GST rules for E-commerce operators – Benefits and Key issues

In India most of the businesses are activate through e-commerce and a big part of the revenue is earned from the e-commerce market and it is very supportive in the growth of the Indian market and Indian economy. In India, the e-commerce market has upgraded as an online marketplace and everything is available online. The Indian marketplace is e-commerce which is owned by e-commerce operators. In India, the e-commerce operators are Amazon, Flipkart, Snapdeal, and Myntra, etc. On the basis of these e-commerce operators, we can purchase anything by the use of the online sitesand through the internet and everything is available there and no need to search the things in the markets, so in India,a very large portion of the Indian market is occupied by these e-commerce operators and they are generating a higher amount of revenue and providing the support in the growth and development in the Indian market and economy.

In this article, we will discuss the following points of e-commerce-

  1. What is E-commerce?
  2. What are the E-commerce business models?
  3. Advantages of E-commerce business.
  4. Disadvantages of E-commerce business.
  5. GST imprecations for the E-commerce Operators.
  6. Key Issues from GST for the E-commerce Operators.
  7. Key benefits from GST for the E-commerce Operators.

What is E-commerce?

In simple words, e-commerce means the sale and purchases the goods or services or both through the internet and we can also transfer the money from one place to another place and we can also share the data to complete the business transactions. E-commerce is also known as internet commerce and e- business because the business is available on the internet. In the case of e-commerce, the business transactions are performed either B2B (business to business), B2C (business to consumer), C2C (consumer to consumer), and C2B (consumer to business).

The world trade organization is defining the meaning of e-commerce, e-commerce as “production, distribution, marketing, sale or delivery of goods and services by electronic means”.

The OECD has also defined the meaning of e-commerce transaction as “the sale or purchase of goods or services, conducted over computer networks by methods specifically designed for the purpose of receiving or placing of orders. The goods or services are ordered by those methods, but the payment and the ultimate delivery of the goods or services do not have to be conducted online. An e-commerce transaction can be between enterprises, households, individuals, governments, and other public or private organizations. To be included are orders made over the web, extranet, or electronic data interchange. The type is defined by the method of placing the order. To be excluded are orders made by telephone calls, facsimile or manually typed e-mail.”

There are some other definitions, which are provided by some other authorities in India and define the meaning of the e-commerce-

(a)-  As per the Consumer Protection Act, 2019 e-commerce is“buying or selling of goods or services including digital products over a digital or electronic network.”

(b)- As per the Ministry of Electronics and Information Technology (MeitY) e-commerce means “a type of business model, or segment of a larger business model, that enables a firm or individual to conduct business over an electronic network, typically the internet. Electronic commerce operates in all four of the major market segments: business to business, business to consumer, consumer to consumer, and consumer to business.”

(c) The Central Goods and Service Tax Act, 2017 defines the term “electronic Commerce” under section 2(44) as “the supply of goods or services or both, including a digital products over digital or electronic network.”

(d) The Department for Promotion of Industry and Internal Trade (DPIIT), FDI Policy, 2017 defines e-commerce as “buying and selling of goods and services, including a digital products over digital and electronic network”.

On the basis of these definitions we can concludemeaning of the e- commerce is the buying and the selling of goods and services by the use of the internet. Some examples of e-commerce operators are Walmart, Amazon, Flipkart, eBay, Freelancer, OLX, Quicker, Myntra, etc.

What are the E-commerce business models?

E-commerce business is categorized in the following business models-

  1. Business to business (B2B)
  2. Business to consumer (B2C)
  3. Consumer to consumer (C2C)
  4. Consumer to business (C2B)
  5. Business to government (B2G)
  6. Consumer to government (C2G)
  7. Market based model
  8. Fulfillment model
  9. Managed marketplace model
  10. Inventory model
  11. Direct sales model
  12. Hybrid model

Advantage of E-commerce business

There are certain advantages of e-commerce business-

  1. Wide availability– In the e-commerce business there are many e-commerce operators and they provide a wide range of all the products. On the basis of e-commerce business the consumer can get anything and everything on the online site there is no need to go anywhere to purchase any goods. The service of e-commerce business is available worldwide.
  2. Speed of access– From the online sites the person can purchase and search any goods or services or both within seconds so the speed of access this online site by the use of a computer, mobile, internet, and bandwidth,etc. is very fast and very easy to purchase any goods and services.
  3. 24*7 availability– The online site are available 24*7 and the person access these sites at any time from anyplace.
  4. With e-commerce the person can sell its goods and services to any customer who is staying outside India i.e. by the use of e-commerce the person can perform the business activities internationally.
  5. Lower cost– For doing business activities through the internet there is no need to spend warehousing costs, rent, inventory cost, and other costs.
  6. Personalization– These online sites provide the recommendation of goods on the basis of the requirement of the consumers. By the use of these online sites, the customer can view its purchase history and such data is very much useful for the customer as well as e-commerce operators.

