017.

5. The Finance Act, 2023.

6. Notification No. 17/2017- Central Tax (Rate), dated 28.06.2017.

7. Notification No. 23/2017-Central Tax (Rate), dated. 22-08-2017.

8. Notification No. 51/2018-Central Tax dated 13.09.2018 w.e.f. 01.10.2018.

9. Notification No. 17/2021-Central Tax (Rate), dated 18.09.2021.

10. Notification No. 34/2023-Central Tax, dated 31.07.2023.

11. Notification No. 36/2023-Central Tax, dated 04.08.2023.

12. Notification No. 37/2023-Central Tax, dated 04.08.2023.

13. Notification No. 16/2023-Central Tax (Rate), dated 19.10.2023.

14. Notification No. 15/2024-Central Tax, dated 10.07.2024.

15. Notification No. 01/2024-Integrated Tax, dated 10.07.2024.

16. CA.Ram Akshya, E-Commerce Operators (Law, Practice & Procedure) 18 (Bharat Law

House Pvt. Ltd, 2022).