Introduction:
On December 31, 2024, the Central Board of Indirect Taxes and Customs (CBIC) issued Circular No. 240/34/2024-GST to address a critical concern regarding Input Tax Credit (ITC) for electronic commerce operators (ECOs). This clarification provides much-needed guidance for e-commerce platforms covered under Section 9(5) of the Central Goods and Services Tax (CGST) Act, 2017.
The Background:
Previously, Circular No. 167/23/2021-GST, dated December 17, 2021, clarified that ECOs paying tax on restaurant services under Section 9(5) were not required to reverse ITC. However, ambiguity persisted regarding ITC treatment for other notified services under Section 9(5), prompting the CBIC to step in with additional clarifications.
Key Issues Addressed
- Applicability of ITC Reversal
The new circular confirms that ECOs supplying notified services under Section 9(5) are not required to reverse proportionate ITC on inputs and input services related to these supplies. This principle aligns with the treatment outlined for restaurant services in Circular No. 167/23/2021.
- Tax Payment via Cash Ledger
ECOs must discharge their tax liability under Section 9(5) exclusively through the electronic cash ledger. ITC cannot be used for this purpose. However, ITC can still be utilized for other tax liabilities incurred for services provided on their platform (e.g., platform fees or commissions).
DISCLAIMER:
The information contained herein is in summary form and is prepared based on the provisions of GST and allied laws and related Rules, Circulars, Notifications therein. For details, please refer the relevant provisions. While the information is believed to be accurate to the best of our knowledge, we do not make any representations or warranties, express or implied, as to the accuracy or completeness of this information. Reader should conduct and rely upon their own examination and analysis and are advised to seek their own professional advice. We accept no responsibility for any errors it may contain, whether caused by negligence or otherwise or for any loss, howsoever caused or sustained, by the person who relies upon it.
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