Understanding EPBG, GST, and Threshold Limits on the GeM Portal

Before delving into the key concepts related to the GeM portal, you must understand how it works in the first place. It allows government departments (both state and central), ministries, PSUs (Public Sector Undertakings), and autonomous bodies to procure goods and services directly from registered sellers.

The GeM portal operates like any other structured e-commerce platform, albeit with a few differences. Sellers list their products or services under predefined categories, while buyers can compare prices, specifications, and seller ratings before placing orders. Depending on the order value and procurement requirement, buyers can choose from multiple procurement methods, including direct purchase, normal bidding, reverse auction, and L1 buying.

Everything, from buyer and seller registration to bidding to order placement to payment, is carried out digitally. This makes GeM one of the most transparent government procurement systems globally.

EPBG in the GeM portal stands for Electronic Performance Bank Guarantee. It refers to a financial guarantee that a seller needs to submit after getting a procurement order. An EPBG in the GeM portal has a similar role as that of a Bank Guarantee (BG) in regular trades. It provides assurance to buyers that the seller will fulfil all contractual obligations as per the order terms.

However, unlike a physical bank guarantee, an EPBG is generated and submitted electronically through approved financial institutions. The seller can upload it directly to the GeM portal. The primary purpose of an EPBG is to protect the buyer against non-performance, delayed delivery, substandard supplies, or breach of contract conditions.

In simpler words, an EPBG acts as a safety net for government buyers procuring through the GeM portal. If the seller fails to perform as agreed, the buyer can invoke the EPBG to recover financial losses without going through lengthy legal procedures.

Below are the key features of an EPBG:

• It is a type of Bank Guarantee submitted electronically.
• It assures that the seller will fulfil all contractual obligations as per the order terms.
• It protects buyers against non-fulfilment of contractual obligations.
• An EPBG remains valid until delivery or the warranty period (as applicable).
• An EPBG is released or cancelled after the contractual obligation.

Is EPBG Mandatory on GeM?

EPBG in the GeM portal is mandatory for specific contracts, especially for most high-value and bid-based procurements. Once an order specifies EPBG as a condition, the seller is legally required to submit it within the stipulated timeframe.

However, an EPBG may not be required in the following circumstances:

• If the order value is low.
• In the case of direct purchases.
• If the buyer has explicitly waived EPBG.
• For certain exempted categories or emergency procurements.

What is the Minimum Percentage of EPBG in GeM?

The minimum percentage for EPBG in GeM is typically 5% of the total order value. In some cases, this percentage may increase to 10%.

Here are a few scenarios where a higher EPBG percentage is required:

• The order value is very high.
• The delivery period is long and fragmented.
• The goods or services are critical in nature.
• The trade or delivery involves high-risk conditions.

Benefits of EPBG in the GeM Portal

Submitting an EPBG benefits both buyers and sellers on the GeM portal. Here’s how:

• Reduced risk for buyers: An EPBG assures government buyers of contractual fulfilment by sellers. In case a seller defaults, the buyer can claim financial compensation.

• Mutual trust and transparency: An EPBG ensured transparency and accountability in the public procurement system. Additionally, it helps build mutual trust between buyers and sellers.

• Less financial burden: An EPBG reduces the financial burden on sellers. Instead of depositing large sums of money as performance guarantees, they can simply issue EPBGs, which are usually backed by a small margin.

• No risk of delayed payments: Submitting an EPBG helps a seller avoid the risk of delayed payment. Once the buyer is assured of contractual fulfilment, it can release the payment early.

• Higher participation opportunities: With EPBGs, even smaller businesses can confidently bid on government tenders. In turn, government buyers can trade with confidence with these sellers.

Difference Between EPBG and EMD on GeM

It’s common for GeM participants to get confused between EPBG and EMD. While both offer financial guarantees, they serve different purposes in the GeM procurement lifecycle. EMD stands for Earnest Money Deposit. It is a refundable financial guarantee required at the time of bidding to demonstrate the seriousness of the seller. It prevents bidders from withdrawing or altering bids arbitrarily.

An EPBG, on the other hand, is submitted after the order is awarded and ensures the successful execution of the procurement contract. While EMD protects the bidding process, EPBG protects the order execution phase.

The table below depicts the differences between an EPBG and an EMD:

Yes. Goods and Services Tax (GST) is applicable to most products and/or services procured through the GeM portal. As per the GST Act of 2017, all eligible items must attract the GST at the applicable rate.

