The Law Committee, a key body responsible for interpreting and advising on GST-related legal issues, recently held a meeting to address queries regarding the reversal of Input Tax Credit (ITC) for Electronic Commerce Operators (ECOs) like Zomato Swiggy.
This comes after representations seeking clarity on whether ECOs, such as Swiggy and Zomato, are required to reverse ITC for services other than restaurant supplies under section 9(5) of the Central Goods and Services Tax Act (CGST Act).
The committee, which includes senior officials from the Ministry of Finance, the Central Board of Indirect Taxes and Customs (CBIC), and experts in tax law, reviewed these concerns and is expected to issue a draft clarification circular soon.
The issue stems from Circular No. 167/23/2021-GST, issued in December 2021, which clarified that ECOs are not required to reverse ITC when providing a platform for restaurant services subject to tax under section 9(5). However, ambiguity remained on whether the same treatment applies to other specified services under the same provision, prompting further deliberation.
The committee will soon issue a clarification stating that ECOs required to pay tax under section 9(5) for specified services are not obligated to reverse ITC for inputs and input services linked to these supplies. However, it will also specify that the ITC cannot be used to offset the tax liability for supplies made under section 9(5) and must be paid fully through the electronic cash ledger.