Compliance under DVAT for E-Commerce Portals and sellers selling on E-Commerce Portals (Part-2)

Discussion on Compliance under DVAT for E-Commerce Portals and sellers who are selling on E-Commerce Portals 

PART-2

In our blog "Compliance under DVAT for E-Commerce Portals and sellers selling on E-Commerce Portals (Part-1)", we have have discussed about compliance for E-Commerce Portals and Dealers under DVAT. We have discussed in details about Forms applicable for E-Commerce Portals. Now in this blog we'll discuss regarding compliance and Forms applicable to dealers for E-Commerce transaction.

Complete details of compliances

1. For E-Commerce dealers- 

DVAT deptt. issued  Notifications No.F.3(20)/Fin(Rev-I)/2015-16/dsvi/906 dated 12.11.2015. In this Notification an Annexure - 1E has been inserted in DVAT-16 ( Form for Quarterly return) in which dealer has to give details about sales made on E-Commerce Portals. Extract of Annexure - 1E here below:

In this Annexure, rate wise sales separately for Local and Inter-State to be mentioned. Name and  EC-I Enrollment ID of the E-Commerce Company/Firm also to be mentioned. Separate formats require to fill in case sales made by more than one E-Commerce Portal.

CONSOLIDATED EFFECT OF COMPLIANCE OF E-COMMERCE PORTAL AND DEALER

After getting details from E-Commerce Portals in EC-II and from dealers in Annexure -1E, DVAT deptt. can easily compare them and find difference in tax rate and sales ( if any). By this Deptt. will easily find the dealers who are showing incorrect tax rate or incorrect sales figures and trying to reduce tax liability. So all the dealers conducting sales through E-Commerce portals need to be very cautious while filing returns and give correct details. 

Dealers should take following precautions before filing returns:

1. Rate of Tax on all items should be same as mentioned by dealer and as mentioned by E-Commerce Portals on their web site. If there is any difference then dealer should take it seriously with E-Commerce Portals and get these matched.

2. Sales figures should be matched with sales figures shown on site by E-Commerce portals. It there are differences then these should be eliminates and if not possible then there should be some reconciliation statement.

3. Local and Interstate sales should be correctly bifurcated.

4. Even if Notification for E-Commerce Portals came on 26.06.15 but E-Commerce portals are required to submit quarterly returns starting from quarter 01.04.15 to 30.06.15. So if any dealer found any error in returns for QTR-1 and/or QTR-2 of 2015-16 then he should file revised return and pay tax correctly.

Hope above details will assist regarding compliance of Notification No.F.3(515)/Policy/VAT/2015/330-41 dated 26.06.2015 and Notifications No.F.3(20)/Fin(Rev-I)/2015-16/dsvi/906 dated 12.11.2015.

CASE LAW - FLIPKART INTERNET PRIVATE LIMITED (KERALA HIGH COURT)

On 20.10.2015 Kerala High Court gave a decision in favor of Flipkart Internet Private Limited and quashed penalty imposed by Kerala VAT deptt. for non-filing of Returns and discharge of tax liability for "sales made by dealers from outside Kerala to consumers in Kerala through Flipkart E-Commerce Portal". 

In newspapers and in online media it is taken as a decision in which Vat/CST can't be levied on E-Commerce portals for the sales made by registered sellers on these portals and these E-portals are just facilitators and not the sellers. But when we go through the 19 pages decision of the Kerala High Court it not seems exactly like that.

In this case Kerala Vat deptt. issued notices to Flipkart imposing taxes and penalties on sales made on Flipkart portal by sellers outside Kerala to Consumers in Kerala. Kerala VAT deptt. considered that when the consumer of Kerala placing online order from Kerala thorugh Flipkart portal then contract of sale made in Kerala hence situs of sale is in Kerala hence VAT should be payable under Kerala VAT Act. Here Kerala VAT deptt. taken a wrong view. VAT/CST is levied on the basis of delivery of goods and not on the basis of situs of contract of sale. If a contract of sale is made in UP but goods are delivered from Delhi to Haryana then VAT/CST is applicable as per Delhi Vat laws and Central Sales Tax Laws. In Flipkart case goods are delivered from outside Kerala and dealers are registered in that state and discharging their tax liability accordingly.

