2026-VIL-490-KAR
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SGST High Court Cases

GST – Liability to collect Tax Collection at Source (TCS) on supplies made through e-commerce portal, Applicability of Section 17(2) and Section 52 of CGST Act, 2017, Invocation of Section 74 – DGGI issued a show cause notice under Section 74 alleging violation of Sections 52 and 17(2) of the CGST Act and proposed tax demand – Applicability of Section 52 of CGST Act - Whether the petitioner, being an e-commerce operator, is liable to collect TCS under Section 52 of the CGST Act – HELD – In terms of Section 52, the TCS obligation arises only when the e-commerce operator collects payment/consideration with respect to supplies made through its platform. Section 52 which provides for the e-commerce operator to collect TCS would not apply unless payment / consideration is collected. The petitioner does not collect any payment/consideration with respect to the supplies in question and hence, the provisions of Section 52 are not applicable to the petitioner – Further, there is no provision in the CGST Act to treat the petitioner as an assessee in default and also, there is no provision to issue a notice to the person who has not collected the tax to pay such tax. The impugned SCN alleging that the petitioner had violated Section 52 of the CGST Act, since they failed to collect TCS @ 1% of the net value of the taxable supplies made through it by other suppliers where the consideration with respect to such supplies is to be collected by the operator is illegal, arbitrary and without jurisdiction or authority of law and contrary to the provisions of the CGST and the same is quashed – The writ petition is allowed - Promotional activity vs Exempt supply - Applicability of Section 17(2) of CGST Act - Whether the petitioner has violated Section 17(2) of the CGST Act by failing to restrict availment of ITC – HELD – The Section 17(2) restricts exempt supplies which would cover only services attracting nil rate of tax or are wholly exempt from tax. Doing promotional activities which benefit the petitioner and other suppliers cannot be construed or treated as exempt supplies and consequently, in the absence of any specific exemption or the services being levied with “nil” rate of tax, the same cannot qualify as exempt supply leading to the sole conclusion that Section 17(2) would not be applicable to the facts of the instant case - The activities undertaken by the petitioner, i.e., promotion of its own platform along with the services provided therein, are not 'free supplies' and are undertaken for the benefit of the petitioner's own business. The mere non-charging of consideration to enhance footfall on the online portal cannot be construed as 'free or non-taxable or exempt supplies' so as to attract Section 17(2) – The provisions of Section 17(2) would be applicable only to a registered person using goods or services or both partly for effecting taxable supplies including zero rated supplies and partly for effecting exempt supplies. In the absence of any material to show that the petitioner is partly effecting taxable supplies and partly effecting exempt supplies, Section 17(2) has no application. The impugned show cause notice alleging violation of Section 17(2) is illegal and without jurisdiction - Whether the impugned show cause notice issued under Section 74 of the CGST Act is valid and maintainable – HELD - The foundational jurisdictional facts to trigger/invoke Section 74 of the CGST Act, i.e., existence of wilful suppression to evade/avoid payment of GST, are not satisfied in the present case. In the instant case, Section 74 could not have been invoked for any non-compliance of Section 52 as the transactions on which demand is sought to be raised are not the supplies of the petitioner. It is the sellers / service providers who undertook such supplies that are required to discharge GST - Mere omission to mention the value of services correctly in the returns and/or apply the correct GST rate would not amount to wilful suppression, in the absence of any intention to evade payment of tax. Further, when the facts are known to both the parties and the issue of classification itself is in a state of flux, the assessee cannot be attributed with any suppression or misstatement of facts with intent to evade duty. The impugned show cause notice fails to satisfy the mandatory requirements and parameters for invocation of Section 74(1) of the CGST Act. Accordingly, the impugned show cause notice is quashed.
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