Circular No. 240/34/2024-GST – Clarification on ITC Reversal by E-Commerce Operators for Services under Section 9(5)

The Central Board of Indirect Taxes and Customs (CBIC), vide Circular No. 240/34/2024-GST dated 31 December 2024, has clarified the Input Tax Credit (ITC) treatment applicable to Electronic Commerce Operators (ECOs) in respect of services notified under Section 9(5) of the Central Goods and Services Tax (CGST) Act, 2017.

The clarification extends the principle previously explained in Circular No. 167/23/2021-GST dated 17 December 2021, which dealt with restaurant services supplied through electronic commerce platforms.

Issue Requiring Clarification

Representations were received seeking clarification on whether ECOs are required to reverse proportionate ITC on their inputs and input services to the extent of supplies of services, other than restaurant services, made under Section 9(5) of the CGST Act.

The issue arose because an ECO may undertake two types of activities:

• Supplying services notified under Section 9(5), for which the ECO is liable to pay GST as if it were the supplier.

• Providing its own electronic platform services and charging platform fees, commissions or similar amounts from platform users.

ECOs may avail ITC on inputs and input services used for providing their own platform-related services.

CBIC Clarification

1. No Proportionate ITC Reversal Required

CBIC has clarified that an ECO liable to pay GST under Section 9(5) is not required to reverse proportionate ITC on its inputs and input services under Section 17(1) or Section 17(2) of the CGST Act to the extent of supplies made under Section 9(5).

This clarification extends the principle stated in Circular No. 167/23/2021-GST for restaurant services to other services specified under Section 9(5).

2. GST Liability Must Be Paid Through the Electronic Cash Ledger

Although proportionate ITC reversal is not required, the ECO must discharge the entire GST liability arising from supplies covered under Section 9(5) through the electronic cash ledger.

ITC availed on inputs and input services cannot be utilised to pay the GST liability under Section 9(5).

3. Utilisation of ITC for Own Services

The circular further clarifies that ITC availed on inputs and input services may be utilised for discharging the ECO's GST liability in respect of services supplied on its own account, subject to the applicable provisions of the CGST Act.

Practical Implications for E-Commerce Operators

The clarification is relevant to ECOs that are liable to pay GST under Section 9(5) on notified services supplied through their platforms.

Such operators should ensure that:

• ITC is not reversed proportionately merely because they make supplies covered under Section 9(5).

• GST liability under Section 9(5) is paid entirely through the electronic cash ledger.

• ITC is not utilised to discharge the tax liability under Section 9(5).

• Eligible ITC is utilised for their own service-related tax liabilities in accordance with the applicable provisions.

• Their accounting and GST compliance systems appropriately distinguish Section 9(5) liabilities from liabilities relating to their own services.

Conclusion

Circular No. 240/34/2024-GST clarifies that ECOs liable to pay GST under Section 9(5) of the CGST Act are not required to reverse proportionate ITC on inputs and input services attributable to such supplies. However, the GST liability under Section 9(5) must be paid entirely through the electronic cash ledger, and the related ITC may be utilised for the ECO's own service-related tax liabilities, subject to applicable conditions.