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Services on Which E-commerce Operator Has to Pay Tax

We had learnt that certain services will be notified by the GST Council, on supply of which, the tax is liable to be paid by the e-commerce operator and not the person supplying the service.

These services on which an e-commerce operator has to pay tax have now been notified by the GST Council. These are:

  1. Transport of passengers by a radio-taxi, motor cab, maxi cab and motor cycle

Example: Certain cab aggregators like Ola Cabs, Uber, etc. act as a platform where cab drivers can register and provide transportation service. On supply of the transportation service by cab drivers, the operator will be liable to pay tax, and not the cab driver.

  1. Accommodation in hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes, except where the supplier is liable for registration.

Example: Accommodation aggregators like Oyo Rooms, Airbnb, etc. partner with hotels, guest houses, etc. to provide standardized accommodation and services to customers. In these cases, if the hotel is liable for registration, such as a hotel chain whose turnover crosses the threshold limit, then the hotel has to pay the tax on the accommodation service provided. However, if the hotel is not liable for registration, then the operator has to pay the tax on the service.

Note: Many e-commerce operators who provide the above services might not even have a physical presence in the State where the transport or accommodation service is provided. Their operations could be entirely through a mobile application or website. However, this cannot be a reason to not pay the tax that arises on account of the provision of these services.

The Law clearly states that if an operator providing the above services does not have a physical presence in a State, any person representing the operator for any purpose will be liable to pay the tax. Further, if the e-commerce operator does not have a representative in the State, then it should appoint a person in the State for the purpose of paying tax.

As an e-commerce operator, it is important to note the tax liability that arises on account of the supply of transportation or accommodation services and ensure that appropriate measures for compliance are taken.

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