DSoft Innovations LLP ., In re

FULL TEXT OF THE ORDER OF AUTHORITY FOR ADVANCE RULING, GUJARAT

M/s. DSoft Innovations LLP, 15′ floor, 1503 to 1505, Sapath V, Opp. Kamavati Club, SG I Iighway, Vejalpur, Ahmedabad 380 015 (for short `applicant’] is engaged in providing service through their Freedecin application/platform for short `freedeem app’]. The applicant, is registered with the department & his registration number is 24AAPFD4973Q1Z1,. The applicant’s TCS registration number is 24A A PFD4973 QIC W & 19AAPFD4973Q1CN.

2. According to the applicant, the main function of frecdcem application is as under:

• to help local businesses by promoting their store on its digital platform at zero investment;
• that any merchant can register himself on the app by making an online application; that the applicant’s back-end operating team based at Ahmedabad verifies the merchant details on telephone via the register mobile number provided by merchant;
• that during the phone call verification, applicant’s team confirms b details of the respective merchant/s; that once a business is yen merchant can add his/her offer from the freedeem app by sending a mail to applicant’s back-end team at Ahmedabad;

• that generally on merchant’s request, offers are created by applicant’s back-end team and once the same is verified by the merchant, the same goes live on the freedeem app; that all operations are taken care of from the central office based at Ahmedabad location;
• that the primary function is to enable the local businesses (merchants) to participate on the freedeem app without any upfront charges, by offering discounts / deals on their merchandise;
• that freedeem app charges a success fee (commission) only if business is transacted through the app;
• that the applicant is paying GST on the success fees @18%;
• that consumers have to visit the store of the merchant physically and avail the offer as per the terms and conditions mentioned in the offers;
• that the applicant never provides any delivery of goods or services to the recipient of goods or services through the freedeem app like Swiggy and “tomato;
• that currently this freedeem app is operational at Ahmedabad, Gandhinagar, Mehsana, Surat, Vadodara, and Kolkata; that they wish to expand it to other cities by replicating the same business model;

3. The applicant has further explained the process of voucher/coupon purchased on the freedeem app, is as under

“User can purchase voucher/coupon on Freedeem Platform by using following methods:

a) Pay 131/1:-

In this method, Users directly visit the merchant and confirm the availability of the offer by showing it to the merchant. After consuming service/product user- will pay the bill using “Pay Bill” option as per merchant’s invoice, in which user will enter bill’s discounted value and pay on the Freedeem app. The collected amount will be paid back to the merchant in the next on second Day of redemption after deducting commission and necessary taxes by Freedeem.

b) Buy Now:-

In this method, Users directly visit the merchant and confirm the availability of the offer by showing it to the merchant. Once merchant confirms the availability of the offers, users buy the same by clicking the “Buy Now” button on the Freedeem App. User will pay offer amount to the Freedeem which will be paid back to the merchant on second day of redemption by Freedeem after deducting its commission and necessary taxes. Users can redeem the purchased offer as per its validity and T&C at the outlet of the merchant by scanning the QR code (a unique QR code is provided to every merchant) Once a user redeems the offer, merchants provide the service /product as mentioned on the Freedeem App. Users can the selected offer in the wallet to avail the limited quantity or limited time period benefit provided by the merchant. The process is purely dependent on merchants and users. Freedeem acts as a facilitator for both parties.”

4. The applicant has further stated that earlier they were raising monthly commission invoices for providing services to the merchant/s; that since it was not paid by the merchants in a timely manner and owing to the difficulty faced in collecting the commission after provision of services, the applicant decided to introduce an option wherein customer pays offer value on the freedeem app and thereafter the applicant transfers the share to the merchant on the second day of such redemption.

5. The applicant further claims that merchants engaged in bakery products, saloons, beauty parlors, hotel and restaurants arc registering themselves on the freedeem app and floating their scheme in the open market to attract business.

