Ebay Commission Charges
For each fulfilled order Ebay charges commission from sellers. Now question arises whether GST under RCM is payable on such a commission as Import of service ?
As per Section 2(11) of IGST Act, Import of service means supply of service where: –
- Supplier of service is located outside India
- Recipient of Service is located in India
- The place of supply of service is in India
Now, we need to find out whether all the above conditions gets fulfilled for the commission charges paid to Ebay to consider it as import of services?
- Ebay is the supplier of services (as you are paying commission to Ebay) who is located outside India.
- Ebay Seller (You) is a recipient of service, who is located in India.
- Place of supply of service in this scanerio is the location of the suppliers (i.e Ebay) who is located outside India (more details below).
Hence Ebay Seller is not liable to pay GST under Reverse Charge Mechanism (RCM) for the commission charged by Ebay.
Place of Supply of Services
As per Section 13(8)(b) of the IGST Act, the place of supply of services in case of intermediary service shall be the location of the supplier of the services.
As per Section 2(13) of the IGST Act, “intermediary” means a broker, an agent or any other person, by whatever name called, who arranges or facilitates the supply of goods or services or both, or securities, between two or more persons, but does not include a person who supplies such goods or services or both or securities on his own account. Further, GST department has released a Circular No. 159/15/2021-GST to explain it in more details (more details below).
In simple terms, the person arranging as well as facilitating supplies between two or more persons are covered within the definition of intermediary but excludes who supplies goods, services or securities on his own account.
As Ebay facilitates the supply of goods between seller and customer so it get covered under intermediary services and the place of supply shall be the location of the Ebay which is outside India i.e. in non-taxable territory so no GST is payable under RCM.
Circular No. 159/15/2021-GST
To explain the scope of “intermediary”, GST department released Circular No. 159/15/2021-GST. As per this circular, the pre-requiste requirement for classification of intermediary services must have: –
- Minimum three persons
- seller (You i.e. person registered in India)
- buyer (Your customer i.e. end customer to whom the goods will be delivered)
- intermediary service provider (Ebay )
- Two distinct supplies
- Main supply (supply of goods between seller and buyer)
- Ancillary supply (facilitating or arranging the main supply between the two principals i.e. seller and buyer)
Note – Specific provision of Section 13 of IGST Act for place of supply of intermediary services is applicable only when the location of the supplier of intermediary services or the location of the recipient of intermediary services is outside India.
Further, the above mentioned circular has an example which exactly matches with the Ebay Sellers as below: –
Example
‘A’ is a manufacturer and supplier of a machine. ‘C’ helps ‘A’ in selling the machine by identifying client ‘B’ who wants to purchase this machine and helps in finalizing the contract of supply of machine by ‘A’ to ‘B’. ‘C’ charges ‘A’ for his services of locating ‘B’ and helping in finalizing the sale of machine between ‘A’ and ‘B’, for which ‘C’ invoices ‘A’ and is paid by ‘A’ for the same. While ‘A’ and ‘B’ are involved in the main supply of the machinery, ‘C’, is facilitating the supply of machine between ‘A’ and ‘B’. In this arrangement, ‘C’ is providing the ancillary supply of arranging or facilitating the ‘main supply’ of machinery between ‘A’ and ‘B’ and therefore, ‘C’ is an intermediary and is providing intermediary service to ‘A’.