Disadvantages of E-commerce business

There are some disadvantages of e-commerce business, which are as follows-

  1. To able to touch & see– on the online sites the goods are available but there is a problem that we cannot touch and we cannot check the quality of such goods at the time of purchase. For the example, I want to purchase a speaker from an online site. From these online sites I can see the pictures of the speaker but we cannot check the quality, sound of the speaker. This is one of the normal problems when we purchase any product from the online sites.
  2. Limited customer services– In the case of offline purchase, if the customer has any type of issue or any problem then the clerk and the authorized person will solve it at the same time but in the case of online shopping, there are limited customer care services if any person has any problem and want to discuss with customer care then there is the requirement to wait for the specified period.
  3. Security– when we purchase any product from the online site then for make the payment there is the requirement to provide credit card, debit card, netbanking, and UPI details. It can create risk. The hacker can hack the bank account on the basis of this information.

GST implications for the E-commerce Operators

As per the provision of the GST Act 2017, the activity of sale and the purchase of the goods and services are taxable and the provision of the GST will be applicable. When there is any sale and purchase of any goods and services through e-commerce then it will also be taxable under the GST Act 2017. Under the GST law, the e-commerce operator is defined as a person who owns, operates, and manages an electronic platform, which provides the facility of supply of goods & services through the internet. As per the provision of the GST there is a concept of TCS, as per the TCS concept the e-commerce operator is required to collect the amount of TCS @1% of the net taxable amount and such amount is deposited to the government. Under the GST there is no other tax that is required to be imposed on the e-commerce operators neither state tax nor central tax. In the case of e-commerce, there are certain cases where the goods are returned by the customers due to any default or any other reason on which the TCS is collected at the time of supply. The e-commerce, they also transfer the stock from vendor to warehouse and warehouse to operation offices/ shops then such transfer will also be considered as supply under the GST and the provision of GST will be applicable. For the growth and the development of the business the government provides many benefits and for the purpose of this,all the e-commerce operators are required to comply with all the provisions of the GST Act 2017.

As per the provision of GST, the person who is supplying the goods and services on their own behalf is not considered as an e-commerce operators and the concept of TCS will not be applicable to such person.

Key Issues from GST for the E-commerce Operators –

There are certain issues to the e-commerce Operators are as follows-

  1. Registration under GST– As per the provision of GST, there are the certain condition for the registration under GST if the these conditions are fulfilled then the person is required to be registered under the GST nut in the case of e-commerce operator there is no specified turnover limit i.e. if there is any person who is registered as an e-commerce operator is mandatorily required to be registered under the GST.
  2. Composition Scheme for the e-commerce operator– Under the provision of GST, the small and the medium taxpayer has an option to get composite registration. As per the composition scheme, the person is required to file GST quarterly return and needs to pay tax @ 2%. This scheme reduces the compliance burden and compliance cost. But as per the provision of GST, such a scheme is not available for the e-commerce operator i.e. if there is any small and medium e-commerce operator and want to be registered under the composition scheme of GST then he cannot get the benefit of such composition scheme
  3. Credit available only when the taxes are paid– The credit of tax is available, which is paid by the person to the government.
  4. Higher compliance cost– under the GST law, there is a concept of TCS and according to this, the e-commerce operator is required to collect the amount of TCS and deposit such amount of TCS to the government within the relevant time period. Normally the e-commerce operators have a large number of vendors or a large number of transactions on which they have collected the amount of TCS so this concept of GST creates the compliance burden on the e-commerce Operator and due to this there is also an increase in the compliance cost of the person.
  5. GST on stock transfer– In business, there is the stock transfer which is done by e-commerce Operator i.e. as per the requirement they transfer their goods from supplier to warehouse and warehouse to shop. Under the GST this type of transfer will be considered as supply and will be taxable under the GST. The amount of GST which is paid by the e-commerce Operator is eligible for the credit.
  6. Issue of valuation when there is any discount – As per the provision of GST, the transaction value will be taxable under the GST. In case if there is any discount which is provided by the e-commerce Operator to the purchaser then how we will calculate the transaction value of such supply i.e. the transaction value will be before deduction of discount or after deduction of discount. As per the GST law, there are 2 types of discounts.