6. The applicant, thereafter relying on Notification No.17/2017- Central Tax (Rate), dated the 28th June, 2017, as amended, has stated that in case of restaurant services, when supplied through ecommerce operator, GST is to be paid by ecommerce operator in terms of section 9(5), ibid; that the applicant further stated that they will not fall within the ambit of 9(5), owing to the following viz.,

• that a platform is provided to the merchants through the app; that this allows the end users to identify offers through which they can avail maximum benefit;
• that the merchant ought to have given discount/offers to the end users after making live on app;
• that the applicant is having full control over offer once it goes live;
• that the applicant only receives the money on behalf of the merchants from the end users;
• that the applicant is not responsible for deficiency in services;
• that the applicant is only engaged in connecting merchants to the end users.

7. In view of the foregoing, the applicant has made the application seeking an advance ruling, in respect of following questions:

“(a) Whether applicant is considered as E Commerce operator under the GS not? If yes, then applicant is required to take compulsory registration or not J;

(b) Applicant is liable to pay RCM u/s. 9(5) of the UST being E Commerce Operator though applicant not providing food delivery service through its freedeem platform to the recipient of services?

(c) If answer of question a & b is in yes, then as to whether applicant is required to deduct TCS under the GST Act while making payment to merchants registered under the GST Act and not registered merchants under the GST Act or not?

(d) If Freedeem get exemption from RCM for Restaurant service, will the TCS be applicable to the Restaurant Service in that case?

(c) For TCS Collection, state wise registration is compulsory as e commerce operator even if centralized management systems are followed. If the answer of the question is no then whether Freedeem should deduct 1% ITCS or 0.5% CTCS and 0.5% STCS for supply at state other than state of Gujarat as applicant is following centralized management & operation system?

(I) Separate GST Number as regular Taxpayer: -In case Freedeem follows provision of sec.9(5), is it mandatory to register as a separate regular taxpayer state wise for discharging Sec.9(5) liability by charging CGST and SGST or it can be discharged by charging IGST for other than principal place of business as all other regular supply will be reported under same GSTIN for principal place of business?”

8. Personal hearing was granted on 28.10.2024, wherein the Shri Samir Siddhapuria, Advocate appeared on behalf of the applicant. He reiterated the submission already made. He further stated that as they have not supplied any restaurant service they would not fall within the ambit of section 9(5) of the CGST Act, 2017; that they are already deducting TCS. During the course of personal hearing, the applicant submitted additional submissions containing the following viz.,

[i] sample copy of agreement made with customers;

[ii] sample copy of tax invoice issued by restaurant to the customer;

[iii] sample copy of the invoice raised by Tomato.

8.1 The agreement made with the customers, known as “Merchant Registration Form’, contains the following viz.,

8.2 In pursuance to the change in Member (State), a fresh personal hearing was held on 29.7.2025, wherein Shri Samir Siddhapuria, Advocate appeared on behalf of the appellant and reiterated the submissions made in the application.

Discussion and findins

9. At the outset, we would like to state that the provisions of both the CGST Act and the GGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provision a reference to the CGST Act would also mean a reference to th provisions under the GGST Act.

10. We have considered the submissions made by the applicant in their application for advance ruling as well as the submissions made during the course of personal hearing, additional written submissions and oral submissions made during the course of personal hearing. We have also considered the issue involved, the relevant facts & the applicant’s submission/interpretation of law in respect of question on which the advance ruling is sought.

11. Before dwelling on to the questions on which the applicant has sought ruling, it would be prudent to reproduce the relevant sections, notifications, etc. for ease of understanding viz.,

CENTRAL GOODS AND SERVICES TAX ACT, 2017

> Section 2. Definitions.-

In this Act, unless the context otherwise requires,-

(i) “electronic commerce” means the supply of goods or services or both, including digital products over digital or electronic network;

(ii)”electronic commerce operator” means any person who owns, operates or manages digital or electronic facility or platform for electronic commerce;

> Section 9. Levy and collection.-

(5) The Government may, on the recommendations of the Council, by notification, specify categories ofservices the tax on intra-State supplies of which shall be paid by the electronic commerce operator ifsuch services are supplied through it, and all the provisions of this Act shall apply to such electronic commerce operator as if he is the supplier liable _.for paying the tax in relation to the supply of such services:

Provided that where an electronic commerce operator does not have a physical presence in the taxable territory, any person representing such electronic commerce operator for any purpose in the taxable territory shall be liable to pay tax:

Provided_. further that where an electronic commerce operator does not have a physical presence in the taxable territory and also he does not have a representative in the said territory, such electronic commerce operator shall appoint a person in the taxable territory_.* the purpose of paying tax and such person shall be liable to pay tax.

