Impact on E-commerce market place and sellers:
According to capital float, presently GST appears to be an assortment of compliance guidelines. The enhanced regulatory requirements might take a seller’s focus away from operations for some time. However, GST as a single tax product across india will be beneficial for all e-commerce sellers in the long run because of the aspect of transparency in trade brought forth by this new indirect tax reform. Let’s discuss the impact of GST on an online seller’s operations.
- Increased reach of e-commerce sellers: GST has opened avenues to small and medium size businesses to compete with larger enterprises at a national level. Previously, these sellers were limited to operating within the confines of one state due to the looming tax rates of trading across multiple states. By unifying the taxation, e-sellers need not be burdened by multiple taxes while selling to consumers across various states.
- Compulsory registration required:The government has specified a turnover threshold of Rs 20 lakh for registration under GST. This has been relaxed to Rs 10 lakh for north-eastern states. However, for e-commerce sellers, registration is mandatory, irrespective of whether they fall below the turnover slab of Rs 20 lakh or not. Removal of the threshold for registration will help bring more online businesses into the sphere of taxation.
- Ineligible for Composition Scheme: E-commerce sellers are not eligible for the Composition Scheme either. The Composition Scheme permits businesses with a turnover of under Rs 1 crore to file quarterly returns instead of monthly and pay tax at a low rate of 1-5%.
- Tax collected at source (TCS):E-commerce marketplaces are required to deduct 2% TCS on the net value of sales as the GST liability of the seller and deposit it with the government. Further, the sales reported by both the e-commerce marketplace as well as the seller need to tally at the end of each month. Discrepancies, if any, will be added to the turnover of the seller and they will be liable to pay GST on the additional amount. This measure will weed out fraudulent sellers and shall subsequently build trust between marketplaces and sellers.
- Filing of tax returns:The e-commerce sellers need to follow the same process that is followed by brick-and-mortar retailers. Form GSTR-1, containing details of outward supplies, needs to be submitted by the 10th of every month. The seller will receive Form GSTR-2A by the 11th of the same month, which contains details of the tax collected by the e-commerce marketplace. They then need to review and submit Form GSTR-2 by the 15th of the month. Discrepancies in supplies are to be submitted through Form GST ITC-1 by the 21st of the same month. This would require businesses to be particular about tallying data coming from different sources before filing returns. Taking the help of a professional GST services provider in meeting compliance has become a requisite in light of these regulations.
- Increase in Credit:The GST law has established ‘input tax credit’ to cover goods or services used by a company in the course of business. E-commerce sellers need to establish a direct relationship between the input material and the final product/service is eliminated. Much like other registered entities under GST, e-commerce sellers too can now avail input credit.
- Refunds under cash on delivery:Consumers extensively opt for ‘cash on delivery’ in India and such sales witness return of orders to the tune of 18%. The reconciliation process for refunds takes around 7-10 days. Initially, there might be confusion around generating refunds for cancelled orders where taxes have already been filed.
Impact of GST on E-commerce customer:
The advent of the Goods and Services Tax (GST) gave rise to different scenarios. Customers are happy with post GST discounts . Flipkart and Amazon restarted delivery in Uttar Pradesh, Bihar and Gujarat. And, smartphones and electronics regained their former glory in terms of sales. Here are the latest discounts on various e-commerce websites:
Flipkart is offering upto 80 per cent discount across various brands. The online retailer also launched its own brand of clothes recently under names Divastri and Metronaut, which is also on sale.
It’s rival, Amazon is not far behind. The US-headquartered firm is offering lucrative deals across major brands like Levi’s, Adidas and United Colors of Benetton.
The two major online portals are also offering attractive deals on bags and wrist watches as well.
As it was speculated that post-GST, the prices of electronic appliances will soar dramatically, but no, not in e-commerce world. While, Flipkart is offering up to 35 per cent off on large appliances like washing machines and vacuum cleaners, Amazon is offering up to 33 per cent off on air conditioners and refrigerators.
In case you want to buy that fancy sofa or a double bed, this would be the right time to do so. Flipkart is leaving no stone unturned to attract its customers, offering discount up to 81 per cent on sofa sets and other wooden furniture.
Another website, Pepperfry.com , is also offering good deals on furniture shopping. Pepperfry’s ongoing ‘Happy GST Sale’ is offering up to 55 per cent off on most products, including beds, wardrobes and shoe racks.
The new tax regime levies 18 per cent tax on cameras, but online the prices are unaffected. Canon and Nikon cameras on Flipkart are available with up to 50 per cent discount.
So, if it is a huge piece of an attractive furniture you want to decorate your living room with or just a perfect pair of jeans from your favourite brand, online shopping may be the best option.
Impact of GST on logistics and warehousing:
With the Government having done away with multiple layers of tax, GST is bound to reduce costs incurred in e-commerce logistics. This reduction, according to some estimates, could be as high as 20%. Also, with state-level taxes being subsumed under GST, e-commerce platforms can reduce warehousing costs as they need not maintain huge warehouses across multiple locations in India. Such warehouses were earlier operating below their rated capacities, adding to inefficiencies and the selling price of products. Now, e-commerce marketplaces can opt for maintaining a few warehouses at strategic locations. These well-maintained logistics hubs will be able to attract FDI inflows and lead to an increase in overall efficiency in operations. With the free movement of goods and services and a uniform tax rate across states, e-commerce sellers will be free to transport across different locations in India.
The implementation of GST stands to benefit e-commerce sellers, as due to the elimination of entry taxes and faster movement of goods vehicles across states, the last mile delivery costs will come down. This benefit can be passed on to customers. Also, e-commerce marketplaces are now free to source goods from SMEs across India and not just limit themselves to local players across states. They were compelled to do this earlier to save costs on heavy inter-state taxation. Such a move will give impetus to the SME sector in India and foster healthy competition among SMEs, thereby improving the quality of products and services available in India.
While some celebrated the benefits of GST others endured severe impacts. Marketplaces began banning non-GST compliant sellers and other platforms stopped pre-GST payments to sellers. As we can see, the GST law may have a negative impact on the e-commerce sector. Given that e-commerce sector in India is one of the most rapidly advancing sectors and the government is vigorously promoting digitised economy, the introduction of such cumbersome compliances cringes the growth of this sector.
On the surface of it all, everyone is for the tax and what it stands for but are online sellers happy with the way GST implementation was executed?
There is no doubt that e-commerce will be subject to increased tax compliance and subsequently increased costs. However, in the long run, GST should level the playing field for e-commerce sellers, thereby streamlining their operations and setting the tone for increased business growth.