“When a small craftsman in a village in India brings a smile to a customer looking at his phone on a metro ride in New York, we know we are creating something that has fundamentally changed our lives.
I see technology as a means to empower and as a tool that bridges the distance between hope and opportunity. Social media is reducing social barriers. It connects people on the strength of human values, not identities.”
It has been approximately two years since Narendra Modi’s speech about Digital India. In these words NaMo has captured the essence of E-Commerce. The E-Commerce industry has grown with leaps and bounds in the last 18 years with advancement in technology as well as internet. This growth in E-Commerce has lead to the concept of online marketplaces (a platform owned by the E-Commerce operators like Amazon, Flipkart and Snapdeal). An online marketplace is much like the market places our mothers would drag our fathers to, except that these market places are on the internet and basically intangible.
More than lakhs of sellers are present on these e-commerce websites conducting millions of transactions every other second. With July approaching fast and the government not citing any threshold limit for registration and migrations, every business conducting e-commerce activities has to get registered under GST. This means that starting from the makers of cane furniture to the manufacturer of smart phones, every seller in between, above and below will have to get registered. Hmm, my crystal ball shows chaos.
The entire idea behind demonetization and Goods and Service Tax, besides bringing uniformity, was to curb the growth of black money and tax evasion. The reason for making registration compulsory for every merchant was to prevent tax evasion on online sales, which mind you happens more often than we wish to count. This could be a sore point for small traders whose turnover is below Rs. 20 lakhs and who would have otherwise been exempt.
The crystal ball also says that the frenzy won’t end there. As per the clauses of the draft bill, the E-Commerce websites would have to collect TCS of up to 1% on the sale of goods and services made by the supplier. Also, it will be the responsibility of the E-Commerce platform to file the monthly and annual returns. This increases the burden on accounting and is probably the only time when smaller businesses would be happy about their small size. If only everyone was content with smaller proportions, things would have been easier. If you’re wondering what would happen in case of returns, some part of your smile might come back. In case of returns by the consumer, the companies won’t have to deduct TCS because there is no actual sale (hey, I mentioned ‘just a part’).
The woes of the E-Commerce platforms seem never ending right now, don’t they?
The Government has introduced a Composition Scheme under GST. The motive behind this scheme is to reduce compliance related burdens for small and medium businesses – although they don’t get to claim input credit, they have to pay taxes at a lower rate (up to 2%); they get to file returns quarterly instead of monthly, they would need to provide bill of supply instead of tax invoice and so on. Seems fancy, doesn’t it? For the E-Commerce sellers who have graced this article by reading it and can feel a bubble of relief rising inside – pop the bubble. The Government of India has explicitly denied entry to E-Commerce businesses under this scheme, no matter how teeny tiny their business might be.
You’ve reached the end of the article but the E-Commerce industry is going to suffer a little more in the aftermath of GST. Read the next article to know more about GST after-effects.
(To be continued)