> Section 24. Compulsory registration in certain casey.-

Notwithstanding anything contained in sub-section (1) of section 22, the following categories of persons shall be required to be registered under this Act,-

(i)  persons making any inter-State taxable supply;

(ii) casual taxable persons making taxable supply;

(iii) persons who are required to pay tax under reverse charge;

(iv) person who are required to pay tax under sub-section (5) of section 9;

(v) non-resident taxable persons making taxable supply;

(vi) persons who are required to deduct tax under section 51, whether or not separately registered under this Act;

(vii) persons who make taxable supply of goods or services or both on behalf of other taxable persons whether as an agent or otherwise;

(viii) Input Service Distributor, whether or not separately registered under this Act;

(ix) persons who supply goods or services or both, other than supplies specified under sub-section (5) of section 9, through such electronic commerce operator who is required to collect tax at source under section 52;

(x) every electronic commerce operator ‘[who is required to collect tax at source under section 52;1

(xi) every person supplying online information and database access or retrieval services from a place outside India to a person in India, other than a registered person; ²1* * *

³[(xia) every person supplying online money gaming from a place outside India to a person in India; and]

(xii) such other person or class of persons as may be notified by the Government on the recommendations of the Council.

> Section 52. Collection of tux ut .source.- [relevant extract[

(1) Notwithstanding anything to the contrary contained in this Act, every electronic commerce operator (hereafter in this section referred to as the “operator”), not being an agent, shall collect an amount calculated at such rate not exceeding one per cent., as may be notified by the Government on the recommendations of the Council, of the net value of taxable supplies made through it by other suppliers where the consideration with respect to such supplies is to be collected by the operator.

Explanation .-For the purposes of this sub-section, the expression “net value of taxable supplies” shall mean the aggregate value of taxable supplies of goods or services or both, other than services notified under sub-section (5) of section 9, made during any month by all registered persons through the operator reduced by the aggregate value of taxable supplies returned to the suppliers during the said month.

(2) The power to collect the amount specified in sub-section (1) shall he without prejudice to any other mode of recovery from the operator.

(3)  The amount collected under sub-section (1) shall be paid to the Government by the operator within ten days after the end of the month in which such collection is made, in such manner as may be prescribed.

  Notification No.17/2017- Central Tax (Rate)

New Delhi. the 28th June. 2017

G.S.R… (E).- In exercise of the powers conferred by sub-section (5) of section 9 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government, on the recommendations of the Council, hereby notifies that in case of the following categories of services, the tax on intra-State supplies shall be paid by the electronic commerce operator —

(i) services by way of transportation of passengers by a radio-taxi, motorcab, maxicab and motor cycle;

(ii) services by way of providing accommodation in hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes, except where the person supplying such service through electronic commerce operator is liable for registration under sub-section (1) of section 22 of the said Central Goods and Services Tax Act

 notification No. 23/2017 – Central Tax (Rate)

New Delhi, the 22rd August, 2017

G.S.R .(E).- In exercise of the powers conferred by sub-section (5) of section 9 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government, on the recommendations of the Council, hereby makes the following amendments in the notification of the Government of India, in the Ministry of Finance (Department of Revenue), No.17;2017-Central Tax (Rate), dated the 2S June, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 696(E) dated the 28^th June, 2017, namely: –

In the said notification, in the first paragraph, after clause tit) the folkm tug clause shall be inserted, namely:-

“(iii) services by way of house-keeping, such as plumbing, carpentering etc, except where the person supplying such service through electronic commerce operator is liable for registration under sub-section (1) of section 22 of the said Central Goods and Services Tax Act.”.

