In India, electronic commerce enterprises are categorized as either “aggregators” or “marketplaces.” These platforms serve as intermediaries that facilitate transactions between sellers and buyers, giving rise to their liability under the Goods and Services Tax (GST) framework. Consequently, these digital marketplaces bear the responsibility of collecting and remitting GST on behalf of the vendors they host. The applicable GST rate hinges on the nature of the goods or services being transacted.
The process of registering for GST as an e-commerce business is as follows:
- E-commerce entities that fall within the ambit of GST are obligated to secure GST registration.
- This registration procedure is conducted exclusively through online channels, with businesses being able to initiate their application via the GST portal.
- Essential documents, such as the Permanent Account Number (PAN) card, Aadhaar card, proof of address, and banking details, need to be submitted during the registration process.
How to register for GST as an E-Commerce Business?
- GST operates on a principle of taxation based on the destination of goods and services, signifying that they should be taxed at the point of utilization or consumption, rather than their origination point.
- The determination of the “location of supply” governs the appropriate form of GST to be levied on the goods or services for the purpose of GST collection, encompassing Central GST (CGST), State GST (SGST), or Integrated GST (IGST).
- Erroneous assignment of the location of supply can culminate in the incorrect collection of taxes by an unintended state.
Here are several instances that illustrate the kind of Goods and Services Tax (GST) applied according to different locations of provision-
Illustration 1: Intra-regional Transaction
- Amit, a resident of Shimla, Himachal Pradesh, engages in a purchase of a smartwatch from TechGems, a seller operating from Chandigarh and listing on the e-commerce platform “Ezonics.”
- Given that both Amit, the purchaser, and TechGems, the vendor, are located within the boundaries of the same state, the transaction incurs the levies of Central Goods and Services Tax (CGST) and State Goods and Services Tax (SGST) exclusively.
Illustration 2: Inter-regional Transaction
- Amit, residing in Shimla, Himachal Pradesh, initiates the acquisition of a smartwatch from GadgetHub, a seller headquartered in Pune, Maharashtra, featured on the online platform “GizmoWorld.”
- Considering that the geographical location of the supplier differs from that of the purchaser, the transaction triggers the application of Integrated Goods and Services Tax (IGST).
Illustration 3: Delivery to a Third Party
- Amit, a resident of Shimla, Himachal Pradesh, places an order for a smartwatch through “Ezonics,” intended as a gift for his friend Ravi, residing in Jaipur, Rajasthan.
- Facilitating the delivery is ExpressTech, an entity based in Delhi, National Capital Territory of Delhi. Despite the delivery being directed towards Ravi, the invoice for the purchase is addressed to Amit.
- Within the framework of the Goods and Services Tax regulations, it is deemed that the consignment of the smartwatch is effectively received by the primary buyer, Amit, even though the ultimate recipient is his friend.
- Since this particular scenario aligns with intra-state supply criteria, the transaction attracts the imposition of Integrated Goods and Services Tax (IGST).
Key Considerations for E-Commerce Enterprises Regarding Goods and Services Tax (GST)
In the realm of e-commerce, meticulous attention to GST-related aspects is imperative for seamless operations. E-commerce operators should be cognizant of the following essential points to ensure compliance with GST regulations:
- Tax Officer Interaction: In instances where tax authorities necessitate information pertaining to supplies or inventory from e-commerce operators, an official notice will be dispatched to the operator. It becomes the responsibility of the e-commerce entity to furnish the requested particulars within a 15-day window subsequent to the notice issuance. Notably, this notice is dispatched by an officer holding a position not lower than that of a Deputy Commissioner.
- Additional Place of Business: For suppliers who choose to warehouse their products within the facilities managed by e-commerce operators, it is mandatory for the said warehouse to be formally registered as an auxiliary place of business. Adhering to this requirement ensures that the entire supply chain remains in compliance with GST mandates.
- Tax Collection at Source (TCS) for Tax-Exempt Goods: E-commerce operators are not mandated to levy TCS on transactions involving tax-exempted goods through their portals. This exemption is grounded in the fact that the net taxable value of these products amounts to nil, consequently negating the need for TCS imposition.
- TCS Exemption for Supplier-Owned E-Commerce Platforms: In cases where a supplier directly sells goods via their proprietary e-commerce platform, the imposition of TCS is not applicable. This underscores the distinction between transactions facilitated by the operator and those conducted on an individual supplier’s digital platform.
In conclusion, comprehending the intricacies of GST within the Indian e-commerce landscape holds paramount importance. Adhering to the stipulated laws and regulations is pivotal to evading legal complications. Maintaining an informed stance, coupled with meticulous record-keeping, empowers businesses to accurately administer GST rates, ensure timely GST Return Filing, and fulfill tax obligations. This diligence not only safeguards against penalties but also actively contributes to the nation’s economic advancement, fostering transparency and accountability within the tax framework.