Question 1 – gst implications on e-commerce operator

Answer –

Summary

Under the Goods and Services Tax (GST) regime, an E-Commerce Operator (ECO) has
significant compliance obligations. Key implications include mandatory registration under
Section 24(x) of the CGST Act, 2017, irrespective of turnover. The primary responsibility is
the collection of Tax at Source (TCS) under Section 52 on the net value of taxable supplies
made through its platform where it collects the consideration. The TCS rate is 0.50% (0.25%
CGST + 0.25% SGST/UTGST or 0.50% IGST) effective from July 10, 2024. The ECO must
deposit this TCS and file a monthly statement in FORM GSTR-8 by the 10th of the
subsequent month, along with an annual statement in FORM GSTR-9B. The TCS so collected
is credited to the electronic cash ledger of the actual supplier, who can then utilize it for tax
payment or claim a refund.

Detailed Explanation

The GST implications for an E-Commerce Operator are multifaceted, primarily revolving
around registration, tax collection, and reporting. The key provisions are detailed below.

1. Definition and Scope

 Electronic Commerce: As per Section 2(44) of the CGST Act, 2017, it is defined as the
supply of goods or services, including digital products, over a digital or electronic
network.

 Electronic Commerce Operator (ECO): Section 2(45) defines an ECO as any person
who owns, operates, or manages a digital or electronic facility or platform for
electronic commerce.

2. Registration Requirements

 For the ECO: It is mandatory for every ECO to obtain GST registration, irrespective of
their turnover. Section 24(x) of the CGST Act, 2017, mandates compulsory
registration for every electronic commerce operator who is required to collect tax at
source under Section 52.

 Registration in Multiple States: An ECO must obtain registration in each State/UT

where its suppliers are located. If the ECO does not have a physical presence in a
particular State/UT, it can declare its Head Office as its place of business for
registration purposes. This applies to foreign ECOs as well, who may appoint an agent
if they lack a physical presence in India.

 For Suppliers on the Platform: As per Section 24(ix), any person supplying goods
through an ECO must also obtain compulsory registration. However, an exemption is
 available for persons supplying services (other than services specified under Section
9(5)) through an ECO, provided their aggregate turnover does not exceed the
threshold limit of ₹20 lakhs (or ₹10 lakhs for specified special category States), as
notified vide Notification No. 65/2017-Central Tax.

3. Tax Collection at Source (TCS)

The most significant compliance for an ECO is the collection of tax at source under Section
52 of the CGST Act, 2017.

 Legal Mandate: Section 52(1) requires every ECO (not being an agent) to collect TCS
on the "net value of taxable supplies" made through it by other suppliers, where the
consideration for such supplies is collected by the ECO.

 Rate of TCS: The applicable TCS rates are as follows:

Period Rate Legal Basis

Notification No. 52/2018-Central Tax

October 1, 2018, 1% (0.5% CGST + 0.5%
& corresponding IGST/SGST
to July 9, 2024 SGST/UTGST) or 1% IGST
notifications

As amended by Notification No.

From July 10, 0.50% (0.25% CGST + 0.25%
1/2024-Integrated Tax, dated 10th
2024 SGST/UTGST) or 0.50% IGST
July 2024

 Net Value of Taxable Supplies: This is defined in the explanation to Section 52(1) as
the aggregate value of taxable supplies of goods or services (other than services
notified under Section 9(5)) made by all registered suppliers through the ECO during
a month, reduced by the aggregate value of taxable supplies returned to those
suppliers during the same month.

 Sales returns are adjusted from the gross value of supplies for the month.

 If returns in a month exceed the supplies for a supplier, the negative value is to be
ignored and cannot be carried forward.

 Timing of Collection: TCS must be collected at the time of supply, irrespective of

when the consideration is actually collected by the ECO. For instance, if a supply is
made in October and payment is collected in November, TCS is applicable for the
month of October.

 Non-Applicability of TCS: TCS is not required to be collected on:

 Exempt supplies.
  Supplies on which the recipient is liable to pay tax under the Reverse Charge
Mechanism (RCM).

 Services notified under Section 9(5) where the ECO itself is liable to pay the entire
GST.

 Import of goods or services.

 Services supplied by unregistered persons whose turnover is below the registration

threshold (as per Notification No. 65/2017-Central Tax).

4. Payment and Return Filing Obligations

 Payment of TCS: The amount collected as TCS must be deposited with the
Government within 10 days from the end of the month in which the collection was
made. This payment cannot be made by utilizing the Input Tax Credit (ITC) of the
ECO.