  Notification No.17/2017- Central Tax (Rate)

New Delhi. 18th November, 2021

G.S R.. (E).. In exercise of the powers conferred by sub-section (5) of section 9 of the Central Goods and Services Tax Act. 201″ (12 of 2017), the Central Government. on the recommendations of the Council, hereby makes the following amendments further to amend the notification of the Government of India, in the Ministry of Finance (Department of Revenue), No 17 2017- Central Tax (Rate), dated the 25th June, 2017, published in the Gazette of India, Extraordinary, Part11, Section 3, Sub-section (i). vs& number G.S.R. 696(E) dated the 25th June, 2017, nam ely. –

1. In the notification.-

(ii) after clause the following clause shall be inserted, namely-,

^–(iv) supply of restaurant service other than the services supplied by restaurant, eating jousts etc. located

at specified premises”

12. The facts of the case are mentioned in detail supra, and hence is not being repeated for the sake of brevity.

13. Moving on to the first question, in terms of the definition at section 2(44) & (45) of the CGST Act, 2017, supra, ‘electronic commerce’ means supply of goods or services or both including digital products over digital or electronic network while ‘electronic commerce operator’ means any person who owns, operates or manages digital or electronic facility or platform for electronic commerce.

14. We find that bakery, saloons, beauty parlours, hotels and restaurants, etc., are merchants who have registered on the app; that the backend team of the app, stationed at Ahmedabad verifies the business & consequently the merchant can add his/her offer in the app by sending a mail to the backend team; that the app enables purchase of voucher/coupon through the freedeem app in two ways viz., ‘pay bill’ or ‘buy now’. The applicant, during the course of personal hearing held on 29.7.2025, has relied on circular No. 243/37/2024-GsT dated 31.12.2024, the operative part of which states as under:

3.4 On combined reading of the definition of “voucher” as per section 2(118) of thee- CGST Act, along with definition of “money” as per section 2(75) of the OGST .1ct and the description of “pre-paid instruments” given by RBI, it emerges that where the voucher is covered as a pre-paid instrument recognized by the RBI and is used as a consideration to settle an obligation, then in such cases, the voucher will fall under the definition of “money”. In such a case, as “money” is excluded the definition of goods and services as provided in section 2(52) and section 2(102) of the CGST Act respectively, the transactions in voucher would be considered neither as a supply of goods nor as a supply of services.

3.5. In cases, where voucher is not covered as a pre paid instrument recognized by RI31 and hence, cannot be treated as money, the voucher will be in nature of an obligation on the supplier to receive it as consideration or part consideration and assure the beneficiary/voucher holder to claim certain goods and/or services as specified on the voucher or in the related documents. In such cases, the voucher can be considered as an “actionable claim” within the meaning of section 2(1) of the CGST Act, read with section 3 of the Transfer of Property Act, 1882.

3.6 Further, as per entry 6 of Schedule III of CGST Act, an activity or transactions of actionable claims, other than specified actionable claims, is to be treated neither as a “supply of goods” nor as a “supply of services”. Further as per section 2(102A) of CGST Act, specified actionable claim means the actionable claim involved in or by way of betting, casinos, gambling, horse racing, lottery or online money gaming. As vouchers are not covered under definition of specified actionable claim, it appears that they are covered in entry 6 of Schedule III of CGST Act as actionable claims, other than specified actionable claims. Therefore, it appears that even in such a case, transaction in vouchers would be treated neither as a “supply of goods” nor as a “supply of services”.

