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?
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.
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.
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.