Tally Solutions | Nov-19-2019
GST on E-Commerce Overview
Surely under GST, online shopping could transform into a better experience. However, a more holistic view on the impact of GST on e-commerce, need to be taken by both businesses and customers.
- Mandatory registration – Similar to the rules of GST on e-commerce operators, all e-commerce GST liable suppliers are mandatorily required to register under GST, irrespective of turnover. In other words, even if an e-commerce supplier’s aggregate turnover is less than INR 10 Lakhs (in Special Category States) or INR 20 Lakhs (in rest of India), registration will be mandatory.
- Non-eligibility for Composition Scheme –One of the major implications of GST on e-commerce seller is that such a dealer will not be eligible for registration under the composition scheme. Hence, even if the person’s aggregate turnover does not cross INR 1.5 Crore, which is the revised composition scheme limit, he does not have the option to become a composition taxpayer.
- Negative impact on Cash flow -E-commerce under GST could see a negative impact on the cash flow for suppliers, primarily because of the tax collected at source i.e. TCS at 1% by operators. This tax paid will be available as input credit to the supplier on 20th of the next month, which means cash blockage of 30-45 days. Another challenge could be that the ITC available to e-commerce suppliers will be dependent upon their vendor’s compliance – as ITC can be availed only if the vendor has filed the monthly return and made full payment of the tax due.
- Seamless availability of ITC – In the previous regime, e-commerce platforms would charge service tax on the services provided to suppliers on their platform - such as warehousing, logistics, marketplace commission etc. Suppliers were unable to claim input tax credit on the service tax paid, which would become a cost. But, levy of GST on e-commerce players will ensure that ITC will be available on all inputs used in the course of or for the furtherance of business. In effect, this will result in reduced cost of operations for suppliers as they will now be able to take the credit of tax paid on inputs, which was until now adding up to their cost.
- Returns process – An e-commerce supplier has to follow the same GST returns process applicable to a regular dealer – which means adherence to GSTR 1 and GSTR 3B – each of which need to be processed diligently. In addition, the details specific to e-commerce transactions i.e. GST on e-commerce sales, GST on e-commerce purchases and GST on e-commerce commissions - will need to be specified. Adherence to these forms, will ensure that the right ITC gets availed by the E-commerce suppliers.
- One Nation, One Market - In the previous regime, suppliers had to keep track of the State-wise taxation rules relating to the products they deal in as often, the same product would be taxed at different rates in different states. In some cases, due to ambiguity in dealing with the models of e-commerce business, multiple taxes were imposed on the same product. Many States also imposed entry tax on the entry of goods sold online to their states. However, under GST, goods and services have fixed rates across the nation, irrespective of whether they are sold at physical stores or online. Hence the coming together of GST and e-commerce, would definitely mean opening up of the entire nation as one united market.