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CA Final · Indirect Tax Laws · Electronic Commerce Transactions

Lumina Stays Ltd, a foreign-based electronic commerce operator with no physical presence in India, supplies through its platform a category of services notified under section 9(5), and the tax on intra-State supplies of those services is payable by the operator. It has no representative in the taxable territory. What does the Act require?

The operator must appoint a person in the taxable territory for the purpose of paying tax, and that person becomes liable to pay it. This follows from the second proviso to section 9(5), which applies when an operator has neither physical presence nor a representative in the taxable territory.

  1. AThe recipient of the service must pay tax under reverse charge
  2. BThe operator must appoint a person in the taxable territory for the purpose of paying tax, and that person is liable to pay the taxCorrect
  3. CNo tax is payable because the operator has no physical presence in the taxable territory
  4. DThe individual service providers on the platform must each pay the tax

Explanation

The second proviso to section 9(5) says that where the operator has no physical presence and no representative in the taxable territory, it must appoint a person in the taxable territory for paying tax, and that person is liable to pay the tax. Absence of physical presence does not remove liability, and the tax is not shifted to the recipient or the individual providers.

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