Clarification on Input Tax Credit for Electronic Commerce Operators under Section 9(5) of CGST Act, 2017

In the realm of GST compliance, questions often arise concerning the input tax credit (ITC) obligations of electronic commerce operators (ECOs), particularly for services covered under Section 9(5) of the Central Goods and Services Tax Act, 2017 (CGST Act). To provide clarity, the Central Board of Indirect Taxes and Customs (CBIC) has issued updated guidelines, referencing Circular No. 167/23/2021 – GST dated 17.12.2021.

Understanding the Context
ECOs, under Section 9(5) of the CGST Act, are obligated to pay tax as if they are the suppliers of certain notified services (e.g., restaurant services). A common query has been whether ECOs must proportionately reverse ITC on inputs and input services used for such supplies.

Key Clarifications Provided

1. Dual Role of ECOs:
• ECOs supply services notified under Section 9(5) (e.g., restaurant services) for which they are liable to pay tax.
• They also provide their own services, such as charging platform fees or commissions, for which they utilize inputs and input services.
2. ITC Reversal Not Required:
• As per Circular No. 167/23/2021, ECOs do not need to reverse ITC for restaurant services supplied through their platform.
• The same principle applies to other services under Section 9(5). ECOs are not required to reverse ITC under Sections 17(1) or 17(2) of the CGST Act for these supplies.
3. Tax Liability Payment:
• Tax liability under Section 9(5) must be discharged in full via the electronic cash ledger.
• ITC on inputs and input services related to such supplies cannot be utilized for this purpose but can be used for discharging tax liabilities for the ECO’s own services.

This clarification ensures uniformity in implementation and simplifies compliance for ECOs. By delineating the use of ITC and specifying payment methods for Section 9(5) liabilities, it provides a structured approach to managing tax obligations while safeguarding the ITC on other services.

ECOs are encouraged to review the circular in detail and ensure adherence to these guidelines for seamless compliance and efficient ITC utilization.