All sellers on the GeM portal are required to be GST-registered and must comply with the GST norms. Whereas the buyers must provide their GSTIN (GST Identification Number) at the time of registration. Furthermore, the GeM portal makes it mandatory for sellers to provide a clear break-up of their products or services for these variants:

• The base price of the product/service
• Applicable GST rate
• The GST Amount
• Final price that the buyer needs to pay

This ensures transparency for buyers and compliance with GST laws. The final order value displayed on GeM is inclusive of GST, and buyers pay the tax as part of the procurement.

GST Classification and Rate Selection on GeM

One of the most critical responsibilities of sellers on GeM is selecting the correct GST classification and rate for their products or services. Each listing on GeM requires sellers to specify the applicable GST slab, such as 5%, 12%, 18%, or 28%.

Incorrect GST rate selection can cause multiple issues, including invoice rejection, payment delays, and post-audit objections from government authorities. Therefore, sellers must cross-check GST rates with official notifications and ensure consistency between their GeM listing, tax invoice, and GST returns.

What are GST Cess 1 and 2 in the GeM Portal?

GST Cess refers to an additional tax levied on specific goods and services over and above the standard GST rate. On the GeM portal, buyers may sometimes encounter GST Cess 1 and GST Cess 2, depending on the product category.

GST Cess 1 usually applies to goods notified under compensation cess or special tax categories, such as certain automobiles or luxury items. GST Cess 2 may be applicable in cases where multiple cess components are prescribed under law or industry-specific regulations. GST Cess 1 is expressed as “percentage” while GST Cess 2 is expressed as “quantum”.

Sellers must correctly identify whether their product attracts cess and declare it accurately on GeM. Incorrect cess selection can lead to invoice mismatches, payment delays, and tax compliance issues.

Input Tax Credit (ITC) in GeM Transactions

GST paid on procurements made through GeM is generally eligible for Input Tax Credit (ITC), subject to the conditions prescribed under the GST Act. Government departments that are registered under GST can claim ITC on eligible procurements, provided the supplies are used for taxable or business purposes.

For sellers, correct GST reporting on GeM ensures that buyers can seamlessly claim ITC. Any discrepancy in GSTIN, tax amount, or classification can lead to ITC denial.

GST Invoicing and Compliance on GeM

Invoices generated for GeM transactions must strictly follow GST invoicing rules. This includes correct mention of GSTIN, HSN (Harmonised System of Nomenclature) or SAC (Services Accounting Code) codes, tax rate, tax amount, and place of supply.

GeM facilitates invoice creation but does not replace the seller’s responsibility for GST compliance. Sellers must ensure that the invoice uploaded on GeM matches the invoice reported in GST returns. Any discrepancy may attract scrutiny during audits.

The threshold limit in the GeM portal refers to the order value up to which a buyer can choose a specific procurement method. There are four types of procurement methods allowed in the GeM portal:
1. Direct purchase
2. L1 purchase
3. Bidding
4. Reverse auction

The threshold limits in the GeM portal are designed to ensure fairness, competition, and transparency in public procurement.

GeM Threshold Limit for Direct Purchase

The GeM threshold limit for direct purchase is ₹50,000. It means that if the order value is below this threshold limit, the buyer can select any seller of their choice and place a direct order. This limit exists to simplify small-value procurements and reduce administrative burden.

GeM Threshold Limit for L1 Buying

The threshold limit for L1 buying on the GeM portal is ₹10 lakhs. This procurement method applies to all orders between ₹50,000 and ₹10 lakhs. It allows a buyer to select from at least three different sellers on the portal. The order is generally placed with the seller offering the lowest price (L1).

GeM Threshold Limit for Bidding

For procurements above ₹10 lakhs, bidding becomes mandatory. Buyers must create a tender by defining technical and financial criteria to attract bids from sellers. Eligible sellers can respond to these tenders and start placing their bids to sell their products to government organisations.

The process of bidding typically involves two stages - technical bidding and financial bidding. Sellers who win the technical bidding round go through to place financial bids for an order. The process helps government buyers procure products at competitive prices while maintaining compliance with General Financial Rules (GFR).

Understanding EPBG, GST, and threshold limits is essential for anyone operating on the GeM portal. These are not optional procedural elements but foundational pillars of government procurement.

Sellers who understand these rules clearly are better equipped to participate confidently, execute orders smoothly, and build long-term credibility on GeM. For buyers, these mechanisms ensure transparency, accountability, and value for public money.

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