CBIC clarification on reversal for ITC availed by electronic commerce operators

CBIC clarification on reversal for ITC availed by electronic commerce operators

CBIC issues Circular No. 240/34/2024-GST dated 31.12.2024 clarifying in respect of input tax credit availed by electronic commerce operators where services specified under Section 9(5) of Central Goods and Services Tax Act, 2017 are supplied through their platform

CBIC Circular No. 167/23/2021-GST dated 17.12.2021 clarified that electronic commerce operators ( “ECOs”) required to pay tax under section 9(5) of the Central Goods and Services Tax Act, 2017 ( “CGST Act”) are not required to reverse input tax credit (ITC) in respect of supply of restaurant services through their platform (notified services under section 9(5)).

Clarification was sought regarding requirement of reversal of ITC, if any, in respect of supply of services, other than restaurant services, under section 9(5) of CGST Act. 

The following clarification / FAQs have been issued:

Question 1: Whether electronic commerce operator, required to pay tax under section 9(5) of CGST Act, is liable to reverse proportionate input tax credit on his inputs and input services to the extent of supplies made under section 9(5) of the CGST Act.

Answer: 1. ECO, required to pay tax under section 9(5) of CGST Act, is making supplies under two counts:

(i). Supplies notified under section 9(5) of CGST Act for which he is liable to pay tax as if he is the supplier of the said services.

(ii). Supply of his own services by providing his electronic platform for which he charges platform fee /commission etc. from the platform users.

2. For providing the services mentioned at 1(ii) above, the ECO procures inputs as well as input services for which he avails Input Tax Credit.
3. It has been clarified vide question no. 6 of Circular No. 167/23/2021-GST dated 17.12.2021 that the ECO shall not be required to reverse input tax credit on account of restaurant services on which he pays tax under section 9(5) of the CGST Act. It has also been clarified that the input tax credit will not be allowed to be utilized for payment of tax liability under section 9(5) and whole of the tax liability under section 9(5) will be required to be paid in cash.

4.The principle, which has been outlined in question no.  6 of Circular No.  167/23/2021 – GST dated 17.12.2021, also applies to the supplies made in respect of other services specified under section 9(5) of CGST Act.

5.In view of this, it is clarified that Electronic Commerce Operator, who is liable to pay tax under section 9(5) of the CGST Act in respect of specified services, is not required to reverse the input tax credit on his inputs and input services proportionately under section 17(1) or section 17(2) of CGST Act to the extent of supplies made under section 9(5) of the CGST Act.

6. It is further clarified that ECO will be required to pay the full tax liability on account of supplies under section 9(5) of the CGST Act only through electronic cash ledger. The credit availed by him in relation to the inputs and input services used to facilitate such supplies cannot be used for discharge of such tax liability under section 9(5) of the CGST Act. However, such credit can be utilized by him for discharge of tax liability in respect of supply of services on his own account.

Download CBIC Circular No. 240/34/2024-GST Click Here >>

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