E-Commerce Operators Liable To Collect TCS For Providing Platform For Selling Digital Gold: AAR

The Karnataka Authority of Advance Ruling (AAR) has ruled that e-commerce operators are liable to collect TCS for providing a platform for selling digital gold.

The bench of Dr. M.P. Ravi Prasad and Kiran Reddy T. has observed that the applicant supplies the services of e-commerce platforms through the app, for which they get the consideration equivalent to a certain percentage on the value of the sale of the gold in the second supply, for which they are charging and collecting GST. 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 in accordance with the provisions of Rule 12 of the CGST Rules 2017.

The applicant is engaged in the business of providing an online micro-savings and investment platform by way of an application named "Jar." The applicant entered into a distribution agreement with Digital Gold India Private Limited (DGIPL) for 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 other large players. The users of the applicant's platform can save and invest money in the digital gold offered by DGIPL. Digital gold is a non-custodial form of owning gold that is vaulted by the seller. The applicant has been offering only Digital Gold offered by Digital Gold India Private Limited on their platform since the launch of their platform and has not been offering any other product offered by any other player.

The applicant sought the advance ruling on the issue of 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 him as an “agent” for the purpose of 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.

Yet another issue raised was whether applicants are required to obtain registration as an e-commerce operator as per the provisions of Rule 12 of the Central Goods and Services Tax Rules, 2017.

The applicant submitted that it is only providing a platform for facilitating transactions for the sale of digital gold. Gold and other products transacted on the platform are owned and offered for sale by DGIPL and not by the applicant. As per clause 1.1.10 of the agreement, platform means and includes the application by the name and style of "Change Jar" or "Jar" App that the customer accesses for the transactions, i.e., for the purchase and sale of gold, including all other contents, services, and technology offered through the platform.

The applicant contended that the difference between an e-commerce operator and an agent can be related to a tour operator and a travel agent. A tour operator assumes complete responsibility for the package that they offer to sell. They do not sell anybody else's packages; they sell only the packages they themselves have created or put together. And a tour operator is what in law is referred to as a "principal," meaning they take responsibility for the package that they create and cover that liability with (usually) an ATOL license and/or some form of bonding to ensure that the consumer gets their money back if the tour operator fails, or is flown home if they are abroad when a tour operator fails. A travel agent offers the consumer a range of holiday packages that have been put together by a tour operator. They do not, in theory, put together any of their own packages; they sell lots of different holidays put together by lots of different tour operators. They do not usually design or create the holidays they sell, and they do not act as a principal. The tour operator whose product they sell takes responsibility for the holiday; the travel agent does not.

The AAR held that the electronic commerce operator is not an agent of a third-party supplier, namely DGIPL.

Applicant's Name: M/S. Changejar Technologies Pvt. Ltd.

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