Important to note here that

1. In this case sales in consideration are not the sales made through E-Portals from Kerala to Kerala Consumers or outside Kerala Consumers, but are sales made from outside Kerala to Kerala Consumers. So the matter "whether VAT/CST can be levied by Kerala VAT authorities on Flipkart on sales made from Kerala to Kerala or outside Kerala" is not taken at all.

2. The matter "whether E-Commerce companies are dealer or just facilitator" is also not considered at all. As of now maximum E-Commerce portals are providing ware housing facility also, where the sellers registered on these portals send goods in advance to ware house of these portals and on getting orders  these portals doing all logistic work ( like packaging, delivery etc.) and delivering goods to the ultimate buyer. This model is on the target of taxing authorities to consider portals as dealer and levy taxes. This type of transaction is not considered in Flipkart decision at all.

So the Kerala High Court just ordered that sales made from outside Kerala to Kerala consumers are outside the preview of Kerala VAT laws. It should be taken that Flipkart or we can say E-Commerce portals are kept outside of VAT/CST laws.

Disclaimer: The opinion(s) expressed by author are of his own, and/OR information provided by author, the users need to verify it from their own sources. No responsibility of any sort taken by author for any opinion expressed or the information posted on this blog.

Compliance under DVAT for E-Commerce Portals and sellers selling on E-Commerce Portals (Part-1)

Discussion on Compliance under DVAT for E-Commerce Portals and sellers who are selling on E-Commerce Portals 

PART-1

Purpose of this blog

Objective of this blog is to discuss and have better understanding about the applicability, provisions etc. of compliance under Delhi Value Added Tax for E-Commerce Portals who facilitates the selling of the products of some other persons on their portals. Also we'll discuss here compliance requirements of sellers who are selling their products on these portals.

We'll try to touch upon some news and case laws from other states also to have understanding how much tax authorities are serious to increase tax collections from E-Commerce transactions ( restricted to VAT/CST on selling through E-Commerce Portals).

List of relevant Notifications of DVAT deptt. here below:

1. Notifications No.F.3(515)/Policy/VAT/2015/330-41 dated 26.06.2015

2. Notifications No.F.3(20)/Fin(Rev-I)/2015-16/dsvi/906 dated 12.11.2015

First Notification dated 26.06.2015 is regarding compliance of E-Commerce portals and second Notification dated is regarding compliance by Sellers who are selling on E-Commerce Portals ( we'll call them dealers in this blog).

Summary of compliance :

1. For E-Commerce Portals- 

(i) Getting enrolled with DVAT deptt. by filing online Form EC-I

(ii) Filing of quarterly return in till 20th of the month following the quarter to which return pertains. For example return for 01.04.15 to 30.06.15 to be filed by 20.07.15 (unless otherwise extended). This return to be filed in Form EC-II and EC-III. Form EC-II contains details of Delhi dealers making Sales to Delhi consumers as well as to outside Delhi Consumers. Form EC-III contains details of outside Delhi dealers making Sales to Delhi Consumers.

Important to note that DVAT deptt. has extended due date of filing return for QTR-1 and QTR-2 of 2015-16 several times and latest due date is 30.11.15 as on information available till writing of this blog.

2. For dealers making sales through these E-Commerce Portals

(i) No separate registration etc. required. Registration as applicable in normal is applicable in this case also. Just 1 compliance added from quarterly return for 01.10.15 to 31.12.15 that an Annexure No.1E is added which contains details of sales made through E-Commerce portals. 

