Goods and Services Tax is going to launch by 1st July this year and businesses are getting ready to get GST compliant. GST was proposed to ease the structure of indirect taxes in India but above that, this law has many other aspects that all businesses will have to comply with. This article will discuss how new GST guide will impact the growing e-commerce industry in India. The e-commerce industry is one of the major business channels in India playing a large role in goods and services trading.
The new GST rules will impact online businesses in many aspects as it deals with inter-state transitions. The online industry is booming in India due to its price arbitrage which will be greatly affected by the due to tax rule modifications. The e-commerce merchants from a state with lower VAT liability offers attractively lower price for many goods. Explaining this better; some states in India has a lower tax rate on electronic goods and through online trading, consumer across India can get those goods at a cheaper rate. With Goods and Services Tax, such retailers have to find another way such as tie-ups to keep their prices competent according to the current prices. Read our Why GST Will Be More Helpful For The Startups! Blog.
Moreover, with transformation to GST, the e-commerce industry will have to make many changes into their system. Under GST guide, the online merchants will have to mention all the HSN/SAC details of any goods sold by them. Their system will need to be updated for every aspect of product delivery from the catalog to payment collection. The e-commerce websites will have to introduce many changes in their current system to issues invoice on behalf of merchants. These changes from the side of e-commerce platform and merchants are required for monthly GST return filing. The e-commerce player will find it quite different as Goods and Services Tax has a dual mode, State GST, and Centre GST.
Due to monthly filing feature of GST, all sellers and merchants will have to declare all their selling done through different platform along with the GSTIN information of the aggregator. The merchants will have to declare all the online selling separately under GST Guide. The aggregators will also require filing all their selling, returns and merchant details in their monthly return filing. This rules will lessen the chances of data misinterpretation by the sellers in their account book. If any seller/merchant produce any data that will not match with the e-commerce’s filings then the data filed by e-commerce operator will be considered as true and the tax liability difference will be taken from the merchant. Goods and Service Tax also recommend giving a public-efficiency rating to the registered merchants so that e-platforms can easily identify the merchants who file regular returns.
Read our Some Less Discussed Yet Important Facts About GST Rates blog to understand GST rules. The GST law also acknowledges merchants stocking their goods in the e-commerce owned warehouse and thus government officials can ask stock information from the e-commerce operators on merchant’s behalf. However, there can be tax dispute issue in the case of fulfilling orders from the e-commerce owned warehouse stocks. GST implication will also directly impact the Tax Collection at Source by the merchants. Under GST guide, the goods will get a deduction (proposed at 2%) from the merchant's level due to the structure of the tax, which will affect the cash flow of the business. However, this rule is specific for the e-commerce retailer, and not applicable to physical retailers.
After GST implications, online merchants will find it harder to avoid tax payment and all size of merchants are required to register under Goods and Services Tax to sell goods online. This can make it harder for the small online sellers who generate turnover below INR 20 lakhs. GST will also bring happy things to the e-commerce sellers. Normally online marketplaces release many festive offers and discounts to acquire new customers, but many traders buy things online at a cheaper price on those occasions which put the e-commerce strategy down. With implicating GST guides, the traders will find it hard to do as they will have to show input credit in their monthly filing. As, in the monthly filing, the traders will have to mention GSTIN of the supplier in input credit details to claim input credit. So it can be said that e-commerce will get this as blessings from GST implications which will reduce malpractices.
With Goods and Service Tax implication, transit goods across India will be easier as different taxes imposed by the states will vanish away. The only tax all goods will have is destination based taxes which will be beneficiary for the state delivering the goods. The incentives given to the states will make it easier for goods transition within the country.