The Goods and Services Tax (GST) Council is scheduled to provide further clarity on the tax collected at source (TCS) liability of suppliers on the Open Network Digital Commerce (ONDC) platform. The focus is on transactions involving multiple operators. The open and interoperable nature of the network raises questions regarding who should be responsible for TCS compliance under GST laws.

Recommendations and Models of ONDC Operations

Sources have indicated that the Law Committee, comprising tax officers from the central and state governments, has recommended to the GST Council that, in cases where multiple ecommerce operators (ECOs) participate in a single transaction on the ECO platform, the supplier-side should be responsible for TCS compliance, ultimately releasing payment to the supplier.

ONDC operates under two models: the inventory model and the marketplace model. In the inventory model, the buyer places an order through an ecommerce platform and directly pays the supplier. The ecommerce platform deducts TCS during payment to the seller. The marketplace model creates confusion regarding TCS liability as it involves two intermediaries in a single transaction.

Clarity on TCS Deduction in the Marketplace Model

In the marketplace model, the buyer places an order on the ecommerce platform (buyer app), which sources the goods or services from another ecommerce entity (seller app). The seller app then procures the required goods or services from the actual supplier. With multiple entities involved, the DPIIT has sought clarity from the GST Council on whether the buyer or the seller should deduct TCS on ONDC.

Sources indicate that the seller should deduct TCS while making payment to the supplier in the marketplace model.

GST Council waived mandatory registration for suppliers to e-comm platforms for intra-state supplies if their annual turnover is below the GST registration threshold. This provision will come into effect from October 1.

Launched in 2022, the ONDC has rapidly expanded to more than 235 cities across India. The network currently includes over 40,000 sellers. With around 18,000 operating in major cities such as Mumbai, Delhi NCR, Chennai, Hyderabad, and Kolkata. Recently, the network expanded its beta coverage to these cities, further solidifying its presence in the market.

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