Complete details of compliances

1. For E-Commerce Portals- 

Before 26.06.2015 there was no separate compliance regarding E-Commerce transaction under DVAT Act. On 26.06.2015 DVAT department issued Notification No.F.3(515)/Policy/VAT/2015/330-41 according to which E-Commerce portals have to get them enrolled with DVAT department by filing Form EC-I online and get a Unique ID which would be used to file quarterly returns in Form EC-II and EC-III. Purpose of this compliance requirement is because department feeling that there are sellers who selling goods through these portals and and paying correct tax to the deptt. So by this compliance department want to get information of dealers. E-Commerce portals has to provide details only and no need to pay any tax as per this Notification. So department motive is to capture dealers and not E-Commerce portals.

The Notification a person has to comply provisions of this notification who satisfy following criteria-
 (i) The person should be engaged in providing facility of electronic shopping (commonly known as e-commerce) through their web portals. here to be noted that this Notification apply on a person who provides shopping through websites. If a person facilitating sales through other communication mode like telephone, mobile etc. not covered here.
(ii) The Portals may be acting as facilitator, directing the dealer to directly supply goods to the buyer.
(iii) The Portals may be acting as facilitator, providing storage facility to the dealer and directly supplying goods from their storage place to the buyer. In such case the dealer keeps stock in advance in Portals storage house.

Form EC-I

Form EC-I to be used by E-Commerce Portals to get them enrolled with DVAT deptt to get a Unique ID. This Form contains some basic information of the web Portal concern. This Form has to be filled and submitted online on DVAT Deptt. website. After that a Unique ID will be provided by the deptt. to web Portal Concern. Important to note here that no time limit has been mentioned to file Form EC-I. Extract of Form here below:

Form EC-II

Under DVAT every E-Commerce Portal need to file a quarterly return within 20 days of end of the quarter. One part of this return is EC-II. In this E-Commerce portal has to provide information of Delhi Dealer ( may be registered or unregistered under DVAT Act) making sales to Delhi Consumers as well as to outside Delhi Consumers. Extract of EC-II here below:

All fields are self explanatory. Total sale turnover for a quarter to be given for each dealer, rate wise and Local and Interstate separately.  Here important to note that as per Notification net sale ( Total sale  minus return)for the quarter to be given. But surprisingly return to be deducted should be the return for which goods have been sold during the same quarter. For Example if Total sale for QTR-1 is Rs.1000. Return against sale of previous quarter is Rs.100, and against sale of same quarter is Rs.200, then net sale would be Rs.800 ( and not Rs.700) . Return of Rs.100 ( of previous quarter sale) would not be deducted. There may be several cases under which sales are made nearby end of quarter and return received after filing of return. In such cases E-Commerce portals need to revise their return.

Form EC-III

Second part of the return is EC-III. In this E-Commerce portal need to provide information in respect of Outside Delhi dealers making sales to Delhi consumers. Purpose why deptt. asking this information is not clear. Tax on sales made by Dealers outside Delhi to Delhi Consumers are collected by State of that dealer. May be DVAT deptt. also thinking on same path where Kerala Vat Deptt. was thinking a sent a demand Notice for taxes on all Sales made in kerala thorugh Flipkart portal. This case law will discussed in our other Post in same Blog. Extract of Form here below:

All fields are self explanatory.

Compliance regarding Dealers will be discussed in our next post

Disclaimer: The opinion(s) expressed by author are of his own, and/OR information provided by author, the users need to verify it from their own sources. No responsibility of any sort taken by author for any opinion expressed or the information posted on this blog.

Form BE-1 & BE-2 under DVAT

Discussion on BE-1 & BE-2

Purpose of this blog

Objective of this blog is to discuss and have better understanding about the applicability, provisions etc. of Notification No.F.3(393)/Policy/VAT/2013/1086-1096 dated 19.12.2013 according to which now owners/lessee/custodian of the venue for functions/ programmes to be organised are required to file fortnightly return in advance for details of bookings for next fortnight. Link for the Notification, FAQ etc. here below

1. Notification No.F.3(393)/Policy/VAT/2013/1086-1096 dated 19.12.2013

2. Notification No.F.3(393)/Policy/VAT/2013/1137-1147 dated 27.12.2013

3. FAQ issued by DVAT deptt. on DVAT website

In this post :

ACT means Delhi Value Added Tax Act, 2004. 

