Regulatory body CBIC has introduced new e-commerce tax rules in India affecting estate taxpayers and unregistered individuals. These are special e-commerce procedures for the delivery of goods with the aim of improving tax transparency and compliance with the law. E-commerce operators in India are required to collect TCS for estate taxpayers while unregistered individuals require registration numbers before delivering goods. These measures will apply from October 1, 2023 and support small businesses. Businesses should prepare for the changes and seek professional advice to ensure a smooth transition.

India’s Central Board of Indirect Taxes and Customs (CBIC) issued two important notices dated August 4, 2023, namely Notice No. 36/2023 – Central Tax and Notice No. 37/2023 – Central Tax.

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These notices introduce a specific procedure for e-commerce operators in relation to the supply of goods by estate taxpayers and unregistered individuals. They aim to simplify tax compliance, increase transparency and support the growth of small and medium-sized enterprises (SMEs).

As the effective date of these changes – October 1, 2023 – approaches, it is prudent for organizations to familiarize themselves with the changes and consider seeking professional advice to ensure a seamless transition to the new protocols.

New E-Commerce Tax Rules for Inheritance Taxpayer Supplies in India

With Notice No. 36/2023 – Central Tax, the CBIC has assigned specific responsibilities to e-commerce operators and established new procedures to manage the settlement of the supply of goods by estate taxpayers. The main points are as follows:

• Interstate Delivery Restrictions: The new rules prevent e-commerce operators from facilitating the interstate supply of goods by estate taxpayers.
• Withholding Tax Collection (TCS): Under the new rules, e-commerce operators are responsible for collecting TCS for the supply of goods by estate taxpayers.
• Use of TCS: Composition taxpayers have the flexibility to use the funds available in their electronic ledger, derived from the TCS collected by the e-commerce operator, to offset their output tax liability.
• Electronic reporting: To ensure transparency and simplified reporting, e-commerce operators are required to electronically provide details of goods supplied by estate taxpayers via Form GSTR-8 on the GST Common Portal.

New E-Commerce Tax Policies for Deliveries by Unregistered Persons

CBIC has issued Notice No. 37/2023 – Central Tax setting out a special procedure for e-commerce operators in relation to the delivery of goods by unregistered persons. The main provisions are as follows:

• Requirement for the registration number: Unregistered persons are allowed to offer goods via e-commerce operators, but must first obtain a registration number from the common GST portal. This requirement ensures that unregistered businesses complete the necessary registration procedures before engaging in e-commerce activities.
• No withholding tax collection: Unlike supplies made via estate taxpayers, e-commerce operators are not entitled to levy TCS under Section 52 of the CGST Act on goods supplied by unregistered persons. This exemption simplifies the tax collection process for unregistered suppliers.
• Digital reporting: E-commerce operators are required to provide comprehensive information on deliveries made by unregistered persons electronically using the GSTR-8 form on the GST common portal. This initiative increases transparency and improves compliance.