55th GST Council Issues Clarification on ITC Reversal for E-Commerce Operators u/s 9(5) of CGST Act

The GST Council, in its 55th meeting, provided clarification of an important issue regarding the reversal of Input Tax Credit ( ITC ) by electronic commerce operators ( ECOs ) concerning supplies covered under Section 9(5) of the Central Goods and Services Tax ( CGST ) Act, 2017.

This section mandates that certain categories of services, when supplied through an e-commerce platform, require the ECO to pay GST directly instead of the actual supplier.

The Council clarified that ECOs are not required to make a proportional reversal of ITC under Sections 17(1) or 17(2) of the CGST Act, 2017, for such supplies. These provisions typically apply to cases where ITC is attributed to both taxable and exempt supplies, necessitating a proportionate reversal of ITC for exempt supplies.

However, in this context, the GST Council clarified that supplies for which the ECO is liable to pay tax under Section 9(5) are already considered taxable supplies. Hence, no ITC reversal is necessary for these transactions.

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The clarification provided by the council is as follows : “The GST Council recommended that no proportional reversal of ITC under section 17 (1) or section 17 (2) of CGST Act, 2017 is required to be made by the ECO in respect of supplies for which they are required to pay tax under section 9(5) of CGST Act, 2017.”

The meeting was addressed by the Finance Minister Nirmala Sitharaman and was attended state ministries and other governmental officials.

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