Rules means Delhi Value Added Tax Rules, 2005. 

CST Act means Central Sales Tax Act,1956.

CST-Rules means Central Sales Tax (R&T) Rules,1957

CST-Delhi Rules means Central Sales Tax (Delhi) Rules,2005

Provisions under DVAT regarding Food & Beverages served in restaurant, banquet etc.

Let us first go through the various definitions, provisions under DVAT relating to serving of Food etc.

Sec 2 (zc) (vii) of DVAT Act-      sale......includes.....supply by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink ( whether or not intoxicating), where such supply or service is for cash, deferred payment or other valuable consideration.

As per Rule 4A of DVAT Rules in case of "residential hotels charging a composite sum for lodging and boarding with breakfast/lunch/dinner" if the dealer do not have sufficient documentary evidence to prove component of taxable turnover of sales in composite sum then taxable turnover will as follows:(a)  Where  the  composite  charges  include  the                                  5%  of  composite charges

       the charges for breakfast.                                                             

(b)  Where  the  composite  charges  include  the                                  10%  of  composite charges

       charges for lunch.                      

(c)  Where  the  composite  charges  include  the                                  15%  of  composite charges 

      the charges for dinner

(d)  Where  the  composite  charges  include  the                                  15%  of  composite charges 

      the charges for breakfast and lunch

(e)  Where  the  composite  charges  include  the                                  20%  of  composite charges 

      the charges for breakfast and dinner

(f)  Where  the  composite  charges  include  the                                  25%  of  composite charges 

      the charges for lunch and dinner

(g)  Where  the  composite  charges  include  the                                  30%  of  composite charges 

      the charges for breakfast, lunch and dinner

other then above there are no specific provisions under DVAT in relation to serving of food and beverages. So normal provisions will apply.

Now we'll analyse each and every aspect of the Notification dated 19.12.2013 as amended by notification dated 27.12.2013.

Who is required to file return

Owner/lessee/custodian of the venue is required to file the return .

What are the conditions when return need to be filed

(i) a programme/ function to be organised in a banquet hall, Farm house, Marriage/Party hall, Hotel, Open ground etc.; and

(ii) food and/or liquar items are to be supplied/ provided; and

(ii) cost of booking exceeds rupees one lakh per function 

So all the 3 conditions must be fulfilled then only return in BE-2 need to be filed.

Any exemption for small functions

Yes, return need to be filed for programme/ fuctions whos booking value exceeds rupees one lakh.

When return to be filed and for which period

Return to be filed 3 days before the fortnight. For example return for the period 01.02.2013 to 15.02.2013 to be filed till 28.01.2013 for for period 16.02.2013 to 28.02.2013 be filed till 12.02.2013. So here a point to be noted that due date filing the return for the 2nd fortnight of the month will be 12 of that month, but for the first fortnight due date will be not 28th of every month as in case of 1st fortnight of March due date will 25 February and for first fortnight of May due date will be 27 of April.

What is the first tax period for which return to be filed

As per Notification No..F.3(393)/Policy/VAT/2013/1086-1096 dated 19.12.2013 this is applicable from first fortnight of January,2014 . But it has been amended by Notification No.F.3(393)/Policy/ VAT/ 2013/ 1137-1147 dated 27.12.2013 and now it is applicable from second fortnight of January,2014. Hence first return need to be filed till 12.01.2014.

What is the procedure for registration for owner/lessee/custodian

Owner/lessee/Custodian has to get them enrolled with the DVAT department by filing information in Form BE-1. After that department will issue a enrollment number which will be used for all filing purposes etc. There is no last date has been specified for filing BE-1 so it can be filed within a reasonable time so that department can issue enrollment number and return can be filed till due date. It is important to note that even if such owner/lessee/custodian is registered under DVAT Act and having TIN, still he need to get enrollment number for this purpose.

What are forms provided for registration and return

Information for enrollment to be filed in Form BE-1 and return to be filed in Form BE-2.

