Library / Goods and Services Tax: The Professional's Master Guide

28. E-Commerce, Digital Services and Online Gaming

Online platforms bring together millions of small sellers and consumers. The law uses the platform as a collection point: it collects tax at source on sellers' sales, and for some services it pays the whole tax in place of the supplier. This chapter covers those two mechanisms, then digital services from abroad and online gaming.

28.1 Who is an e-commerce operator

Electronic commerce means supply of goods or services, including digital products, over a digital or electronic network (section 2(44) of the CGST Act). An electronic commerce operator (ECO) is any person who owns, operates or manages a digital or electronic facility or platform for electronic commerce (section 2(45)). A marketplace such as a food delivery app or an online store for third-party sellers is an ECO.

In the marketplace model, independent sellers sell through the platform, which collects TCS and charges 18% on its commission. In the inventory model, the platform sells its own goods and pays tax on them as a seller; no TCS arises.

28.2 Tax collected at source (section 52)

An ECO must collect tax at 0.5% (0.25% CGST + 0.25% SGST, or 0.5% IGST) on the net value of taxable supplies made through it by other suppliers, where the ECO collects the consideration. The rate was 1% until 9 July 2024. Net value means taxable supplies less returns during the month; supplies on which the ECO itself pays tax under section 9(5) are excluded. TCS is deposited by the 10th of the next month with GSTR-8. The seller gets it in his cash ledger.

28.3 Registration of sellers on platforms

Section 24(ix) requires compulsory registration of persons supplying through an ECO that collects TCS, but it has been relaxed. Suppliers of services through an ECO with aggregate turnover below the threshold are exempt from registration. From 1 October 2023 suppliers of goods through an ECO with turnover below the threshold are also exempt, provided they supply only intra-State, hold a PAN and obtain an enrolment number on the portal. Composition taxpayers may also sell goods intra-State through ECOs from that date. The ECO itself must register regardless of turnover (section 24(x)).

28.4 Services where the ECO pays the tax (section 9(5))

For some services the Government notified under section 9(5) that the ECO, not the actual supplier, is liable to pay tax as if it were the supplier. The notified services are:

• Passenger transport by radio taxi, motor cab, maxi cab, motorcycle or omnibus.
• Accommodation in hotels, inns, guest houses, clubs and similar places, except where the supplier is himself liable to be registered under section 22(1).
• Housekeeping services such as plumbing and carpentry, with the same exception.
• Restaurant services, from 1 January 2022, other than services at specified premises.
• Local delivery services, from 22 September 2025, where the supplier is not registered. The ECO pays 18%.

The ECO pays this tax in cash; ITC cannot be used for section 9(5) liability. Its own commission from the supplier is a separate supply at 18%. In GSTR-3B, Table 3.1.1(i) is used by the ECO to report supplies on which it pays tax under section 9(5), and Table 3.1.1(ii) is used by the registered supplier to report supplies made through the ECO on which the ECO pays tax, so that they are not taxed twice.

28.5 Digital services from abroad

Online information and database access or retrieval (OIDAR) services include streaming, cloud software, online advertising, e-books and similar services delivered over the internet. When a foreign supplier provides OIDAR services to an Indian consumer who is not registered (a non-taxable online recipient), the foreign supplier must register under the simplified scheme and pay IGST at 18% (section 14 of the IGST Act). From 1 October 2023 the definitions were widened to cover any unregistered recipient.

Where the Indian recipient is registered, the import is taxed under reverse charge. A company buying a foreign SaaS subscription pays IGST at 18% in cash and takes ITC in the same return, so the net cost is nil for a fully taxable business.

28.6 Online gaming and actionable claims

From 1 October 2023, supply of actionable claims in online money gaming, betting, casinos, gambling and horse racing was made taxable at 28% on the full face value of the amount deposited by the player (sections 2(80A), 2(102A) and 15(5), rules 31B and 31C). The distinction between games of skill and games of chance was removed. The Promotion and Regulation of Online Gaming Act, 2025 then prohibited online money games altogether, while permitting e-sports and online social games. From 22 September 2025 these specified actionable claims (betting, casinos, gambling, horse racing, lottery and online money gaming) are taxed at 40%. Online games without stakes, such as social games and e-sports, continue at 18%.

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