The Ecommerce industry is growing rapidly in the country. There are not just companies big and small but also individual sellers who are selling their goods using different ecommerce portals. Companies such as Amazon, Flipkart, Myntra, and Paytm are some of the largest ecommerce players in the market there are thousands of companies and individuals who have registered with them as third party sellers, and sell their products and goods.
India is the fastest growing E-commerce market in the world with increased internet users, online shoppers and investors. GST has been rolled with specific provisions for E-commerce market and an increased compliance have been placed on E-commerce operators, as well as Suppliers in terms of the Registration, Invoicing, Returns and Tax Collected at Source. Thus, the Government can track the majority of suppliers who are currently unorganized and can broaden the tax base.
Here is a Projection of the Industry
With the Goods & Services Tax (GST) coming into effect, this industry will boom further and here is how it is making things better.
1. Goodbye Trade Barriers, Hello Uniform Tax: GST removes all the previous trade barriers and brings uniform taxation into effect. Previously, every state had its own tax rate on every product in the form of VAT. And ecommerce operators had set up their distribution centres in specific locations and sellers preferred to sell the products from the state with less VAT rate. This resulted in loss of revenue for which an additional entry tax was levied. But, with implementation of GST, a destination based tax on consumption of goods or services or both and the revenue would accrue to the state where the sale has been made.
2. Tax Collection at Source (TCS): On each transaction, the buyer pays the total value of goods or services including GST component of the E-commerce operator & then E-commerce operator is liable to deduct TCS of 1% of net taxable value of supply to be paid or payable to E-commerce supplier. However, no TCS is applicable on inventory based models. This is to encourage compliances by ecommerce companies under GST.
3. More Compliances to be met: Under the GST regime, there will be more compliances to be met by the ecommerce players and sellers. Though, it may seem cumbersome at the outset, but will be beneficial to the industry and economy at large. Among other, ecommerce operators will have to make a monthly report of supplies made by seller and TCS collected. Moreover, the sales report by the ecommerce operator should tally with that submitted by the supplier at the end of every month. Any variation will call for additional application of GST. In addition, ecommerce operators will have to register in every state and file reports on a monthly basis.
However, the GST Council in their 22nd meeting, recommended to postpone the Registration and operationalization of TCS provision till 31.03.2018.
4. GST Registration Compulsory: : It is mandatory for every ecommerce operator and the sellers to register for GST and obtain a GSTIN. The threshold limit of Rs. 20 lakhs is not applicable to these ecommerce operators, as well as the sellers. Moreover, the sellers will not get the composition scheme benefit and cannot pay a flat tax of 1% for every product sold. This was expected to make sellers withdraw from the online space, however, such has not been the case and companies report that most sellers have continued with them.
In a nutshell, the goods and service tax is applicable on both the transactions between
1) Buyer and E-commerce supplier
2) E-commerce supplier and E-Commerce Operator
Hence, under GST era, the ecommerce operators will have to bear a higher tax rate on the output side, but they can claim credit of all taxes on the input side. Moreover, all the output taxes will be credited to the ecommerce operator after services are provided by the sellers. Likewise, sellers will also have a higher tax rate on the output side, but can claim an input credit of all taxes other than the additional tax paid.
Overall, it is a good move for this industry and Indian online seller as inventory and logistics cost will come down and tax computation will be easy as there are fixed taxes on products falling under a particular category. So, businesses and consumers, both will benefit eventually.