The GST clarification on ITC for Electronic Commerce Operators (ECOs) like Swiggy and Zomato is expected soon, addressing long-standing ambiguity under Section 9(5) of the CGST Act. The Law Committee, comprising senior officials from the Ministry of Finance and CBIC, recently convened to resolve these queries.
🔍 Background on Section 9(5) and ITC
Section 9(5) of the Central Goods and Services Tax Act mandates ECOs to collect and pay GST on certain supplies, such as restaurant services. While Circular No. 167/23/2021-GST clarified that ECOs are not required to reverse Input Tax Credit (ITC) for restaurant services, confusion persisted about other services covered under Section 9(5).
📊 Key Concerns of ECOs
The ambiguity raised concerns among platforms like Swiggy and Zomato on whether they need to:
- Reverse ITC for services beyond restaurant supplies.
- Pay GST liabilities only in cash without utilising ITC.
🚿 What the Upcoming Clarification Might Say
The committee’s expected draft clarification will likely address:
- ITC Reversal Not Required: ECOs paying GST under Section 9(5) for specified services won’t need to reverse ITC linked to inputs and input services for those supplies.
- ITC Utilisation Restriction: While ITC can be claimed, it cannot offset the tax liability for Section 9(5) supplies. The tax must be paid via the electronic cash ledger.
🔒 Legal Precedents & Implications
- This aligns with the principle established in Circular No. 167/23/2021-GST, reinforcing that ITC reversal shouldn’t apply when the ECO is merely facilitating supplies.
- For businesses, this clarification will:
- Reduce Compliance Burden: Clear rules on ITC will ease financial and administrative uncertainty.
- Impact Cash Flow: ECOs will need to ensure sufficient cash balance to meet GST obligations.
💬 Industry Response & Next Steps
Platforms like Swiggy and Zomato have been advocating for this clarity to avoid unintended financial setbacks. Once the draft is released:
- Businesses Must Adapt: Ensure accounting practices align with the clarification.
- Stay Updated: Follow CBIC notifications and circulars to avoid non-compliance.
Conclusion:
This GST clarification on ITC for Swiggy and Zomato is set to provide much-needed relief and clarity. Understanding the nuances of Section 9(5) will help businesses stay compliant and optimise their tax processes.