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Types of GST applicable on E-Commerce Sales

By Annapoorna

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Updated on: Oct 7th, 2024

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4 min read

e-Commerce has grown tremendously in India as more users are buying and selling items online, thanks to smartphones and internet connectivity. Under earlier tax laws, there was no clear treatment of online sales. GST has proper rules in place for e-commerce portals such as Amazon and their sellers.

In this article, we will discuss the following

  • How does an e-commerce sale work?
  • Place of supply
  • Invoicing
  • e-Commerce benefits both customers and sellers

How does an e-commerce sale work?

  • Sellers register on the marketplace/e-commerce platforms such as Amazon. They then takes pictures of products and uploads along with descriptions and prices
  • Buyer orders the product
  • In most cases, items are shipped by the seller directly or through the e-commerce operator’s logistics centre
  • e-Commerce operator charges a subscription fees/commission on the sale and assists sellers in everything from the photography of goods to delivery and payment

Place of supply

The Place of supply of goods under GST defines whether the transaction will be counted as intra-state or inter-state, and accordingly levy of SGST, CGST & IGST will be determined. Wrong determination of place of supply will result in tax collection by the wrong state. For example, inter-state supply is wrongly treated as intra-state supply and CGST & SGST are filled instead of IGST. The only option is to pay IGST separately and claim a refund of CGST & SGST.

GST is a destination-based tax, i.e., the goods/services will be taxed at the place where they are consumed/used and not at the origin. So, the state where they are consumed will have the right to collect GST.

In very simple words, where the supplier is from does not matter. Where the goods are going is relevant.

This rule applies to all e-commerce platforms  as well as the sellers who sell their goods through such e-commerce platforms.

Let us go through the provisions of the place of supply for goods:

SupplyPlace of supply
Seller sells goods to the buyer (shipping address is same as billing address)Place where the goods are delivered to the buyer
Seller sends goods to someone else (Shipping address is different from billing address)Billing address (It is assumed that the buyer has received the goods and the place of supply of such goods will be the location of the buyer)

Physical goods

Example 1: Intra-state sales

Mr. Raj of Mumbai, Maharashtra orders a mobile from Amazon. The seller Happy Mobiles is registered in Nagpur, Maharashtra.

The place of supply is Mumbai in Maharashtra. The location of the supplier is in Mumbai. Since the place of supply is in the same state as that of the location of the supplier, CGST & SGST will be charged.

Example 2: Inter-State sales

Mr Raj of Mumbai, Maharashtra orders a mobile from Amazon. The seller Mobile Junction is registered in Bangalore, Karnataka.

The place of supply here is in Mumbai, Maharashtra. Since the location of the supplier( i.e. Bangalore) is in a different state when compared with the place of supply (i.e. Mumbai) IGST will be charged.

Example 3: Send to a third party

Mr Raj of Mumbai, Maharashtra orders a mobile from Amazon to be delivered to his mother in Lucknow (UP) as a gift. M/s All Mobiles (online seller registered in Gujarat) processes the order and sends the mobile accordingly and Mr Raj is billed by Amazon.

It will be assumed that the buyer Mr Raj in Maharashtra has received the mobile even though it was actually delivered to his mother.

Place of supply: Mumbai, Maharashtra

Location of supplier: Gujarat

GST: IGST

Digital goods such as eBooks

Selling digital goods like eBooks will be treated as services.

Transaction typePlace of supply
B2B or B2CLocation of the buyer

Example 4 – Sell eBook to a Business

M/s Sharma Chartered Accountants of Mumbai, Maharashtra orders a Book on finance from Amazon. All Books Ltd. (Gujarat) processes the order and sends the book accordingly.

Place of supply: Mumbai, Maharashtra (Location of the buyer)

GST: IGST (as the seller is registered in Gujarat)

Example 5 – Sell eBook to end consumer

Mr Raj of Bangalore, Karnataka orders a bestseller Book from Amazon. All Books Ltd. (Gujarat) processes the order and sends the book accordingly.

Place of supply: Bangalore, Karnataka (Location of the buyer)

GST: IGST (as a seller is registered in Gujarat)

The IP address of the buyer’s device will not be important.

