India’s e-commerce market is estimated to have crossed Rs. 211,005 crore in December 2016 as per the study conducted by Internet and Mobile Association of India. The report further claim that India is expected to generate $100 billion online retail revenue by the year 2020.
The uprising of Electronic Commerce in India has also resulted in conception of online marketplaces. A Marketplace is an e-commerce platform owned by the E-commerce Operator such as Flipkart, Snapdeal and Amazon. Some of the features of a marketplace model are:
Government has also allowed Foreign Direct Investments under such model to promote e-commerce marketplace business model in India.
While the number of third party sellers has increased exponentially in recent times, such sellers are now skeptic about the compliance requirement that GST is bringing along under the new Indirect Tax regime.
Goods and Services Tax has extensively covered the e-commerce segment. For the first time, government has taken initiative to regulate the online business, which has largely been unregulated.
Introduction of these regulation requirements has dismayed the online seller community. Some of the reason which are dreading the online seller community are:
No threshold for GST registration: Government has specified a threshold limit for all the businesses. A business is liable to register under Goods and Services Tax once such threshold limit is breached. Click here to read more about threshold limits under GST. However such limit is not applicable in case of E Commerce sellers. All the businesses carrying out e-commerce activity are required to get registered under GST irrespective of their turnover.
No Benefit under Composition Scheme: Most of these sellers registered with marketplace operators are small and medium businesses. Government has introduced composition scheme under GST law. This scheme is primarily aimed to reduce the burden of compliance for small and medium businesses. Under this scheme, businesses are required to file returns quarterly instead of monthly and pay taxes at nominal rates up to 2%. To know more about Composition Scheme, Click here.
However GST law has explicitly excluded e-commerce businesses from this scheme.
Registration in each individual state: As per the provisions under GST law, every business involved in E commerce is required to get registered in each state in which they are supplying goods. Since the e-commerce business model is as such that the seller expects order from all the states, they are liable to obtain registration in all the states.
Tax Collection at Source by Marketplace Operator: Under the new tax regime, marketplace operators are mandatorily required to deduct a percentage amount as the GST liability of seller and deposit it with government. This mechanism is being termed as “Tax Collection at Source (TCS)” under the GST law. Eventually the marketplace seller will have to file monthly return under GST to claim the credit of TCS collected by the marketplace operator. This will also impact the liquidity and cash flow of these sellers.
While all the marketplace operator have already completed the first level analysis of impact of GST on their operations, marketplace sellers are still unaware of these rules.
Need of the hour is to keep themselves aware of the changes that are going to come. Also such sellers should now start planning their transition strategy for GST regime.
Some of the key points that should be kept in mind are:
Although we are at a very initial stage for GST implementation. But marketplace sellers may not have much luxury of time and it is advised to be proactive in your business decisions for GST transition.