The Indian e-commerce market has had a spectacular rise, which has been propelled by a number of causes including rising internet usage, an influx of foreign direct investment, technology advancements, and innovative business methods. This transformation has brought about a radical change in consumer behaviour, transforming the traditional retail environment into a vibrant digital market.
It is increasingly more difficult to distinguish between goods and services in each transaction due to the complexity of logistics and reverse logistics, advertising and marketing services, software products, music, and eBooks.
Introduction of GST-
On July 1st, 2017, India enacted the Goods and Services Tax (GST), a significant indirect tax reform. The Value Added Tax (VAT), Central Sales Tax (CST), and service tax were all replaced by the GST, which has been lauded as a significant improvement in the country’s tax system’s simplification.
The Indian sellers on e-commerce marketplaces have been significantly impacted by the GST. The administrative and financial burden on e-commerce marketplace sellers, especially small and medium-sized firms, has increased as a result of the increasing compliance requirements and tax rate increases. This has made it more difficult for many e-commerce marketplace merchants to compete with larger enterprises due to rising operating costs and decreased profitability. The procedure of requesting GST refunds can be difficult and time-consuming, which presents difficulties for sellers on e-commerce marketplaces.
GST Advantages for E-Commerce Marketplace Sellers
GST Challenges for E-Commerce Marketplace Sellers
The complexity of GST regulations: E-commerce marketplace vendors may find it challenging to comprehend and adhere to the complicated GST rules and regulations, which can result in mistakes and fines. High compliance expenses: The GST mandates that merchants on e-commerce marketplaces register, file returns, and pay taxes on a regular basis, which might raise their compliance expenses. Lack of IT (Information Technology) infrastructure: E-commerce marketplace vendors could not have the needed IT setup to abide by the digital system for billing and filing returns as required by GST. Claim for input tax credit may be difficult for sellers on e-commerce marketplaces as they do not have the requisite paperwork or invoices to substantiate their claim.
The following provisions ensure that e-commerce complies with GST:
E-commerce and E-Commerce Operators Defined In accordance with Section 2(44) of the CGST Act of 2017- “Electronic Commerce” refers to the supply of goods, services, or both over digital or electronic networks, including digital products. The term “Electronic Commerce Operator” refers to anyone who owns, maintains, or manages a digital or electronic facility or platform for electronic commerce, as defined by Section 2(45) of the CGST Act, 2017. Ex: E-Commerce companies Amazon and Flipkart enable third-party sellers to supply goods through their respective online marketplaces.
E-commerce operators must obtain a GST registration by law, regardless of the value of the supply they make, and they must pay GST on any commission payments they receive from different suppliers without being able to use any exemptions.
Foreign E-Commerce Operator- A foreign E-Commerce operator is any E-Commerce operator who does not have a physical presence in India’s taxable area. They must designate an agent on their behalf in order to conduct business in India. A mandatory registration under GST is required of such an operator, as is a registration in each state where operations are carried out. In addition to receiving a distinct TCS Collection Number (from Normal Registration), these operators who are required to collect TCS must register themselves through mandatory registration. Any e-commerce business can apply for registration using their registered head office address even if they have no physical presence in any States or UTs.
TCS and E-Commerce- On the net value of taxable supplies made through an online marketplace, an e-commerce operator must collect TCS @1% (0.5% as CGST & 0.5% as SGST). The government must receive payment of the TCS collected no later than the 10th of the following month. However, TCS deposited by e-commerce operators would show up in the GSTR-2A of the suppliers’ portal, where the suppliers can then utilise the TCS by claiming it and filing a refund. The TCS collected must be recorded in the supplier’s cash ledger.
GST return and E-Commerce operator- GSTR-1 and GSTR-3B are monthly GST returns that are filed by an E-Commerce operator. Aside from this, an E-Commerce operator must also submit a GSTR-8 electronic statement. This statement includes the TCS and information on outward supplies of goods and/or services made available by suppliers through its marketplace, net of returns. Ten days after the end of the relevant calendar month, GSTR-8 must be submitted. The tax is deducted at source, and the E-Commerce operator is also obliged to file an annual statement called GSTR-9B by the 31st of December after the end of the financial year in which the transactions have occurred.
In light of the current state of the digital economy and numerous GST compliances, the CBIC has granted permission through a number of notifications for suppliers to offer items through E-Commerce Operators without being registered under the GST or the composition scheme. However, CBIC has outlined the guidelines/procedures that the e-commerce operators must adhere to with regard to such providers.
When should an e-commerce operator pay GST?
Three parties, namely the seller, the buyer, and the E-Commerce operator, engage in an E-Commerce transaction. Between the provider and the buyer for the supply of goods or services and between the supplier and the E-Commerce operator for a commission charged, for the use of the marketplace, are two separate transactions for the purposes of the applicability of GST requirements. The E-Commerce Operator levies GST on both of these transactions. The E-Commerce Operator must, however, pay the GST on behalf of the suppliers in certain specified transactions that have been notified under sections 9(5) of the CGST Act 2017 and section 5(5) of the IGST Act 2017:
Understanding the various GST rates for various goods and services can be challenging for e-commerce marketplace vendors, which can result in mistakes with invoices and tax payments. Dealing with numerous tax authorities can be challenging because GST compels ecommerce marketplace merchants to do so, which can take time and be complicated. But when we think about e-commerce taxation, the newly enabled provisions had shed relaxation to the compliance of GST.
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