GST Obligations of E-Commerce Operators: Section 9(5), TCS, and the Deemed Supplier Concept

The GST framework for e-commerce has evolved significantly since 2017, with the government progressively expanding the tax obligations of electronic commerce operators (ECOs). ECOs now operate under a sophisticated dual-obligation framework: Tax Collection at Source (TCS) under Section 52 for marketplace transactions, and deemed supplier liability under Section 9(5) for specified service categories. Understanding these overlapping obligations is essential for any entity operating a digital marketplace.

Who is an Electronic Commerce Operator?

Section 2(45) of the CGST Act defines an ECO as any person who owns, operates, or manages a digital or electronic facility or platform for electronic commerce. This broad definition covers not just traditional e-commerce marketplaces (like online retail platforms) but also app-based service aggregators, cloud-based service platforms, and any intermediary that facilitates digital transactions between buyers and sellers. Importantly, a person who supplies services/goods through an ECO is the "supplier" while the ECO is the "operator"—unless Section 9(5) applies, in which case the ECO becomes the supplier.

Section 52: Tax Collection at Source (TCS)

Under Section 52, every ECO must collect 1% TCS (0.5% CGST + 0.5% SGST, or 1% IGST for inter-state) on the net value of taxable supplies made through its platform by other suppliers. The TCS must be paid to the government by the 10th of the following month, and GSTR-8 must be filed monthly. The net value of taxable supplies means the aggregate value of supplies minus returns. The TCS collected by the ECO is reflected in the supplier's GSTR-2B and can be claimed as a credit against the supplier's output tax liability, after verification through Form GSTR-2A/2B matching.

Section 9(5): The Deemed Supplier Mechanism

Section 9(5) is a powerful departure from the normal rule: it makes the ECO—not the actual supplier—liable to pay GST on specified categories of services. Currently, services notified under Section 9(5) include:

• Transportation of passengers by radio-taxi, motor cab, maxi cab, or motorcycle: App-based cab aggregators (like ride-hailing platforms) are treated as the supplier and must pay GST at 5% (no ITC) on the fare.
• Hotel accommodation services (notified with effect from January 1, 2022): Where accommodation is booked through an ECO, the ECO is the deemed supplier if the actual hotel has turnover below the GST registration threshold. Above that threshold, the hotel remains the supplier.
• Restaurant services (notified with effect from January 1, 2022): Cloud kitchens and restaurants supplying food through apps (food delivery platforms) have the ECO treated as the deemed supplier, paying GST at 5% without ITC.

Implications of Section 9(5) for Food Delivery Platforms

The January 2022 notification on restaurant services created significant disruption. Food delivery platforms became deemed suppliers for all restaurant orders placed through their apps, irrespective of whether the restaurant was registered or not. This means the platform must pay 5% GST on the full transaction value (which is the food price, not the delivery fee). The platform can collect this GST from the restaurant, but the legal liability rests with the platform. Restaurants, on the other hand, are no longer required to collect or pay GST on supplies made through ECOs—they are excluded from the supply chain for GST purposes when acting through a covered ECO.

Compliance Challenges for Multi-Service Platforms

Platforms offering multiple service types face the complex task of segregating transactions into: (a) Section 9(5) supplies (where the ECO is the supplier), (b) TCS-covered marketplace supplies (where underlying suppliers pay tax, ECO just collects TCS), and (c) the ECO's own direct services (like platform subscription fees, advertising revenue, delivery charges). Each category has different GST rate, ITC eligibility, return filing, and invoice requirements. The interaction between Section 9(5) and TCS provisions has created interpretational confusion—whether TCS still applies to Section 9(5) supplies where the ECO is itself the deemed supplier is a matter that has needed regulatory clarification.

Registration Requirements for ECOs

ECOs are mandatorily required to register under GST regardless of their turnover (no threshold exemption applies), under Section 24(x) of the CGST Act. Similarly, persons who supply goods or services through an ECO and are not eligible for composition scheme must register mandatorily. However, persons supplying services through ECOs have been provided the benefit of the threshold exemption in certain cases, creating a tiered compliance landscape. The interaction of mandatory ECO registration with the state-wise registration requirement under GST (since GST is a state-level tax) means that pan-India ECOs must obtain registration in each state where they have a business presence.

The Way Forward: Emerging Issues

The GST Council is actively examining further expansion of the Section 9(5) list to cover other platform-based service categories. The treatment of hyperlocal service platforms, professional service aggregators, and peer-to-peer platforms remains uncertain. Additionally, the government is considering whether ECOs should also take on GST collection obligations for unregistered small sellers on their platforms—a move that would fundamentally transform compliance obligations across the digital ecosystem. Businesses operating in the e-commerce space should closely monitor GST Council recommendations and budget announcements for these evolving obligations.