Clarification on TCS liability u/s 52 of the CGST Act in case of multiple ECO in one transaction

The CBIC vide Circular No. 194/06/2023-GST dated July 17, 2023, has issued clarification on TCS liability under Section 52 of the CGST Act, 2017 in case of multiple E-commerce Operators in one transaction.

Reference has been received seeking clarification regarding TCS liability under section 52 of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as “CGST Act”), in case of multiple E-commerce Operators (ECOs) in one transaction, in the context of Open Network for Digital Commerce (ONDC).

In the current platform-centric model of e-commerce, the buyer interface and seller interface are operated by the same ECO. This ECO collects the consideration from the buyer, deducts the TCS under Sec 52 of the CGST Act, credits the deducted TCS amount to the GST cash ledger of the seller, and passes on the balance of the consideration to the seller after deducting their service charges.

In the case of the ONDC Network or similar other arrangements, there can be multiple ECOs in a single transaction – one providing an interface to the buyer and the other providing an interface to the seller. In this setup, buyer-side ECO could collect consideration, deduct their commission and pass on the consideration to the seller-side ECO. In this context, clarity has been sought as to which ECO should deduct TCS and make other compliances under section 52 of the CGST Act in such situations, as in such models having multiple ECOs in a single transaction, both the Buyer-side ECO and the Seller-side ECO qualify as ECOs as per Section 2(45) of the CGST Act.

To clarify the issue and to ensure uniformity in the implementation of the provisions of law across the field formations, the Board, in the exercise of its powers conferred by section 168 (1) of the CGST Act, hereby clarifies the issues as under:

Issue 1: In a situation where multiple ECOs are involved in a single transaction of supply of goods or services or both through the ECO platform and where the supplier-side ECO himself is not the supplier in the said supply, who is liable for compliances under section 52 including collection of TCS?

Clarification: In such a situation where multiple ECOs are involved in a single transaction of supply of goods or services or both through the ECO platform and where the supplier-side ECO himself is not the supplier of the said goods or services, the compliances under section 52 of CGST Act, including collection of TCS, is to be done by the supplier-side ECO who finally releases the payment to the supplier for a particular supply made by the said supplier through him.

e.g.: Buyer-side ECO collects payment from the buyer, deducts its fees/commissions, and remits the balance to Seller-side ECO. Here, the Seller-side ECO will release the payment to the supplier after the deduction of his fees/commissions and therefore will also be required to collect TCS, as applicable, and pay the same to the Government by section 52 of CGST Act and also make other compliances under section 52 of CGST Act.

In this case, the Buyer-side ECO will neither be required to collect TCS nor will be required to make other compliances by section 52 of the CGST Act concerning this particular supply.

Issue 2: In a situation where multiple ECOs are involved in a single transaction of supply of goods or services or both through the ECO platform and the Supplier-side ECO is himself the supplier of the said supply, who is liable for compliances under section 52 including collection of TCS?

Clarification: In such a situation, TCS is to be collected by the Buyer-side ECO while making payment to the supplier for the particular supply being made through it.

e.g. Buyer-side ECO collects payment from the buyer, deducts its fees, and remits the balance to the supplier (who is itself an ECO as per the definition in Sec 2(45) of the CGST Act). In this scenario, the Buyer-side ECO will also be required to collect TCS, as applicable, pay the same to the Government by section 52 of the CGST Act, and also make other compliances under section 52 of the CGST Act.

The Circular can be accessed at: https://taxinformation.cbic.gov.in/view-pdf/1003168/ENG/Circulars