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E-commerce is one of the fastest growing sectors in India today as users are more inclined towards online shopping vis-à-vis shopping through marketpalces, thanks to smartphones and internet connectivity. Under earlier tax laws there were no clear treatment of online sales. With introduction of GST, proper rules and regulations for the e-commerce operators like Amazon, Flipkart and its sellers came into picture. It was the indication of positive tax reform and was poised to boost the growth of the sector by negating the tax concerns which the sector was facing before arrival of GST.
GST Rules and Regulations on Ecommerce Segment
1.No threshold limit for GST registration
Government has specified a threshold limit for all the businesses. A business is liable to register for Goods and Services Tax once such threshold limit is breached. However, such limit is not applicable in case of E-Commerce sellers.
However, Government vide Notification no. 65/2017-Central Tax dated 15th Nov 2017 has exempted persons making supply of services, other than supplies specified under subsection (5) of section 9 of the said Act through an electronic commerce operator who is required to collect tax at source under section 52 of the said Act and having an aggregate turnover, to be computed on all India basis, not exceeding an amount of twenty lakh rupees in a financial year, as the category of persons exempted from obtaining registration under the said Act.
2. No Benefit under Composition Scheme
Most of the sellers registered with marketplace operators are from small and medium enterprises. Government has introduced composition scheme under GST law. This scheme is primarily aimed to reduce the burden of compliance for small and medium businesses. However, GST law has explicitly excluded e-commerce businesses from this scheme.
3. Place of Supply
Under GST the goods/services will be taxed at the place where they are consumed / used and not at the origin. So, the state where they are consumed will have the right to collect GST. This makes the concept of the place of supply crucial under GST as all the provisions of GST revolves around it and accordingly CGST / SGST or IGST will be charged. Thus, where your goods are going is relevant and accordingly will be place of supply.
Place of Supply
Seller sells goods to the buyer wherein shipping address and billing address are same
Place where the goods are delivered to the buyer
Seller sends goods to someone else wherein shipping address and billing address are different
(It is assumed that the buyer has received the goods and the place of supply of such goods will be the location of the buyer)
4.Tax Collection at Source by Marketplace Operator
Under the new tax regime, marketplace operators are mandatorily required to deduct a percentage amount as the GST liability of seller and deposit it with government. This mechanism is being termed as “Tax Collection at Source (TCS)” under the GST law. Eventually the marketplace seller will have to file monthly return under GST to claim the credit of TCS collected by the marketplace operator. This will also impact the liquidity and cash flow of these sellers.
Every supplier has to maintain invoice-wise details of supplies to registered taxable persons and the aggregate value of supplies to unregistered persons made through the e-commerce platform must be provided. Hence it is very important to raise GST compliant invoices.
GST E-Waybill For E-Commerce Sellers
- The government had changed e-way bill rules which are expected to help e-commerce companies in smooth transportation of goods and ease the method of calculating the value of goods. The Government had made certain amendments in E-Way bills and relaxed certain conditions which would significantly address concerns of e-commerce logistics companies, courier/express cargo companies.
- As per the revised norms, generation of e-way bills will not be required for each consignment in case of intra-state movement of goods via e-commerce or courier companies where the value of each consignment is less than Rs. 50,000 but the aggregate value is greater than Rs. 50,000.
- The revised policy has also extended the relaxation on the requirement of updating vehicle details for intra-state movement to 50 Km from 10 Km.
- Recently, it was mentioned by the Government that India would ban e-commerce companies such as Amazon and Walmart-owned Flipkart Group from selling products from companies in which they have an equity interest.
- The government revised foreign investment norms for online retailers which effectively bar companies such as Amazon and Walmart-Flipkart from selling products supplied by their affiliated companies on shopping sites in India.
- The government also said that the companies will be prevented from entering into exclusive agreements with sellers.
- The norms, which would come into effect from 1st February 2019, also bar them from offering special discounts or mandating exclusive rights to sell certain products. The move was aimed at clamping down on firms which operate on an inventory-based model where affiliated sellers account for the majority of sales.
While all the marketplace operators have already completed the first level analysis of impact of GST on their operations, marketplace sellers are still unaware of these rules. Need of the hour is to keep themselves aware of the changes that are going to come. Also such sellers should now start planning their transition strategy for GST regime. It seems there is enough room for modification in the rules and regulations for GST on ecommerce and deadline for meeting the compliance might also get extended.
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