HSN Code and applicable GST Rate

While supplying the goods via e-commerce operators, sellers will charge GST based on the applicable rates on the respective goods. Generally, the amount paid by the buyers is inclusive of GST. The invoice issued by the e-commerce operator, explicitly will indicate the rate and amount of GST.

The commission charged by e-commerce operators from the sellers falls under the HSN code of 9985, having a GST Rate of 18%. 

Invoicing

Every supplier has to maintain invoice-wise details of supplies to registered taxable persons and the aggregate value of supplies to unregistered persons made through the e-commerce platform. Hence it is very important to raise GST-compliant Invoices.

ecommerce sale

Here are some details that should be mentioned in the Sales Invoice –

  1. Name, address, and GSTIN of the supplier
  2. Invoice number
  3. Date of issue
  4. Name, address and GSTINof the recipient (if registered)
  5. HSN code
  6. Description of the goods/services
  7. Quantity of goods
  8. Value (after discount)
  9. Rate and amount of GST

Additionally, if the e-commerce operator is subject to e-invoicing rules, he must generate the IRN and QR code for B2B invoices from the Invoice registration portal. Try Clear e-Invoicing solution for a seamless IRN generation process. It is fast, dependable and affordable!

e-Commerce benefits both customers and sellers

Customers have more options, as compared to the local markets. Often, items are cheaper online as establishment costs, advertising costs are avoided by the sellers.

The sellers can:

  • Reach a bigger market
  • Increase their sales volume
  • Avoid problems and costs of setting up branches
  • Interact only with e-commerce operator for payment reducing debt management costs

For better understanding, read our articles on ClearTax:

Frequently Asked Questions

Can I sell on ecommerce without GST?

According to Section 24 of the CGST Act, every seller selling through e-commerce operators must be required to register under GST, irrespective of the turnover. So, one cannot sell on e-commerce without having GSTIN.

What is the GST turnover limit for e-commerce?

A seller had to register and acquire GSTIN, irrespective of the turnover, in order to sell their goods/services via e-commerce platform.

What is the GST form for ecommerce sellers?

Like regular taxpayers, ecommerce sellers are also required to file the following GST Returns:

  • GSTR-1
  • GSTR-1A (In case of amendments)
  • GSTR-3B
  • Can view GSTR-2A/2B
  • GSTR-9/9C
Do I need GST to sell digital products?

Yes, for selling digital products like e-books via e-commerce, GST registration is mandatory.

What is the applicability of GST on e-commerce sales?

e-commerce collects GST at the rate of 18% on the commission charged from the seller. Also they are required to deduct Tax Collection at Source (TCS) at 0.5% on the payment being made to sellers.

Who is liable to pay GST on e-commerce transactions?

  • Supply of Goods: Seller will collect GST from buyer and will pay the tax liability
  • Commission charged and TCS deducted: E-commerce operators have to collect GST and TCS from sellers and discharge the liability.
How does GST apply to cross-border e-commerce sales?

GST on cross border e-commerce sale transactions will be levied on the basis of treating the same as export or import of goods or services.

What is Tax Collection at Source (TCS) under GST for e-commerce?

TCS at the rate 0.5% is deducted on the net value of taxable supplies made via e-commerce platforms. The TCS is deducted and collected by e-commerce operators from sellers while making the final payment.

About the Author

I preach the words, “Learning never exhausts the mind.” An aspiring CA and a passionate content writer having 4+ years of hands-on experience in deciphering jargon in Indian GST, Income Tax, off late also into the much larger Indian finance ecosystem, I love curating content in various forms to the interest of tax professionals, and enterprises, both big and small. While not writing, you can catch me singing Shāstriya Sangeetha and tuning my violin ;). Read more

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Quick Summary

e-Commerce in India growing due to smartphones and GST rules. Sellers register, buyers order, shipping occurs. Place of supply determines tax rules - intra or inter-state. Customers and sellers benefit from e-Commerce. Invoice must-have details: supplier, recipient, goods, GST. E-commerce provides wider market, easier sales. Rules in place for digital goods sales.

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