3. 7 Therefore, it is clarified that irrespective of whether voucher is covered us a pre­paid instrument recognized by RBI or not, the voucher is just an instrument which creates an obligation on the supplier to accept it as consideration or part consideration and the transactions in voucher themselves cannot be considered either as a supply of goods or as a supply of services. However, supply of underlying goods and/or services, for which vouchers are used as consideration or part consideration, may be taxable under GST

Though, it stands clarified that transaction in vouchers, is neither supply or goods nor services, the applicant is on record that in both the methods viz., ‘pay bill’ or ‘buy now’, the payment is routed through their Freedeem app. What emanates from the above is that there is collection of consideration by the applicant on behalf of the merchants, thereby making the activity supply of services over electronic network, & hence bringing the said activity within the ambit of ‘electronic commerce’. Further, it is factually not disputed that it is the applicant who owns, operates, manages the freedeem app for electronic commerce. We, therefore, answer the first portion of the first question seeking a ruling by holding that the applicant in view of the activity mentioned above, is an electronic commerce operator under the GST Act.

15. As far as the second portion of the first question, i.e. if the a is an electronic commerce operator, is he required to take corn registration or otherwise? We have already held that the applicant is a `electronic commerce operator’. In terms of section 24(x) read with section 52, ibid we find that every electronic commerce operator, irrespective of his turnover is mandatorily required to obtain registration. Further, this registration is in addition to and separate from GST registration obtained as a normal supplier.

16. Going on to the second question i.e., whether the applicant is liable to pay RCM under section 9(5), ibid, being electronic commerce operator, though applicant is not providing food delivery service through its Freedeem app to the recipient of services?

16.1   Notification No.17/2017- Central Tax (Rate), as amended, is already reproduced supra. We find that in terms of the said notification, the Government has specified the below mentioned categories of services, wherein the tax on intra­state supplies shall be paid by the electronic commerce operator, in case such service is supplied through it. The services are viz.,

(i) services by way of transportation of passengers by a radio-taxi, motorcab, maxicab and motorcycle;

(ii) services by way of providing accommodation in hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes, except where the person supplying such service through electronic commerce operator is liable for registration under section 22(1), ibid /;

(iii) services by way of house-keeping, such as plumbing, carpentering etc, [except where the person supplying such service through electronic commerce operator is liable for registration under section 22(1), ibid] ;

iv) supply of restaurant service other than the services supplied by restaurant, eating joints etc. located at .specified premises.

The applicant has stated that what he supplies is voucher/coupon. The applicant has vehemently stated that they are not providing food delivery services to the end users however, they accept payment on behalf of the merchants; that they make the payment on the second day of redemption to the merchants after deducting their commission for providing its services; that they take no responsibility for the supply of services as described on the freedeem app. Since, the applicant’s service does not fall within the ambit of the aforementioned services, notified in terms of section 9(5), ibid, they are outside the scope of the said sub-section.

17. Moving on to the third question,, if answer of question (i) & (ii) above, is in la, then as to whether applicant is required to deduct TCS while making payment to registered merchants and un-registered merchants or otherwise. The question has sub-questions. Since the applicant has sought answer to this question only if answer to question [i] and [ii] are in yes. That not being the case as is evident above, and since we have answered the second question in negative, we are not inclined to answer this question. However, the moot point about TCS has been discussed in the paragraph below.

18. The fourth question is that if the freedeem app gets exemption from RCM for Restaurant service, will the TCS be applicable to the Restaurant Service in that case?

18.1 Surprisingly, after vehemently denying that they are not providing food delivery services to the end users, and do not fall under `restaurant services’ the appellant is seeking a ruling on the question as to whether they are required to deduct TCS if they are not liable under RCM for restaurant services. We find that section 52(1), ibid, very clearly states that every electronic commerce operator not being an agent, shall collect an amount calculated at such rate not exceeding one per cent, as may be notified by the Government on the recommendations of the Council, of the net value of taxable supplies made through it by other suppliers where the consideration with respect to such supplies is to be collected by the electronic commerce operator. The explanation further goes on to state that the expression “net value of taxable supplies” means the aggregate value of taxable supplies of goods or services or both, excluding services notified under section 9(5), ibid, made during any month by all registered persons through the operator reduced by the aggregate value of taxable supplies returned to the suppliers during the month. Further, the applicant is on record that their nature of business allows them to collect money on behalf of the suppliers. This being factually undisputed, we hold that the applicant is liable to collect TCS in terms of section 52, ibid.