1- Pre-supply discount – it is the discount that is provided by the person before the supply and it is permitted under the normal course of business and it will be shown in the invoice and not become part of the transaction value.

2- Post supply discount- The discount which is given after the supply of goods and services. Such type of discount is included in the transaction value at the time of supply because it is provided after supply.

Key benefits from GST for the E-commerce Operators-

Under the GST there are certain benefits for the e-commerce operators.

(i) Consolidated and uniform rate of tax– Before the introduction of GST there are different – different rates of tax (vat) on the same goods and services in the different states and it creates legal disputes but under the GST there is a uniform and consolidated rate of tax and it will not create any dispute.

(ii) Removal of cascading effects– Before the introduction of GST and under the old indirect tax law the traders are not eligible to take the credit of service tax which is paid by him on the input services (warehousing, commission on the marketplace, and logistics, etc.) and the service provider was not eligible to take the credit of vat which is paid by him at the time of purchase of goods and such goods will be used for the production of output. But the GST is a tax that removes such type of issue and removal of cascading effects. Under the GST the person can take the seamless credit of tax and set off the input tax with the amount of output tax liability. So it reduces the overall cost of the person.

FAQs of GST on E-commerce

1- What is an E-commerce business?

Answer- E-commerce business means the sale and purchase the goods or services or both by the use of the internet, and we can also transfer the money from one place to another place and we can also share the data to complete the business transactions.

2- What is the definition of electronic Commerce as per the GST Act 2017.

Answer- Section 2(44) of the CGST Act 2017 “the supply of goods or services or both, including digital products over a digital or electronic network.”

3-Who is an E-commerce operator?

Answer- Any person who owns, manages, or operates digital and provides an electronic facility or electronic platform for electronic commerce/business is known as an e-commerce operator.

4- What are the different types of models in electronic commerce/business?

Answer- There are the following business models-

  1. Business to business (B2B)
  2. Business to consumer (B2C)
  3. Consumer to consumer (C2C)
  4. Consumer to business (C2B)
  5. Business to government (B2G)
  6. Consumer to government (C2G)
  7. Market based model
  8. Fulfillment model
  9. Managed marketplace model
  10. Inventory model
  11. Direct sales model
  12. Hybrid model

5- Whether there is a requirement to get registration under GST for the e-commerce operator?

Answer- Yes, every person who is supplying the goods and services through the e-commerce operator is mandatorily required to get registration under GST i.e. there is no threshold exemption has been provided to the electronic commerce operator under the GST.

6- What is the meaning of TCS under GST?

Answer- As per GST, every person who is supplying the goods and services through the e-commerce operator is required to collect the amount of TCS @ 1% on the net amount of transaction values of supplies and such collected amount is required to be deposited to the government within the specified time period.

7- What is the net amount of transaction value of supplies?

Answer- the net amount of transaction value of supplies is-

The aggregate value of taxable supplies of goods or services made during the month  XXX
Less: Aggregate value of taxable supplies returned to the supplier during the said month (XXX)
Net Value of Taxable Supplies XXX

 

8- When the amount of TCS is required to deposit to the government?

Answer- The collected amount of TCS is required to be deposited to the government within the 10th day from the end of every month.

 

9- Whether the supplier can claim the amount of tax collected at source (TCS) which is collected by the operator?

Answer– Yes, the supplier can claim the credit of tax collected at source which is collected by the electronic commerce operator if the details of supplies are furnished by the electronic commerce operator and it is matched with details of outward supplies furnished by the supplier.

10- What will happen when the details of supply which is furnished by the operator and supplier are not matched?

Answer- If there is any mismatch between the details of supplier and e-commerce operator then such discrepancy shall be communicated electronically between operator and the supplier persons for rectification.

11- If there is any stock transfer whether it will consider as supply?

Answer- If there is a stock transfer is done by an e-commerce operator then this type of transfer will be considered as supply and will be taxable under the GST. The amount of GST which is paid by the e-commerce Operator is eligible for the credit.

12- Who will levy the amount of tax on the supplies which are made through electronic commerce?

Answer- Person who will supply goods or services through electronic commerce operator shall charge the amount of GST on all supplies which are made by him through electronic commerce. However, the central government or the state government specified the categories of services under section 8(4) on which tax is required to be paid by electronic commerce operator.

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