Impact of GST on e-Commerce Sector & Online Sellers in India
The e-commerce industry in India has been greatly impacted by the introduction of Goods and Services Tax – GST. The introduction is being touted as the biggest reform the country has seen until now. The government is promoting GST as a part of its endeavour to create one market for the entire nation. The industry and buyers all have dealt earlier with the disparate segmentation of the Indian economy, which is being dealt away within GST. The idea of a single tax from manufacturing to supply has eliminated the need for sellers to register with multiple tax platforms and file separate returns.
The e-commerce industry in India is made by both big players such as Amazon or Flipkart as well as small retailers and sellers. The GST has made a great impact on the industry, through this blog the impact on e-commerce platforms will be studied.
1. Increased reach of e-commerce
The GST has opened up new avenues for small and medium-sized sellers to compete with larger enterprises. Earlier due to the over looming tax rates in different states, sellers were usually confined to their states only, limiting the free reach to far-flung areas. By the introduction of GST, e-sellers will be relieved of varying tax structures.
2. Compulsory registration required
The government specifies a company to be registered if it has a threshold of more than 20 lac. This limit has been dropped for north-eastern states by about 10 lac rupees. For the e-commerce sector the situation is different as all sellers are to be registered even if their threshold doesn’t cross 20 lac. This is a limitation which if removed would allow more sellers to become a part of an online community.
3. Tax collected at source
E-commerce marketplaces will deduct 2% of the TCS of net value sales an apart of seller liability and are to be paid to the government. Additionally, the sales reported by the marketplaces and those of the seller need to tally each month. If any discrepancies persist, the extra amount needs to be paid by the seller. This measure is aimed to weed out fraudulent activities surrounding online marketplaces and amount of tax evasion will decrease, building trust between marketplaces and the sellers.
4. Ineligible for composition
The e-commerce sellers are not eligible for compensation as part of GST actions. The composition scheme would have enabled sellers whose turnover is about 75 lac to file tax returns quarterly rather than the monthly which is followed now. The tax amount would have been a meager 2%, but the scheme has been kept out of reach for sellers.
5. Increase in credit
The GST has introduced input tax credit for e-commerce marketplaces, establishing a direct contact between input product and final product. They will be able to utilize input tax credit to their benefit.
6. Cash on delivery refund
In developing countries like India, cash-on-delivery is a more popular option exercised by users. The refunds on such orders are issued after a reconciliation of 7-10 days if the taxes have already been paid. This sticky issue has been taken care under GST.
7. Filing of tax returns
The process of filing tax returns to the government have been made alike to the way brick-and-mortar stores pay. The form GSTR-1 containing details of outward supplies need to be submitted by 10th of each month. The seller will receive the GSTR-2 form by 11th of each month, details of the taxes taken by the e-commerce marketplace. The seller after reviewing has to return the form by 15th of each month. Any discrepancies needed to be resolved by 20th of each month. This particular entity has encouraged sellers to tally their data from different sourced before filing returns.
The GST is sure to have a positive outreach to the e-commerce sector of our country. The structure will decrease operating costs by about 20%, also reducing the costs of logistics and warehousing. This move will encourage the sellers to maintain warehouses at strategic locations and be operated efficiently. Due to faster movements of goods, the costs to end-of-mile delivery will get lower, the benefit can be passed on to the buyers. The e-commerce marketplaces will now be free to import products from SMEs, thus enriching the quality of products. The GST on the long run will create a level playing field for e-commerce marketplaces, streamlining their services and increased business growth.
Jishnu Mitra is a dedicated developer of plagiarism free content with over 2 years experience and working towards a better India.