01 May Assessee Considered Electronic Commerce Operator in Digital Gold Sale Case: Karnataka AAR
Introduction
The ruling by the Karnataka Authority for Advance Rulings (AAR) in the case of In Re. M/s. Changejar Technologies Private Limited has significant implications for businesses operating digital gold platforms. This article examines the key aspects of the case and its impact on the classification of e-commerce operators.
Facts of the Case
M/s. Changejar Technologies Private Limited, the Applicant, operates an online micro-saving and investment platform named Jar. Under a distribution agreement with Digital Gold India Private Limited, the Applicant offers the sale of digital gold on its platform.
Issue
The primary issue addressed in the advance ruling application was whether the Applicant should be considered an agent or an electronic commerce operator when digital gold is sold through its platform. Specifically, the query pertained to the tax collection obligations in cases where the sale amount is directly paid through an escrow account, with a commission charged.
Held
The Karnataka AAR ruled as follows:
- Definition of Electronic Commerce Operator: The AAR observed that an electronic commerce operator includes any person who owns, operates, or manages a digital or electronic facility or platform for electronic commerce. This encompasses the supply of goods or services, including digital products, over a digital or electronic network.
- Ownership of Digital Platform: Noting that the Applicant owns a digital platform for offering the sale of seller digital gold, the AAR emphasized the nature of the agreement between the Applicant and the Seller as a distribution agreement.
- Absence of Agency Relationship: The ruling clarified that neither the Applicant nor the Seller acts as an agent to each other. Since the sale of seller products occurs through the Applicant's online platform, the Applicant qualifies as an electronic commerce operator.
- Tax Collection Obligations: As a result of being classified as an electronic commerce operator, the Applicant is required to collect tax at source under Section 52 of the CGST Act. Additionally, the Applicant must obtain compulsory registration as per the relevant regulations.
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