Below is FAQ issued by DVAT department ( available on website of the department)

1 Queries: Advance Information about booking from Banquet Halls, Farm Houses,

Marriage/ Party Halls, Hotels, Open Grounds, in Form BE-1 & BE-2

1. What shall be the due date to file BE-1?

BE-1 form is meant for enrolment of owner/ custodian of the venue. The scheme is

being implemented w.e.f. 1st January, 2014. As such, the eligible persons are required

to file the information 3 days before. Hence enrolment should be done on or before

that date. For the first return, the enrolment should be done by 27th December, 2013.

A unique enrolment number shall be given by the Department once the form BE-1 is

submitted to the Department.

2. Whether any electronic receipt shall be issued for filing BE-1 and BE-2?

No. To begin with, the eligible persons have to file both BE-1 & BE-2 manually ( now option for online filing of BE-1 is available on DVAT Deptt. website) and get the duplicate copy stamped from the office of concerned Zonal Addl. /Jt. Commissioner of the Department. In future, online facility would be provided for the

same.

3. Shall the Department issue an enrolment number immediately on submission, or a

separate certificate shall be given later on?

An enrolment number may be obtained on the next working day of filing manual BE-

1. The concerned zonal in-charge shall take this unique number from Addl.

Commissioner (System) and pass on to the applicant on the next working day (to be

recorded on the duplicate copy of BE-1). Later on, after switching over to electronic

mode, an enrolment certificate would be issued and delivered to all eligible entities.

4. Whether it will be mandatory to mention this enrolment number (if any) on any

stationery?

Yes. It will be mandatory to mention the enrolment number on return form BE-2 and

for all future correspondence with the Department.

5. Whether any separate certificate shall be issued on submission of BE-1?

As replied at (iii) above, the separate certificate would be issued later.

6. When revising BE-2

(a) How to mention whether it is revised or original?

No need to mention any word on the original. However, on revised return, word –

'Revise' may be mentioned. In the electronic mode, facility of drop down shall be

provided.

(b) Where to mention change of information (No column exists for intimating

cancellation)?

May not be required as separate sheet has to be attached for each function. The

latest information shall be treated as final for a period.

(c) How shall the Department differentiate between Original and revised

information about same program.

The latest filed information shall be treated as final.

(vii) While filing original BE-2, how would “Total value of food sold (excluding

VAT)” and “Total value of liquor sold (excluding VAT)” would be disclosed in

advance, when these values can only be known once the program is over.

Estimated value of food and liquor to be sold has to be provided.

Now let us discuss Form BE-1 and BE-2

In Form BE-1 some basic information is asked like - Name, PAN., Address ( principal and additional), TIN ( if having), Phone/Mobile, email, bank details.

In Form BE-2 is actually in 2 parts. Point 1-6 and point-8 are to be mentioned once and details in point 7 to be provided for each programme/function. For example if there are 12 functions in a fortnight then details in point-7 to be provided for all 12 functions. Some important points in BE-2 are:

(a) In point 7(vi) details of number of persons/plate to be provided separately for breakfast, lunch, evening snacks, dinner.

(b) In point 7(ix) particulars of the caterers to be provided- Name, TIN, address

(c) In point 7(x) rate per person/plate to be mentioned. In my view rate to be provided separately for breakfast, lunch, evening snacks and dinner if agreed separately. As number of person booked may be differ for each time.

(d) in point 7 (xi) total value of food (not liquor) sold to be mentioned. In FAQ deptt has clarified that it is on estimated basis.

(e) in point 7 (xii) total value of liquor (not food) sold to be mentioned. In FAQ deptt has clarified that it is on estimated basis.

Hope above details will assist regarding compliance of Notification No.F.3(393)/Policy/VAT/2013/1086-1096 dated 19.12.2013.

Disclaimer: The opinion(s) expressed by author are of his own, and/OR information provided by author, the users need to verify it from their own sources. No responsibility of any sort taken by author for any opinion expressed or the information posted on this blog.