Impact Of Gst On E Commerce}

Impact of GST on e-commerce

by

Rupal Agarwal

Let us look at some of the crucial features and implications of GST affecting the e-commerce sector.

Introduction of TCS (Tax Collected at Source)

With the rolling out of GST, e-commerce retailers will have to collect a TCS at the rate of 2% per transaction from the payments to be made to the vendors and suppliers of goods sold to customers. The TCS will not be applicable to aggregators like OLA, Uber, and MakeMyTrip etc. TCS will also not be applicable on goods which are returned by customers as there is no sale. Implementation of TCS will have implications for both the e-commerce entities and their suppliers.

1. Additional compliance

With TCS, now e-commerce entities will have to furnish returns and details (on a monthly basis) of all the TCS collected from the suppliers by the 10th of next month. This has to be done in the prescribed formats within the prescribed deadline. For example, the amount of TCS collected during the month of August will necessitate that the returns for the same be filed by 10th September. Similarly, the suppliers will also have to furnish their TCS details. Eventually, records received from both the parties will be reconciled by the tax authorities.

2. Working capital factor

Small scale vendors are allaying fears that with TCS in effect, a substantial amount of working capital would get blocked for a period of 20-50 days which could affect the inventory levels maintained by them and their spending on revenue expenditure.

3. No impact on price

TCS will have no effect on the price of the goods sold because suppliers can offset this TCS deducted by the e-commerce entities against the tax payable by suppliers in the form of tax credit.

Compulsory registration

Now, every supplier or vendor of goods operating via the e-commerce route will have to compulsorily register with concerned authorities. The minimum threshold limit will not be applicable in this case.

There could be perceptive barriers about this registration process but it appears to have many long term benefits. It gives the small and medium businesses an opportunity to be a part of the rapidly growing organized retail sector and make their existence matter in policy-making (to avail tax benefits, credit schemes etc).

Standardization of taxes

In the present indirect tax regime, the VAT charged on same goods varies from state to state. Similarly, the octroi tax rates also vary. The resultant effect is disparities in the price of the same goods across the country. GST aims to do away with these variations by adopting a One India One Tax policy. GST aims to address these inter-state variations in the state level taxes (as there will be a standard taxation structure for indirect taxes). This would remove or at least narrow down the disparities in the selling prices of same goods across the country.

Interstate movement of goods

Currently, the goods passing from one state to another are subject to several taxes like octroi, CST, VAT etc. The procedural bottlenecks make it a difficult experience for suppliers and e-commerce companies to procure goods from another state or cater to markets outside the home state. With the proposed new system, as various existing indirect taxes are integrated into one taxing structure, the inter-state movement of goods is expected to improve to a considerable extent.

Increased competition

The e-commerce companies are not the only ones to benefit from the improved facilitation of inter-state movement of goods. The physical store retailers would too benefit from it. With GST in place, it is expected that inter-state procurement of goods will see a rise and retailers will aim to capitalize on newer markets outside their home state. The reduced tax burden (because of GST) will also enable the retailers to compete more fiercely with the e-commerce companies in terms of the product line and product pricing, especially in the local markets.

Discounts

In the present system, there are some ambiguities regarding the taxation of the discounts offered by the e-commerce companies. The GST will be applicable on the transaction value and any discount offered will have to be explicitly mentioned in the invoice. However, if the discount is offered after the sale or is not explicit, it will be subject to GST.

On a concluding note, GST seeks to overhaul the existing indirect tax regime and replace it with an integrated version towards a One India One Tax system. It will also bring more clarity and transparency in the applicability of rules and regulations pertaining to indirect taxes in India.

It looks as if the e-commerce sector will undergo a phase of change as GST seeks to streamline the taxation structure. The TCS part might be considered for a revision which we will have to wait and watch in the coming weeks.

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Article Source:

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