The Directorate of Commercial Taxes, Government of West Bengal, has issued a circular on January 8, 2025, providing clarification on the input tax credit (ITC) reversal for electronic commerce operators (ECOs) who are required to pay tax under Section 9(5) of the West Bengal Goods and Services Tax (WBGST) Act, 2017.
This clarification aims to address queries regarding the reversal of ITC for services supplied through the platforms of ECOs, particularly those beyond restaurant services.
Key Clarifications:
ITC Reversal on Services under Section 9(5)
The circular clarifies that ECOs who are liable to pay tax under Section 9(5) of the WBGST Act for services provided through their platform do not need to reverse the ITC on inputs and input services. This rule, which was first addressed in Trade Circular No. 01/2022, applies to all services specified under Section 9(5), not just restaurant services.
Nature of Supplies by ECOs
ECOs make supplies in two capacities:
- Supply of specified services (e.g., restaurant services), for which they are liable to pay tax as though they are the direct suppliers.
- Supply of their own services by providing an electronic platform, for which they charge a platform fee or commission.
For the latter (own services), the ECO procures inputs and input services and avails ITC on these purchases.
Tax Payment and ITC Utilization
- ECOs are not required to reverse ITC for supplies made under Section 9(5) of the WBGST Act, whether the service is related to restaurants or any other specified service.
- However, the ITC availed on inputs and input services cannot be used to pay the tax liability for the supplies made under Section 9(5). The entire tax liability for these services must be paid through the electronic cash ledger, not using the ITC balance.
- The ITC can, however, be used for the payment of tax on the ECO’s own services (such as the platform fee or commission).
Implementation and Queries
If there are any difficulties or issues in implementing this clarification, ECOs can approach the Commissioner for further guidance.
