Lateral Charge on Ecommerce: All though the above two cases are listed in section 2(98) as ‘reverse charge’, there is another provision which deserves mention in the context of reverse charge. And that provision is the liability of ecommerce operator to pay tax on supply of services through the digital platform or network and for this reason, it can be referred as Lateral Charge as it is neither a forward or reverse charge. This is provided in section 9(5) of the CGST Act, which states:
Lateral Charge on Ecommerce(5) The Government may, on the recommendations of the Council, by notification, specify categories of services the tax on intra-State supplies of which shall be paid by the electronic commerce operator if such services are supplied through it, and all the provisions of this Act shall apply to such electronic commerce operator as if he is the supplier liable for paying the tax in relation to the supply of such services: Provided that where an electronic commerce operator does not have a physical presence in the taxable territory, any person representing such electronic commerce operator for any purpose in the taxable territory shall be liable to pay tax: Provided further that where an electronic commerce operator does not have a physical presence in the taxable territory and also he does not have a representative in the said territory, such electronic commerce operator shall appoint a person in the taxable territory for the purpose of paying tax and such person shall be liable to pay tax.
- It is excluded from the definition of ‘reverse charge’ yet tax is not payable by the supplier
- It is tax payable by a person who is not the recipient but a third person facilitating supply
- It is tax payable not as if the ‘person liable’ to pay tax but as if the ‘supplier liable’ to pay tax
- (i) services by way of transportation of passengers by a radio-taxi, motorcab, maxicab and motor cycle;
- (ii) services by way of providing accommodation in hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes, except where the person supplying such service through electronic commerce operator is liable for registration under sub-section (1) of section 22 of the said Central Goods and Services Tax Act.
- Not only is the actual supplier not liable to tax (substitutionary effect)
- But also that the supply of services by the ecommerce operator to the actual supplier gets subsumed
- Service provided by the actual supplier (taxi driver) to the passenger – taxi service
- Service provided by the ecommerce operator to the actual supplier – commission for securing customer for taxi service
IGST-CGST-SGSTThe entire discussion above has been based on ‘intra-State’ supplies. With identical provisions appearing in section 5(3), (4) and (5) of IGST Act, the above discussion will apply even in case of ‘inter-State’ supply. In case of tax payable by ecom operator, notification 14/2017-Integrated Tax (Rate) dated 28 June, 2017 applies the tax on inter-State supplies.