On December 31, 2024, the Central Board of Indirect Taxes and Customs (CBIC) issued Circular No. 240/34/2024-GST, offering critical clarifications regarding Input Tax Credit (ITC) for Electronic Commerce Operators (ECOs) under Section 9(5) of the Central Goods and Services Tax Act, 2017 (CGST Act). This circular builds on the foundation laid by Circular No. 167/23/2021-GST and aims to resolve ambiguities concerning ITC reversal for services other than restaurant services.
Key Highlights of the Circular
- Applicability:
The circular addresses ECOs liable to pay GST on notified services under Section 9(5) of the CGST Act. It distinguishes between:- Services under Section 9(5): ECOs are deemed suppliers for these services and are responsible for tax payment.
- Own Services: These include platform fees or commissions charged by ECOs for facilitating transactions.
- Clarification on ITC Reversal:
- ECOs are not required to reverse ITC on inputs and input services used for making supplies under Section 9(5).
- The principle established in the earlier circular for restaurant services applies to all other notified services under Section 9(5).
- Tax Payment Mechanism:
- GST liability for Section 9(5) supplies must be discharged entirely through the electronic cash ledger.
- ITC availed on inputs and services facilitating these supplies cannot be utilized for this tax liability. However, ITC can be used for tax obligations arising from the ECO’s own services.
Implications of the Circular
- For Electronic Commerce Operators:
- Simplifies compliance by eliminating the need for proportional ITC reversal for Section 9(5) services.
- Strengthens operational clarity by allowing ITC utilization for other tax liabilities.
- For Tax Practitioners and Businesses:
- Enhances understanding of ITC treatment in cases involving ECOs.
- Reduces compliance-related disputes and ensures consistent application across jurisdictions.
- On GST Administration:
- Promotes uniformity in implementation and interpretation of GST provisions.
- Addresses concerns raised by stakeholders, reducing administrative difficulties.
Key Takeaways
The CBIC’s clarification in Circular No. 240/34/2024-GST is a significant step toward simplifying GST compliance for electronic commerce operators. By eliminating ambiguities regarding ITC reversal, the circular supports ECOs in adhering to GST regulations more effectively.
