The Karnataka Goods and Services Tax ( GST ) Authority for Advance Ruling (AAR) has determined that e-commerce operators are obligated to collect Tax Collected at Source (TCS) for facilitating the sale of digital gold on their platforms.
As an electronic commerce operator, the applicant is mandated to gather tax at source under Section 52 of the Central GST Act 2017. Consequently, they are compelled to register under Section 24(x) of the Central Goods and Services Tax Act 2017, as stipulated by Rule 12 of the Central Goods and Services Tax Rules 2017.
The applicant operates an online micro-savings and investment platform called “Jar,” offering digital gold through a distribution agreement with Digital Gold India Private Limited (DGIPL). DGIPL, a provider of digital gold products, distributes them through various channel partners, including Tanishq, Axis Bank, Tata Neu, and others. Users of the applicant’s platform can invest in digital gold offered by DGIPL, a non-custodial form of gold ownership vaulted by the seller.
In seeking an advance ruling, the applicant questioned whether their role, solely collecting a commission on digital gold sales facilitated through their platform, would categorize them as an “agent” under GST law, thereby exempting them from Notification No. 52/2018, Central Tax, along with Section 52 of the Central Goods and Services Tax, 2017, and corresponding state Notification 20/2018 (Karnataka), in conjunction with Section 52 of the Karnataka Goods and Services Tax, 2017.
Additionally, the applicant queried whether registration as an e-commerce operator, as per Rule 12 of the Central Goods and Services Tax Rules, 2017, was obligatory.
The applicant asserted that they merely provide a platform for digital gold transactions, with DGIPL being the owner and seller of the gold products. They drew a parallel between their role and that of a travel agent compared to a tour operator.
The AAR bench, comprising Dr. M.P. Ravi Prasad and Kiran Reddy T., noted that the applicant provides e-commerce platform services through their app, receiving consideration in the form of a percentage on the sale value of gold. Consequently, they are liable to charge and collect GST.
The AAR thus ruled that the electronic commerce operator does not function as an agent of DGIPL or any third-party supplier and concluded that e-commerce operators are obligated to collect Tax Collected at Source (TCS) for facilitating the sale of digital gold on their platforms.
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