The Hon’ble Karnataka High Court in the case of Hiveloop Technology Private Limited vs Additional Director, Directorate General of GST Intelligence [Writ Petition No. 21130 of 2022 (T-RES), order dated March 09, 2026] held that an e-commerce operator who does not collect consideration for supplies made through its platform is not liable to collect Tax Collection at Source (TCS) under Section 52, and consequently, invocation of Section 74 against such operator is without jurisdiction.
Facts:
M/S. Hiveloop Technology Private Limited (“the Petitioner”) operates an e-commerce portal ‘udaan’, facilitating B2B transactions between independent buyers and sellers. The Petitioner merely provided access to the platform and did not collect payment/ consideration for supplies made through it.
Additional Director, Directorate General of GST Intelligence & Ors. (“the Respondent”) issued a show cause notice (SCN) dated September 19, 2022 under Section 74 alleging violation of Sections 52 and 17(2) of the CGST/KGST Act and proposing tax demand.
The Petitioner contends that Section 52 is inapplicable since the Petitioner does not collect consideration and that transactions are not supplies of the Petitioner, hence Section 74 cannot be invoked. Further, they argued that no provision exists in GST law to treat the Petitioner as an ‘assessee in default’ and that Section 17(2) is wrongly invoked as there are no exempt supplies or ‘free supplies’. The Respondent contended that the Petitioner, being an e-commerce operator, was liable to collect TCS on supplies made through its platform and had wrongly availed ITC without proper restriction under Section 17(2).
Aggrieved by the impugned SCN issued under Section 74, the Petitioner approached the High Court seeking quashing of SCN.
Issue:
Whether an e-commerce operator who does not collect consideration for supplies made through its platform can be held liable under Section 52 and subjected to proceedings under Section 74 of the CGST Act?
Held:
The Hon’ble Karnataka High Court in Writ Petition No. 21130 of 2022 (T-RES) held as under:
- Observed that, a plain reading of Section 52 makes it clear that TCS obligation arises only when the e-commerce operator collects payment/consideration with respect to supplies made through its platform, and in the present case, the Petitioner admittedly does not collect any such consideration. Hence, Section 52 is not attracted.
- Noted that, the transactions in question are not supplies made by the Petitioner, but by independent sellers/service providers using the platform, and therefore, the liability to discharge GST rests with such suppliers and not with the Petitioner.
- Observed that, Section 74 can be invoked only against a “person chargeable with tax” and only when tax has not been paid or short paid by reason of fraud, wilful misstatement or suppression of facts. Since the Petitioner is neither the supplier nor the person chargeable with tax, invocation of Section 74 is impermissible.
- Noted that, non-compliance of Section 52 does not ipso facto attract Section 74, as the latter provision is confined to cases involving evasion of tax with mens rea, which is absent in the present case.
- Further observed that, the CGST/KGST Act does not contain any provision akin to Section 201 of the Income Tax Act to treat a person as an “assessee in default”. Hence, an e-commerce operator who has not collected TCS cannot be made liable to pay tax which is primarily payable by the supplier.
- Observed that, the CBIC Circular No. 194/06/2023-GST dated July 17, 2023 clarifies that Section 52 applies only where the e-commerce operator collects consideration, and the same supports the Petitioner’s case that no TCS liability arises.
- Observed that, the impugned SCN proceeds on the erroneous assumption that promotional activities undertaken by the Petitioner constitute “free supplies” or “exempt supplies”, thereby requiring reversal of ITC under Section 17(2).
- Noted that, promotion of one’s own platform is an activity undertaken for self-benefit and business expansion, and merely because it also benefits other participants does not render it a “free supply”. Further there are no services provided by the Petitioner to others without consideration, and mere non-charging of consideration to enhance footfall cannot be construed as a taxable or exempt supply.
- Noted that, under Section 7, an activity qualifies as “supply” only when made for consideration (except Schedule I activities), and since the activities in question are without consideration and not covered under Schedule I, they do not qualify as supply at all.
- Observed that, in the absence of any exempt supply, the precondition for invoking Section 17(2) is not satisfied, and therefore, restriction of ITC is not warranted.
- Noted that, the impugned SCN contains only vague, bald and omnibus allegations, without establishing any of the mandatory ingredients required under Section 74.
- Held that, the impugned SCN is illegal, arbitrary, and without jurisdiction as it travels beyond Sections 52, 17(2), and 74 of the CGST/KGST Act, and accordingly, the SCN and all consequential proceedings are quashed.
Our Comments:
The Court has placed reliance on Circular No. 194/06/2023-GST dated July 17, 2023, clarifying that TCS liability under Section 52 arises only when the e-commerce operator collects consideration. The judgment strictly interprets Section 52 in line with statutory language and CBIC clarification, reinforcing that collection of consideration is a sine qua non. Further the Court in its earlier decision in M/s. NCN Pearson Inc. vs Union of India & Ors. [W.P. No. 7635/2024, order dated July 16, 2025], holds that absence of jurisdictional facts such as wilful suppression invalidates invocation of Section 74.
Relevant Provisions:
Section 52(1) of the CGST Act, 2017
“52. Collection of tax at source.-
(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.”
Section 17(2) of the CGST Act, 2017
“17. Apportionment of credit and blocked credits.-
(1) Where the goods or services or both are used by the registered person partly for the purpose of any business and partly for other purposes, the amount of credit shall be restricted to so much of the input tax as is attributable to the purposes of his business.
(2) Where the goods or services or both are used by the registered person partly for effecting taxable supplies including zero-rated supplies under this Act or under the Integrated Goods and Services Tax Act and partly for effecting exempt supplies under the said Acts, the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero-rated supplies.”
Circular No. 194/06/2023-GST dated July 17, 2023
“Subject: Clarification on TCS liability under Sec 52 of the CGST Act, 2017 in case of multiple E-commerce Operators in one transaction.
Reference has been received seeking clarification regarding TCS liability under section 52 of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as “CGST Act”), in case of multiple E-commerce Operators (ECOs) in one transaction, in the context of Open Network for Digital Commerce (ONDC).
2.1 In the current platform-centric model of e-commerce, the buyer interface and seller interface are operated by the same ECO. This ECO collects the consideration from the buyer, deducts the TCS under Sec 52 of the CGST Act, credits the deducted TCS amount to the GST cash ledger of the seller and passes on the balance of the consideration to the seller after deducting their service charges.
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