What are the impacts on e-commerce seller of GST

By LegalSalaah

Table of Contents

It has been witnessed that the E-Commerce Sellers have been the winners of the business game under current regime. They operate on low costs, have access to remote customers as well and are liable to pay different taxes like VAT, service tax, etc. This ambiguity or non- uniformity in taxes gives them a chance to get away from paying it.


However, in the GST regime, this tax evasion is not possible as all the businesses are handled via online portal and all the taxes have been replaced by ‘One Single Indirect Tax’ – GST. The advent of GST has been marked by the uniformity in taxes.

Heads

Current Regime

GST Regime

Input Tax Credit

There was a non- availability of a procedure to avail of the input tax credit under this regime.

The portal used to charge the suppliers for renderings its services to them in the form of service tax and thus the suppliers can’t benefit from the input tax credit on it and was counted as cost.

There is a seamless availability of Input tax credit for the sellers operating via E-Commerce platform. 
The credit is available on all the inputs used in or for expanding the business. 
This benefits the sellers a now the inputs are no more adding to their costs but giving them an option to operate on less costs.

Uniformity in taxes

Due to state-wise taxation rules, the sellers were subject to pay multiple, and different taxes on the same product again and again due to different rates at each state. 

This caused a lot of ambiguity, chaos and exploitation of suppliers.

With the advent of GST,  this chaos meets its end. The policy of ‘One Nation, One Tax’ has made it easier for the suppliers to reach greater masses. 
GST has brought about uniformity in the taxation policy and tax. 
There is now a single tax for offline as well as online sellers in the whole nation.

Compulsory Registration under GST Registration Online

Earlier it wasn’t mandatory or all the suppliers to get themselves registered on the online portal as their turnovers didn’t exceed the threshold limit.

This enabled them to sell their products at a lower price than the registered sellers to the general public and the non- maintenance of their account records, GST Return Filing, and invoices. 

Under this, every seller who is selling via the E-commerce platform or availing services in any form has to get registered irrespective of the threshold limit.
It is binding on them irrespective of how low their turnovers are.
This may seem unfair to the online sellers as the sellers operating through physical stores are not subject to GST Registration Online until they cross the threshold limit and are also eligible for the composition scheme if their turn is below INR 50 lakh.
Also the suppliers owning their own portal need not to register until they cross the threshold limit.
All this leads a supplier to maintain their accounts, pay tax on time and timely GST Return Filing.

Composition Tax Payer

In current regime the sellers could become a composition taxpayer with an annual turnover of less than INR 50 Lakh.

They only had to pay a small percentage of their income in the form tax and can file the GST return on a quarterly basis or according to the time period stipulated by their respective state.

The sellers can avail of the composition scheme and hence cannot become composition taxpayer even if their turnover is below the threshold limit (INR 50 Lakh).
The compliance activities and costs have increased under GST due to monthly GST Return Filing and maintaining of records in right order.
Impact on Cash flow

Current Regime 


In this regime, the E-Commerce seller operates on margins. The operator fetches the money from end customers an after the whole sale is made and gives to the seller after deducting his commission. To understand this, an example is given below:

Suppose Ram Pvt. Ltd is a registered seller on the E-Commerce platform that supplies laptops to Karan Pvt. Ltd at Rs 16500 (inclusive of VAT)   

             

Particulars

Rs.

Amount of Laptop

15,000

VAT (10%)

1500

Sale price

16500

Commission 

(-)500
 Assuming the commission to be Rs500 in this example. The amount given back to the seller is 16,000.

GST Regime


Under this regime Commission including GST along with TCS is also deducted from the sales of the products procured by the registered supplier under the GST law by the operator and remaining amount is remitted back to the supplier.

In the following illustration, you will see a reduction in the cash flow to the suppliers. Let us see the same example

Particulars

Rs.

Amount of Laptop

15,000

GST (10%)

1500

Sales price

16500

Commission 

(-)500

TCS (2%)

(-) 300

 The amount remitted back to the E-Commerce supplier is Rs 15,700

Note: The above example is hypothetical and is just for your ease.


This shows that the cash blockage becomes quite significant and the amount received by the seller is less than the amount received in the Current Regime.

The E-Commerce Supplier should take the decision regarding ITC while keeping in mind of choosing the right vendor as they can avail the ITC only if the vendor has filed the monthly return and paid the full payment of tax.

If you need any help on the GST Return Filing feel free to contact us +91 8766393412, Our Business adviser will clear your doubt.