Impact of GST on e-Commerce | H&R Block | Blog
GST council meeting
GST Council Meeting – Latest Updates
May 8, 2018
impact of gst on alcohol
Impact of GST on Alcohol
May 16, 2018

GST Impact on e-Commerce in India

The power of digital distribution over physical retail outlets is you have a chance to create a global audience. This is exactly what the E-Commerce Industry is trying to capitalise, and they have been extremely successful in it. Name anything, and you get it at your doorstep with one click. Also, the E-Commerce industry has been aptly utilising the consumer behaviour pattern, for example by providing discounts to expand their horizons. Has the introduction of GST affected the empire of E-Commerce?

e-Commerce Industry and its Growth

The tremendous boost in the smartphone users and introduction of 4G technology has boosted the operations of the E-Commerce industry by heaps and bounds. The E-Commerce Industry bridges the gap between big brands and the demographic dividend of India, its youth who is mostly from semi-urban areas, where access to big brands is less. E-Commerce operators or locally known as marketplaces are a platform between different sellers and their existing or would be customers.

These marketplaces not just provide customers to the sellers, but also, they provide delivery and transport services of the products that the customer buys through their portal. The seller has to pay some amount to the marketplaces for showcasing their products. The transaction always takes place between the buyer and the seller. The seller can choose to deliver the product through the marketplaces or directly to the buyer. If the seller chooses the former way, he has to pay some incentive to the marketplace.

e-Commerce Operators under GST

Initially, the VAT/CST was to be paid by the seller to the government. After the introduction of GST, e-commerce operator collects the amount at the rate of one percent (0.5% CGST + 0.5% SGST) of the net value of taxable supplies made through it. The amount so collected is called as Tax Collection at Source (TCS).

The TCS will be applied on the one month’s collection which will be paid to the government. This amount of TCS will be seen in the GSTR-2 of the registered supplier on behalf of whom the collection is done.

The e-Commerce marketplace seller needs to submit an online statement, which has the details of all the products sold through the portal and the TCS in Form GSTR-8. The details furnished by the operator in his form will be matched with that of the respective seller in his form. If both the details are not matched, then there will be a notice sent to both the operator and the supplier.

Impact of GST on e-Commerce Marketplace Sellers

  • GST will reduce the cascading effect of taxes and increase the scope of sellers.
  • GST rates are same in the entire nation. Therefore, the sellers do not have to bear different taxes of different states. E-commerce will provide a perfect platform for seller-buyer relations.
  • Intra-state and inter-state sale of goods has become much simpler as the sellers do not have to keep big warehouses. This reduces their inventory and rentals paid for the building thereby reducing the prices of the products.
  • Matching of the details in the form submitted by both operator and seller needs to be matched and if not, there will be notices send to both of them. Therefore, the complexity of the business increases as the details should be matched at any moment.
  • The seller who sells his goods by the medium of e-commerce marketplaces is not eligible for undertaking the composition scheme.
  • The marketplace and the seller have to be registered under GST. The suppliers whose turnover is less than 20 Lakhs will also have to be registered under GST which they were not supposed to if they were not sold by the e-commerce medium.
  • The seller and the operator have to be registered under GST in all states so that they can carry out the smooth flow of business operations.
  • The profits of the sellers will be reduced, and their working capital will not be as liquid as it was earlier.

Though the compliance under GST has increased for the E-commerce industry, still it improves the market for the local suppliers as they can sell in any state with same tax rates. This will promote more sellers to go online and provide best services to the customers. Also, any small start-up will get a huge market opening if it is carrying out a trade using the e-commerce market.

Still confused with the GST operations for e-commerce industry, do feel free to talk to our GST experts at H&R Block.

Leave a Rating!
2.0 (6 Votes)
Niteesh Singh
Niteesh Singh
Niteesh is a Tax Researcher and Content Lead at H&R Block (India). He holds an MBA with a specialisation in BFSI domain. In his career spanning over six years, he has helped thousands of people understand taxes in a simple and effective manner. Outside work, Niteesh is an astronomy geek who is also involved in wildlife conservation activities.