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Online travel agents liable to deduct 1% tax at source

In a recent clarification by the CBEC, the online travel agents are considered as e-commerce operators

Online travel agents that provide online ticketing and additional services will be liable to deduct a 1% tax at source under the GST regime. Since the online travel agents have been classified as e-commerce operators, they will be liable for the tax deduction at source. Under the GST, an e-commerce operator is required to deduct a 1% tax of the net value of the taxable supplies made through it. Under the GST regime, e-commerce has been defined as the supply of goods and services, which includes the sale of digital products over an electronic network and an e-commerce operator is an individual who owns, operates or manages the platform. Thus, online travel agents that provide services through the digital or electronic platform will be liable to deduct the TCS.

CBEC clarified that the benefit of the threshold exemption will not be available to an e-commerce operator on the e-commerce platform. All businesses with a turnover up to Rs.20 lakh are otherwise exempt from the GST. CBEC also clarified that every e-commerce operator is liable to collect the taxes on behalf of the supplier and that tax has to be collected in the month in which the amount was collected from the recipient. Further, the tax amount collected will have to be paid to the government within a period of 10 days after the end of the month in which the amount was collected. The Act empowers the tax officials to seek information on the supply details from the e-commerce operators. It further clarifies that the suppliers selling their own products through a website hosted by him will also fall under the same definition of an e-commerce operator, but in this case, there will be no need to deduct the TCS.

In cases where somebody is selling their own products through a website, there is no need for tax collection at source. These transactions will be liable to the GST at the prevailing rates. Besides, every e-commerce operator will have to furnish an electronic statement within 10 days of the next month providing details of the outward supplies of the goods or services. This includes supplies returned through it and the amount collected as TCS within the month. These details will then be matched with the corresponding details of outward supplies which are furnished by the supplier and in case of any discrepancy; the same will be communicated to both the parties.

With this clarification, CBEC has simplified the tax collection at source and also provided information about the transactions which are not liable for the TCS. This is to remove any confusion among the online travel agents regarding the impact of GST on their business. The clarification is specially meant for the online travel agents who provide ticketing and booking services to the customers via a digital platform.

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