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Tax Issues Relating to E-Commerce

Business transactions are deemed to be taxed by either direct or indirect depending upon how the order is placed or by the delivery of goods. Due to GST barriers in trade had been minimized by applying a single rate. The concept of “one nation and one tax” has been brought through this concept. Prior to the GST, each state had a different rate which further produces difficulty in business transactions. Likewise, in today’s era, the internet has been widely used by children to aged people. Electronic commerce is being a great platform to the business transaction; people are with the aid of computer and internet in order to uplift their work and for easy handling. The issue that arises is how to pay the tax for E-commerce.

The Information Technology Act, 2000, which is the first legislation to deal with e-commerce, is quite silent about the tax system. A substantial amount of state revenue which is generated through direct and indirect taxes is lost when Internet transaction remains untaxed. [1]

Mainly based on OCED, India has signed treaties for tax with various countries. They help to minimize the double taxation that prevails in the country and makes it mandatory to reduce it. The case of First National Bank of Fort Worth v. Bullock followed in the wake of universal and Tidwell and focused upon severability of information from its container in the essence of the transaction test. The Court concluded that the primary object of the transaction test. The Court concluded that the primary object of the transaction, the sale of particular process coded on the software was intangible; therefore the sale was not subject to sales tax.[2]

Article 7 of the OECD Model Treaty provides that an enterprise of a contracting state is generally exempt from tax on its profits derived from business carried on in the other contracting state unless these profits are attributable to a PE located in that other Contracting State. Article 5 defines PE.

As per section 10 of CGST Act, 2017 all medium and small-scale business is allowed for composition scheme. But 10(2) clearly specify that e-commerce operators are kept out of its ambit.

Mandatory forms needed to file by the operates of e-commerce are details of :

  • GSTR 1 –supply
  • GSTR 2- purchase
  • GSTR 3- monthly return along with payment
  • GSTR 8- supplies processed and the amount of TCS collected
  • GSTR 9- annual GST return

GSTR-8 is a return to be filed by the e-commerce operators who are required to deduct TCS (Tax collected at source) under GST. GSTR-8 contains the details of supplies affected through an e-commerce platform and the amount of TCS collected on such supplies. If the GST return is not filed on time, then a penalty of Rs 100 under CGST & Rs 100 under SGST shall be levied per day. The total will be Rs. 200/day. The maximum is Rs. 5,000. There is no late fee on IGST in case of delayed filing.

Along with the late fee, interest at 18% per annum has to be paid. It has to be calculated by the taxpayer on the tax to be paid. The time period will be from the next day of filing to the date of payment.[3]

From this, it could be seen hat GSTR 8 is very important when speaking about the tax issues relating to E-Commerce.

Reference :- 

[1]https://www.manupatrafast.com/articles/PopOpenArticle.aspx?ID=2cf77603-926f-43c0-86b8-6842bcd1de7b&txtsearch=Subject:%20Taxation#f7

[2] Ibid.

[3] https://cleartax.in/s/gstr-8-gst-return