E-Commerce's Tryst with GST - Part 2

The impact of Goods and Service Tax, which has been termed as the biggest tax reform in a long time, is going to be widespread on the E-Commerce industry. Every party included in the trade of E-Commerce will be affected – right from the seller to the E-Commerce Operator (the end consumer not so much as the others).

First, let’s understand who an E-Commerce operator is. An e-commerce operator is a person who owns, operates or manages digital or electronic facility or platform for electronic commerce.

The GST law’s provisions states that the businesses involved in E-Commerce activities are expected to get registered in each of the states that they are supplying to. If, for some reason, an E-commerce operator does not have an established office in a particular state, any person who represents such an operator will be liable to pay the tax on behalf of the operator. In case the operator doesn’t have an establishment as well as a representative, the E-Commerce Operator should appoint a person for the purpose of paying its taxes. Since the nature of the E-Commerce business is such that the seller expects orders from every state, the operators will have to register in EVERY STATE.

Don’t worry; the ecstatic shouts of satisfied customers will soon drown your sighs.

Quite often we see that the products we order online may reach us after the due date. The reasons are varied but one common reason is that many states have lot of paperwork requirements for interstate trade which delays the actual delivery. There are as many as ten documents that are required to be filed by the exporter for one product. Logistics for commercial activities are expected to become easier under GST.

Moreover, E-Commerce Tax (tax on goods bought into the state by E-Commerce marketplaces) would be shown the door because of the nature of GST (it is a destination based tax, after all). This implies that the government of the state in which the delivery is being made would be the beneficial party. I’m sure none of the state governments would oppose to that, would they?

GST is not all that bad. Surely there will be changes in the process of things but it is also going to bring reforms.

We Indians excel at many things and one of these things is the art of saving money. Many traders buy products online with cash backs, festive offers and discounts, only to sell them at a later point. The e-commerce operators who come up with these schemes to rope in new customers end up losing the same. Under the GST regime, this should come to an end. The supplier is required to make a monthly filing with the GST Identification Number (GSTIN) of the purchaser to claim Input Tax Credit. If the purchaser wants to resell the product and wishes to claim the input credit, he will have to mention the other purchaser’s GSTIN as well. This could be a way to curb malpractices.

The E-Commerce websites have become so popular in India because of the convenience they provide and because products are much cheaper as compared to our local markets. Because most E-Commerce websites are pan-India, goods are available from different corners of the country; as a result of differential VAT rates, the goods may be cheaper or expensive depending on the state. GST aims to turn India into one common market.

For better business, there are tie-ups between various brands and e-commerce sites. These tie-ups could take a hit once GST rolls out because the tax advantage that the sites get would be impacted. It breaks my heart to say this: people should be ready to face an increase in prices on E-Commerce websites.

Although majority of acts involved in the process of online buying and selling have been addressed and the laws and policies for the same have been made clear, there are still certain issues that need to be straightened out. For example, the definitions of Operators and Aggregators, treatment of inter-state stock transfers, value to be considered in case of goods sold at discount, returns happening in months different from the month of sales, replacements and booking done from sellers of different states, inter-state cancellations and so on.

These problems may seem too many but are just a minor hurdle in the seventeen year long journey that GST has completed.

Goods and Service Tax is expected to take its place from the 1st of July of this year.