19. Going to the fifth question,, for TCS collection, state registration is compulsory as electronic commerce operator centralized management systems are followed. If the answer of the question is no then whether freedeem should deduct 1% ITCS or 0.5% CTCS and 0.5% STCS for supply at state other than state of Gujarat as applicant is following centralized management & operation system? The first portion of the question as far as state wise registration is concerned, stands answered in the FAQ on TCS under GST issued by the Law Committee, GST Council, dated 28.09.2018, wherein under Sr. No. 8, it is clarified as follows:

For the second portion of the question, regarding the rate of TCS to be deducted, we would like to refer to Sr. No. 4 of the aforementioned FAQ, viz.,

Accordingly, the applicant is required to take registration for TCS in respect of each state and the deductions have to be reflected in the concerned registration while filing the returns.

20. Moving on to the last question, posed for ruling, , in case freedeem app follows provision of section 9(5), is it mandatory to register as a separate regular taxpayer state wise for discharging section 9(5) liability by charging CGST and SGST or it can be discharged by charging IGST for other than principal place of business as all other regular supply will be reported under same GST1N for principal place of business?”. Since in para 16.1, we have already held that the applicant is outside the scope of section 9(5), ibid, we find that this question is rendered infructuous.

21. The applicant, has relied upon the case of M/s. Juspay Technologies P Ltd’ during the course of personal hearing held on 29.7.2025. We find that in terms of section 103 of the CGST Act, 2017, the advance ruling pronounced by the Authority is binding on the applicant and the concerned officer or jurisdictional officer.

22. In view of above, we rule as under:

RULING

Question a: Whether applicant is considered as E Commerce operator under the GST’ Act or not? If yes, then applicant is required to take compulsory registration or not?

Answer : Applicant is an electronic commerce operator. Further, in terms of section 24(x) read with section 52, of the CGST Act, 2017, the applicant is mandatorily required to obtain registration.

Question b: Applicant is liable to pay RCM u/s. 9(5) of the GST’ being E Commerce Operator though applicant not providing food delivery service through its freedeem platform to the recipient of services?

Answer  : As the applicant’s service does not fall within the ambit of the services notified in terms of section 9(5), ibid, vide  Notification No.17/2017- Central Tax (Rate) as amended, they are outside the scope of section 9(5) of the CGST Act, 2017.

Question c: If answer of question a & b is in yes, then as to whether applicant is required to deduct TCS under the GST Act while making payment to merchants registered under the (1ST Act and not registered merchants under the GST Act or not?

Answer : Since the answer to question at [al and !hi, supra is not yes, we arc n o t inclined to answer this question. However, the moot point is discussed in the answer below.

Question d: If Freedeem get exemption from RCM for Restaurant service, will the TCS be applicable to the Restaurant Service in that case?

Answer : The applicant is liable to collect TCS in terms of section 52, of the CGST Act, 2017.

Question e: For TCS Collection, state wise registration is compulsory as e commerce operator even if centralized management systems arc followed. If the answer of the question is no then whether Freedeem should deduct 1% ITCS or 0.5% CTCS and 0.5% STCS for supply at state other than state of Gujarat as applicant is following centralized management & operation system?

Answer: The ruling is in terms of para 19 supra.

Question f: Separate GST Number as regular Taxpayer: -In case Freedeem follows provision of sec.9(5), is it mandatory to register as a separate regular taxpayer state wise for discharging Scc.9(5) liability by charging CGST and SGST or it can he discharged by charging IGST for other than principal place of business as all other regular supply will be reported under same GSTIN for principal place of business?”

Answer:  In para 16.1, supra, it has been held that the applicant is outside the scope of section 9(5) of the CGST Act, 2017, this question is rendered infructuous.

Notes:

¹ Advance Ruling Order No. KAR/ADRG 31/2023 datedf 15.9.2023