 Monthly Statement (FORM GSTR-8): Every ECO must furnish a monthly statement in
FORM GSTR-8 electronically by the 10th of the following month. This statement
contains details of outward supplies made through the platform and the TCS
collected.

 Annual Statement (FORM GSTR-9B): An annual statement containing the details of

supplies and TCS collected during the financial year must be filed in FORM GSTR-9B
by the 31st of December following the end of that financial year.

 Rectification of Errors: Any omission or incorrect particular in GSTR-8 can be rectified

in the statement for the month in which such error is noticed, subject to payment of
interest. This rectification is permitted until the 30th of November of the following
financial year or the date of furnishing the annual statement, whichever is earlier, as
per Section 52(6).

5. Credit Mechanism for the Actual Supplier

 As per Section 52(7) and Rule 67, the TCS amount deposited by the ECO and declared
in its GSTR-8 is reflected in the Electronic Cash Ledger of the respective supplier.

 The supplier can then utilize this amount for the payment of their output tax liability
or claim a refund of any excess balance under Section 54(1).

6. Special Scenarios

 Supplies by Composition Dealers: While Section 10(2)(d) generally restricts

composition dealers from supplying through an ECO, Notification No. 36/2023-
Central Tax, dated 04.08.2023, has laid down a special procedure effective from
October 1, 2023. Under this, an ECO can facilitate intra-State supply of goods by a
composition dealer and is required to collect TCS on such supplies.
  Multiple ECOs in a Single Transaction: Circular No. 194/06/2023-GST clarifies the
liability in such cases:

 Case 1: If the payment to the ultimate supplier is released by a "Supplier-side ECO,"

then this Supplier-side ECO is liable to collect TCS and undertake all related
compliances.

 Case 2: If the "Buyer-side ECO" makes the payment directly to the supplier (who may
also be an ECO), then the Buyer-side ECO is liable to collect TCS.

7. Consequences of Non-Compliance

 Interest: Failure to collect TCS or failure to deposit the collected TCS within the due
date attracts interest as per Section 50(1) of the CGST Act.

 Penalty: Non-collection of tax is also subject to penalty under Section 122(vi) of the
CGST Act.

 Power of Tax Authorities: An officer not below the rank of Deputy Commissioner can
issue a notice to an ECO, requiring it to furnish details of supplies or stock of goods
held by suppliers on its platform within 15 working days (Section 52(12)).
Question 2 – explain sc ruling in uoi vs bharti airtel case

Answer –

Summary

The Supreme Court, in its 2021 judgment in Union of India vs. Bharti Airtel Ltd., held that
Form GSTR-3B is a return under Section 39 of the CGST Act, 2017. Consequently, any
rectification of errors or omissions in a filed GSTR-3B is strictly governed by the mechanism
prescribed in Section 39(9). This provision permits corrections only in the return furnished
for a subsequent tax period (i.e., the month or quarter in which the error is noticed) and
does not allow for the revision or retrospective amendment of the return for the original
period. The Court emphasized that the taxpayer's obligation of self-assessment under
Section 59 is paramount and is based on their own books of accounts, with the common
portal (including forms like GSTR-2A) being merely a facilitator. The non-operationality of
certain forms does not absolve the taxpayer of this primary duty or permit deviation from
the statutory rectification process.

Detailed Explanation

1. Background and Facts of the Case

The matter originated from the initial phase of GST implementation (July-September 2017).

 Taxpayer's Position: Bharti Airtel Ltd. contended that due to the non-
operationalization of the statutorily envisaged forms GSTR-2 (for inward supplies)
and GSTR-3 (monthly return), it could not accurately ascertain its eligible Input Tax
Credit (ITC). As a result, it discharged its Output Tax Liability (OTL) of approximately
₹923 crores for the period of July to September 2017 through its electronic cash
ledger, even though it had sufficient ITC available in its electronic credit ledger.

 Action Taken: Upon realizing this, Bharti Airtel sought to rectify its GSTR-3B returns
for the original period (July-September 2017) to utilize the available ITC and claim a
refund of the cash paid.

 Department's Stance: The tax authorities, relying on Circular No. 26/26/2017-GST

dated 29.12.2017, denied this request. They argued that Section 39(9) of the CGST
Act only permits the correction of errors in a return for a subsequent tax period, not
for the period in which the error occurred.

 Delhi High Court's Decision: The Delhi High Court ruled in favour of Bharti Airtel,
"reading down" the restrictive paragraph in the circular. It held that the
government's failure to operationalize the prescribed return filing system (GSTR-2/3)
should not prejudice the taxpayer's right to claim legitimate credit. It, therefore,
 permitted Bharti Airtel to rectify the GSTR-3B for the original period. The Union of
India subsequently appealed this decision to the Supreme Court.

