CBIC Clarifies Input Tax Credit Rules for E-Commerce Operators Under Section 9(5)

Introduction

On December 31, 2024, the Central Board of Indirect Taxes and Customs (CBIC) issued Circular No. 240/34/2024-GST, addressing the treatment of Input Tax Credit (ITC) for Electronic Commerce Operators (ECOs) supplying notified services under Section 9(5) of the CGST Act, 2017.

This circular resolves key uncertainties surrounding ITC utilization and reversal, ensuring uniform application of GST laws.

Key Clarifications for E-Commerce Operators

1. Types of Supplies by ECOs:
   • Notified Services: Services like ride-hailing and housekeeping, where ECOs act as deemed suppliers and pay GST under Section 9(5).
   • Own Services: ECOs’ platform fees or commissions, where GST is collected on their services.
2. Input Tax Credit (ITC):
   • ECOs are not required to reverse ITC proportionately for notified services under Section 9(5).
   • However, ITC cannot be used to discharge GST liability for these notified services. Taxes for such supplies must be paid fully in cash.
3. ITC Utilization:
   • ITC availed for inputs and input services can be utilized for the ECO’s own tax liabilities (e.g., platform commissions).
   • Full tax liability under Section 9(5) must be settled via the electronic cash ledger.

Implications for E-Commerce Operators

• No ITC Reversal Required: This eliminates the complexity of proportionate ITC reversals, reducing compliance burdens.
• Cash Payment Mandate: ECOs must ensure that GST liability for Section 9(5) services is paid in cash, simplifying audit trails.
• Enhanced ITC Efficiency: ITC can be fully utilized for ECOs’ own services, streamlining their financial operations.

Why It Matters

This clarification provides much-needed transparency for e-commerce operators and ensures consistent GST compliance across the sector. By separating the ITC usage for notified services and own services, ECOs can now align their financial and tax strategies more effectively.

For detailed guidelines, refer to Circular No. 240/34/2024-GST issued by CBIC.