Come July 1, 2017, all the major taxes in India like excise duty, octroi, service tax, special additional duty and VAT will be subsumed into a single tax called GST. But, even with the final deadline hardly a month away, there is still a lot of confusion around some aspects of its regulation and implementation. Further, how the tax will end up affecting various sectors of the Indian economy is also a question that a lot of people are currently seeking answers to. One of the sector in the spotlight in regards to this is the Indian e-commerce sector.
The Indian e-commerce market is acknowledged as a rapidly growing market and has been estimated to have crossed the two lakh crore rupees turnover mark in December last year.
Till now, 18 Indian states have officially passed the SGST bills in their state assemblies. This means, the landmark change in tax regime might be finally becoming a reality by July 1 after having missed its previous deadline.
In this article, Indianweb2 tries to find out if GST’s complex system will hamper the e-commerce business in India.
Threshold And Compliance
First things first, it is important to note that the threshold limit set by the government for businesses for GST compliance leaves out e-commerce sellers. For the uninitiated, the threshold limit set by the government diktats that all the Indians businesses having a turnover of over Rs 20 lakh will have to compulsorily register themselves under the GST regime. However, e-commerce sellers will have to register themselves under the GST irrespective of their turnover figure being less than 20 lakhs.
Further, as far as GST compliance is concerned, it will come at a cost. While the cost might not be that huge for bigger sellers on the Indian e-commerce platforms, but smaller sellers are most likely to get big time affected by it.
Since there is still a lot of ambiguity around how the GST will finally get implemented, the fate of the Indian e-commerce sector majorly rests on how the various e-commerce platforms end up supporting their sellers in the whole transition process. For instance, shopClues has decided to help its sellers with filing return through its platforms and avail credits they are entitled to.
The debate around Tax collected at source (TCS) has been going on since as long as the topic of GST came into existence in India. This is because the actual impact that GST will have on small e-commerce sellers will only be calculated when the final rate of tax, or TCS, is known. If the TCS end up being on the higher end of the scale, them small sellers who earn thin margins will have to face major challenges in selling their goods on these e-commerce platforms as they will have to pay a TCS higher than the tax on margins earned. In order to make sure that such a situation never arises, the e-commerce industry has made several requests to the central government to try keeping the TCS rate as low as possible so that while every transaction gets counted, the small traders don’t end being big losers.
GST Identification Number (GSTIN)
E-commerce players will have to register in every Indian state for GST. They will be required to register for their GST Identification Number in the state of origin of trade as well as the destination where the product will finally be delivered. This means, they will have to register through 29 states and seven union territories. While one understands that the purpose of the entire process is to ensure that the whole chain of transaction is recorded and can be accounted for, but going through 36 (29 states and 7 UTs) registration process will be extremely time consuming. Hence, a lot of e-commerce players are trying their best to convince the government to have a single-point registration instead of having one in every state.
However, some industry experts are hopeful that the government will soon clarify on this and e-commerce companies won’t have to go through the trouble of registering in every state. According to them, since government’s main objective behind the whole process is to ensure collection of tax from every seller on the platform and paying it to the state where the seller is located, this can be easily done from one state where the platform originally is, and doesn’t require registration in every state where the seller is operating.
According to a statement given by a company representative from ShopClues to the News Minute, the e-commerce company is currently meticulously working with all third-party logistics (3PL) partners to dish out details and implement a system that would help make its merchants and 3PL partners compliant from this supply-based invoice requirement. The company is hoping to release this system soon.
Overall, if one looks at the bigger picture, GST benefits for Indian e-commerce sector might end up outweighing its challenges. With GST coming into play, it will end up eliminating all the major hurdles currently being faced in inter-state delivery and include entry tax introduced on e-commerce shipments by some states. The industry is hopeful that the government will follow the route of simplified implementation of the rules that will further result in improving ease of doing business for sellers.