2. Key Issues Before the Supreme Court

The primary legal questions before the Apex Court were:

 Whether Form GSTR-3B is a "return" under Section 39 of the CGST Act, making it
subject to the provisions applicable to returns, including the mechanism for
rectification.

 Whether the rectification of errors in Form GSTR-3B is governed by Section 39(9),

which allows corrections only in subsequent returns.

 Whether Circular No. 26/26/2017-GST was legally valid and consistent with the
provisions of the CGST Act.

 Whether the non-availability of Forms GSTR-2A and GSTR-2 on the common portal
could be a valid reason for a taxpayer to bypass the statutory rectification procedure.

3. Observations and Ruling of the Supreme Court

The Supreme Court overturned the Delhi High Court's judgment, providing the following key
observations:

Aspect Supreme Court's Observation and Ruling

The Court held that Form GSTR-3B, although introduced as a

temporary measure, was prescribed as a valid return under Section
39 read with Rule 61 of the CGST Rules (as amended
Status of GSTR-3B
retrospectively). Therefore, all statutory provisions applicable to a
"return" under Section 39, including the rectification mechanism,
apply to GSTR-3B.

The Court firmly established that the primary responsibility for

correct assessment lies with the taxpayer. Under Section 59 of the
Primacy of Self-
CGST Act, every registered person must self-assess the taxes
Assessment
payable. This self-assessment must be based on their own books of
accounts and records.

Role of the GST The common portal and auto-populated forms like GSTR-2A are
Portal merely "facilitators." Their non-operationality does not absolve the
taxpayer from the duty of accurate self-assessment based on their
own records. The Court stated, "non-performance or non-
operability of Form GSTR-2A or for that matter, other forms, will be
 Aspect Supreme Court's Observation and Ruling

of no avail."

The Court held that Section 39(9) of the CGST Act provides a clear,
specific, and exclusive mechanism for correcting errors. It allows a
Rectification taxpayer to rectify any omission or incorrect particular in the
Mechanism return furnished for the month or quarter during which such
omission or incorrect particulars are noticed. It does not permit
revising the original return.

The Court found Circular No. 26/26/2017-GST to be merely

clarificatory and entirely consistent with the statutory mandate of
Validity of Circular
Section 39(9). It does not impose any new conditions but only
explains the existing legal position.

The Supreme Court warned that allowing taxpayers to unilaterally

Consequences of and retrospectively amend their returns would lead to a "chaotic
Unilateral situation and collapse of tax administration." It would have a
Rectification cascading effect on the entire value chain, disrupting the ITC claims
of other stakeholders and destabilizing the tax ecosystem.

4. Final Decision

The Supreme Court allowed the appeal filed by the Union of India and dismissed the writ
petition filed by Bharti Airtel. The final ruling established that:

 Rectification of Form GSTR-3B is permissible only as per the procedure laid down in
Section 39(9) of the CGST Act.

 Errors or omissions can only be corrected in the GSTR-3B of a subsequent tax period.

 Retrospective revision of GSTR-3B for the period in which the error occurred is not
permitted under the law.

5. Precedential Value and Subsequent Interpretations

The Bharti Airtel judgment has become a landmark ruling, setting a strict precedent for the
finality of filed returns and the prescribed method for their rectification.

 Strict Interpretation: Courts have consistently applied this ruling to deny requests for
rectifying returns beyond the statutory timelines. For instance, in Bar Code India Ltd.
v. Union of India (2024), the Punjab & Haryana High Court, relying on Bharti Airtel,
refused to permit the rectification of Form GSTR-1 after the expiry of the time limit
prescribed under Section 37(3), emphasizing that statutory timelines are mandatory.
  Distinguishing Facts: However, courts have also distinguished cases where the
taxpayer's inability to act was due to systemic failures of the GST Network, rather
than their own error. In Dell International Services India (P.) Ltd. v. Union of India
(2025), the Madras High Court allowed the rectification of GSTR-3B. It distinguished
the case from Bharti Airtel by noting the issue was the inability to transition
legitimate pre-GST credit due to the delayed operationalization of FORM TRAN-1, a
systemic failure, rather than an error in self-assessment of regular ITC.

Question 3 – can i get itc refund on closure of my business

Answer-

Summary

Yes, a registered person is entitled to a cash refund of the unutilized Input Tax Credit (ITC)
remaining in the Electronic Credit Ledger upon the closure of business and cancellation of
GST registration. This position is supported by the judicial precedent set in the case of SICPA
India (P.) Ltd. v. Union of India. The High Court held that the restrictions on ITC refunds
specified in the proviso to Section 54(3) of the CGST Act, 2017 (i.e., for zero-rated supplies
and inverted duty structure) are not applicable to refund claims arising from business
closure. The refund is permissible under the general provisions of Section 49(6) read with
Section 54, as ITC is a vested right that cannot be forfeited without the explicit authority of
law.

