In the digital age, e-commerce has become integral to the global marketplace. The world of possibilities for online sellers is vast, but navigating the complex landscape of tax regulations can be challenging. This comprehensive guide demystifies the realm of Goods and Services Tax (GST) for online sellers, shedding light on crucial aspects such as registration, compliance, tax collection, and more. Whether you’re a seasoned e-commerce entrepreneur or just venturing into the online marketplace, understanding the intricacies of GST is your key to seamless operations and financial success.
Defining E-commerce Sellers
E-commerce sellers encompass businesses and individuals engaged in the online sale of products or services. They utilise various e-commerce platforms like Amazon, Flipkart, and eBay. These sellers may include manufacturers, distributors, retailers, or individuals seeking to market their products or services online.
Who pays GST?
The seller bears the responsibility to pay GST. The e-commerce operator functions as a commission agent intermediary, bridging the gap between the buyer and seller. When the seller directly sells goods to the customer, they are accountable for paying the GST.
Consequently, the seller must issue a GST invoice to the buyer, including details like GSTIN, address, product specifics, quantity, tax rate, and the amount of tax payable.
Major e-commerce platforms such as Amazon, Snapdeal and Flipkart simplify this process by allowing sellers to generate invoices directly from their media. This allows the seller to effortlessly generate the invoice and provide the product to the customer along with the invoice.
Registration Requirements in Various Scenarios:
Seller Already Registered under GST:
If a seller is already registered under GST, they may continue their registration without any need for intimation, notice, or changes. However, if a person is registered under the composition scheme, they must shift to registration under the standard scheme.
Selling Exempted Goods:
Individuals exclusively selling exempted goods can register on online selling platforms without requiring a GSTIN (GST Identification Number). In this case, GST registration is not mandatory.
Operating Across Multiple States:
Online sellers engaged in business across multiple states must obtain GST registration in each form they make supplies.
Different Places of Supply:
In scenarios where the place of supply differs from the seller’s office, the online seller must secure GST registration in the state where the place of supply is located.
Guidelines for Determining Place of Supply in Online Selling
In the context of GST, the taxation system is destination-based, meaning that goods and services are subject to taxation where they are consumed, not at their origin. Place of supply holds significant importance in the GST framework as it dictates the type of tax to be levied.
When the Place of Supply Matches the Supplier’s Location within the Same State:
In cases where the place of supply and the supplier’s location are within the same state, both Central Goods and Service Tax (CGST) and State Goods and Service Tax (SGST) apply.
When the Place of Supply Differs from the Supplier’s Location:
Integrated Goods and Service Tax (IGST) applies when the place of supply and the supplier’s locations differ.
The GST Registration Process for E-commerce Sellers
Access the GST Portal:
The journey towards GST registration for e-commerce sellers involves visiting the official GST portal, accessible at www.gst.gov.in.
Navigate to “Services”:
Once on the portal’s home page, click on the “Services” tab, and from the dropdown menu, select “Registration.”
Complete the Required Information:
E-commerce sellers are then prompted to furnish essential details, including their PAN (Permanent Account Number), email address, mobile number, and the state where their business operates.
Upload Essential Documents:
The next step entails uploading critical documents such as the PAN card, Aadhaar card, bank statement, and proof of address as specified by the authorities.
Submit Your Application:
After entering all the necessary information and uploading the requisite documents, e-commerce sellers must apply through the portal.
The GST authorities will subsequently undertake the verification process, during which they may request additional information or documentation if deemed necessary.
Receipt of GST Registration Certificate:
Upon application approval, e-commerce sellers will be issued the GST registration certificate, signifying their successful registration under the Goods and Services Tax system.
Tax Collected at Source (TCS) in E-commerce:
When you conduct sales of goods or services through an e-commerce platform, such as Amazon, the e-commerce operator (ECO) will withhold a portion of the payment received from the customer before disbursing funds to the seller. This withheld amount should not exceed 1% of the total sales and is a tax obligation owed to the government. Significantly, you can offset this tax by claiming it as a deduction on your GST returns in the same month it was deducted. This credit can be claimed when the e-commerce operator uploads the TCS details.
Both the e-commerce operator and the sellers must provide the government with comprehensive details regarding all sales transactions.
Commission and Its Input Tax Credit
When online platforms facilitate sales, they typically charge sellers a commission, a percentage of the sale price. The specific rate varies depending on the platform and the goods sold category.
For this commission, the platform must levy GST at a rate of 18%, and sellers can claim input tax credit for this GST.
Additionally, the platform may issue credit notes related to the commission or other charges. The GST on these credit notes is deducted from the invoice’s GST to calculate the input tax credit that can be claimed.
Furthermore, the platform may issue invoices for services such as delivery charges, advertisement expenses, and other charges. Input tax credits can also be claimed for these expenses.
GST Return Filing
The provisions for GST return filing remain consistent for online and offline sellers. You must submit GSTR-1 and GSTR-3B returns monthly or quarterly, depending on your selection in the QRMP preference.
Additionally, if you opt for quarterly returns, you may need to file an invoice furnishing facility (IFF).
It’s essential to remember that GST returns must be filed starting from the registration month, even if no transactions have occurred during that period. In other words, filing NIL returns is mandatory; failure to do so may result in penalties.
The introduction of GST has brought about a significant shift in India’s e-commerce landscape. Online sellers of goods and services now navigate a tax framework that varies based on their turnover and the nature of their offerings. Furthermore, GST has far-reaching implications on the place of supply and the applicable tax rates in online transactions. It allows online sellers to harness the advantages of input tax credits, combat tax evasion, and bolster their competitive edge in the marketplace.
As a dynamic and ever-evolving tax law, GST seeks to streamline and unify India’s complex web of indirect taxes. Online sellers must remain vigilant and informed, staying abreast of the latest developments and changes in the GST landscape to ensure seamless and trouble-free compliance.
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Frequently Asked Questions(FAQs)
1. How Much Do Online Sellers Receive in Their Bank Account?
Online sellers receive the sale amount in their bank account after various deductions made by the e-commerce operator. These deductions may include commissions, packaging and delivery charges, Tax Collected at Source (TCS), godown or storage fees, and other additional costs.
2. Can Buyers Add Their GSTIN to Invoices?
Yes, specific online platforms, such as Amazon, offer buyers the option to include their GSTIN on invoices. This provision allows buyers to claim Input Tax Credit (ITC) based on the information provided in the invoice.