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Types of GST applicable on E-Commerce Sales

Updated on:  

08 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 its sellers.

In this article, we will discuss what type of GST you should charge on your online sales.

Place of supply

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.

This makes the concept of the place of supply crucial under GST as all the provisions of GST revolves around it.

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 filled instead of IGST. The only option is to pay IGST separately and claim a refund of CGST & SGST.

In very simple words, where you are selling from does not matter. Where your goods are going is relevant.

This would apply to all e-commerce platforms, sellers such as those who sell on Amazon.

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)

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)

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

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 must be provided. 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 ClearTax e-Invoicing solution for a seamless IRN generation process. It is fast, dependable and affordable!

How can ClearTax help in Invoicing?

The ClearOne software by ClearTax makes things quick and easy for you. Based on your and the buyers GSTIN, the software will automatically calculate the place of supply according to the provisions and inform you whether you need to charge CGST/SGST or IGST.

Time to switch to an Intuitive, Comprehensive, 

Professional & Future-ready invoicing solution- ClearOne

  • Explore professional GST invoicing
  • Personalise your invoices for logos and templates
  • Get access to GST, e-way bill and e-invoicing on tap

This is how the invoice would look with all the details in it.

ecommerce sale

After the generation of the invoices, GST returns have to be filed by the due dates stipulated for the monthly and quarterly filer. ClearTax GST software eases compliance for you! Visit gst.cleartax.in.

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

How does an e-commerce sale work?

  • Seller registers on the marketplace/e-commerce platform such as Amazon
  • Seller takes pictures and uploads them to the website 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
  • e-commerce operator assists sellers in everything from the photography of goods to delivery and payment

For better understanding, read our articles on ClearTax:

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