However, this refund is of the balance ITC after making the mandatory reversal of credit on
inputs and capital goods held in stock at the time of cancellation, as required under Section
29(5) of the CGST Act.

Detailed Explanation

1. Legal Framework for Refund on Business Closure

The eligibility for a refund of unutilized ITC upon business closure is determined by a
combined reading of Sections 29, 49, and 54 of the CGST Act, 2017.

 Section 29(1)(a): This section provides the legal basis for a registered person to apply
for cancellation of registration where the business has been discontinued.

 Section 49(6): This section states that the balance in the Electronic Credit Ledger may
be refunded in accordance with the provisions of Section 54.

 Section 54(3): This is the primary section governing the refund of unutilized ITC. The
department often contests refunds on business closure by citing the proviso to
 Section 54(3), which states that no refund of unutilized ITC shall be allowed in cases
other than:

 (i) Zero-rated supplies made without payment of tax; and

 (ii) Where credit has accumulated on account of an inverted duty structure.

Since business closure is not one of these two specified scenarios, refund claims are
frequently disputed. However, judicial interpretation has clarified this position.

2. Judicial Precedent: SICPA India (P.) Ltd. v. Union of India

This case, decided by the High Court of Sikkim on June 10, 2025, provides a definitive
clarification on the matter.

Aspect Details

Whether a cash refund of unutilized ITC is permissible upon business

Key Issue
closure, despite the restrictions in the proviso to Section 54(3).

The High Court ruled in favour of the petitioner, holding that the
Court's
restrictions under the proviso to Section 54(3) are not applicable to refund
Finding
claims arising from business closure.

The Court observed that while Section 54(3) deals with refunds during
ongoing operations, the statute does not provide for the retention of tax or
credit without the authority of law. It emphasized that Input Tax Credit is a
Rationale
vested right that cannot be extinguished or forfeited merely due to the
closure of a business, in the absence of an express legal provision to that
effect.

The writ petition was allowed, and the petitioner was held to be entitled to
Decision
the refund of the unutilized ITC balance in their Electronic Credit Ledger.

3. Mandatory Reversal of ITC upon Cancellation

Before claiming a refund of the net balance, a taxpayer must comply with the provisions of
Section 29(5) of the CGST Act, which mandates the reversal of certain credits at the time of
cancellation.

 Section 29(5) of the CGST Act: A person whose registration is cancelled must pay an
amount, by debiting the electronic credit or cash ledger, equivalent to the higher of:

 The ITC in respect of inputs held in stock, and inputs contained in semi-finished or
finished goods held in stock, and on capital goods or plant & machinery.

 The output tax payable on such goods.

  Rule 44 of the CGST Rules: This rule prescribes the manner of determining the
amount to be reversed under Section 29(5).

Type of Asset Method of Calculation for Reversal

The ITC is calculated proportionately based on the corresponding

Inputs in Stock
invoices on which the credit was originally availed.

The ITC involved in the remaining useful life of the asset is

Capital Goods & computed on a pro-rata basis. The total useful life is taken as five
Plant/Machinery years (60 months).<br>Formula: Reversal Amount = Total ITC
taken on the capital good × (Remaining useful life in months ÷ 60)

The amount calculated as per Rule 44 must be paid and declared in the final return, FORM
GSTR-10. The refund can be claimed for the balance ITC remaining in the Electronic Credit
Ledger after this reversal has been made.

4. Procedural Steps for Claiming Refund

To correctly process the cancellation and claim the refund, the following steps should be
followed:

1. Application for Cancellation: File FORM GST REG-16 on the GST portal, selecting
"Discontinuation of business" as the reason and specifying the desired effective date
of cancellation.

2. Final Return and ITC Reversal:

 Calculate the amount of ITC to be reversed as per Section 29(5) and Rule 44.

 File the final return in FORM GSTR-10 within three months from the effective date of
cancellation or the date of the cancellation order, whichever is later.

 Debit the calculated reversal amount from the Electronic Credit Ledger or pay
through the Electronic Cash Ledger.

3. Application for Refund:

 Once the final return is filed and all liabilities are settled, file a refund application
in FORM GST RFD-01 for the net balance remaining in the Electronic Credit Ledger.

The refund application should be filed under the category "Refund of excess balance in
electronic credit ledger" or "Any Other", as applicable on the portal.