The Karnataka Authority For Advance Rulings ( AAR ) has held that e-commerce operators are liable to collect Tax Collected at source ( TCS ) on providing a platform for the sale of digital gold. The authority viewed that the applicant qualifies as an electronic commerce operator and is not an agent of the third-party supplier M/S DGIPL, and hence is covered under Notification No. 52/2018 — Central Tax, read with Section 52 of CGST Act, 2017.
M/S. Changejar Technologies Pvt, the applicant is a company engaged in the business of providing an online micro-saving and investment platform by way of an application named “Jar”; they entered into a distribution agreement ( “Agreement” ) with Digital Gold India Private Limited ( “DGIPL” or “seller” ) for offering the sale of DGIPL’s gold on its platform. DGIPL is a company that offers Digital Gold products and distributes them through a wide range of channel partners such as Tanishq, Axis Bank, Tata Neu, Bajaj Finserv, Airtel Payments Bank, Fino payments bank, Amazon, Flipkart, Phone pe and such other large players; the users of applicant’s platform can save and invest money in digital gold offered by DGIPL; Digital gold is a non-custodial form of owning gold which is vaulted by the seller. The applicant, at present, has been offering only Digital Gold offered by Digital Gold India Private Limited on their platform from the launch of their platform and has not been offering any other product offered by any other player.
The question before the authority was whether the applicant, who only collects a commission as a percentage of the value of digital gold sold through its platform and the entire sale proceeds are paid directly to the seller of Digital gold through an Escrow account would qualify as an ‘Agent’ for GST law and is therefore not covered by the applicability of Notification No. 52/2018 — Central Tax, read with Section 52 of Central Goods and Services Tax, 2017 and corresponding state Notification 20/2018 ( Karnataka ) read with Section 52 of Karnataka Goods and Services Tax, 2017?
The applicant, in comparison with e-commerce operators such as Amazon etc., contends that they do not assume any responsibility; they do not collect any platform fee from the seller DGIPL; they charge only commission at a rate per cent of the value of digital gold sold; they transact only single product at present through the app and thus they claim that they are a selling agent but not an e-commerce operator & therefore they are excluded from the purview of Section 52 of the CGST Act 2017. They further contend that the miscellaneous clause 9.4 of the agreement intends to clarify the contractual obligation of the parties.
The Authority comprises Dr. M.P. Ravi Prasad, Additional Commissioner of Commercial Taxes Member ( State ), Sri. Kiran Reddy, Additional Commissioner of Customs & Indirect Taxes, Member ( Central ) held that the applicant qualifies as an electronic commerce operator and is not an agent of the third-party supplier M/S DGIPL, and hence is covered under Notification No. 52/2018 — Central Tax, read with Section 52 of CGST Act, 2017.
Further held that the applicant, being an electronic commerce operator, is required to collect tax at source under Section 52 of the CGST Act 2017 and thus is liable to be registered compulsorily under Section 24(x) of the CGST Act 2017 read with the provisions of Rule 12 of CGST Rules 2017.
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