[Opinion] Guidance on Input Tax Credit Utilization by E-Commerce Operators Liable to Pay Tax u/s 9(5) of the CGST Act

Kishore Kumar – [2025] 170 taxmann.com 113 (Article)

1. Background

The Central Board of Indirect Taxes and Customs (CBIC) has issued Circular No. 240/34/2024-GST, providing much-needed clarification regarding the Input Tax Credit (ITC) availed by E-Commerce Operators (ECOs) in scenarios where services specified under Section 9(5) of the CGST Act, 2017 are supplied through their platform. This circular extends principles previously clarified in Circular No. 167/23/2021, dated December 17, 2021, for restaurant services to other services notified under Section 9(5).

2. Key Considerations of the Circular

Tax Liability Scenarios for ECOs: The circular outlines two distinct scenarios in which ECOs are liable to pay tax under the CGST Act:

A.1. Tax on Notified Services:

• ECOs are treated as suppliers for certain services notified under Section 9(5). They are required to pay tax on these services as if they were the actual suppliers.

A.2. Tax on Own Services:

• ECOs provide their own services, such as facilitating transactions on their platforms, for which they charge platform fees or commissions. They are also liable to pay tax on these services.

Input Tax Credit (ITC) Eligibility and Utilization: The circular provides the following clarifications regarding ITC:

B.1. Eligibility to avail ITC:

• ECOs are entitled to claim ITC on inputs and input services used for providing their own services (e.g., platform fees) and notified services under Section 9(5).

B.2. Restriction on ITC Utilization for Section 9(5) Liability:

• The ITC cannot be utilized to pay the tax liability under Section 9(5). Instead, this liability must be discharged entirely in cash.

B.3 Utilization for Other Tax Liabilities:

• The ITC can still be utilized to discharge tax liabilities arising from the ECO’s own services, such as platform fees or commissions.

3. Extension of Earlier Clarifications

The circular draws upon the principles established in Circular No. 167/23/2021-GST, dated December 17, 2021, which clarified the ITC treatment for restaurant services provided through ECOs. These principles are now explicitly extended to other services notified under Section 9(5).

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