Provisions in GST with Respect to E-Commerce

Last updated on August 8th, 2017 at 06:10 pm

Electronic Commerce or e-commerce has transformed the way business is done in India. Currently, the e-commerce industry in India is faced with the levy of multiple taxes. Every state has imposed its own set of rules and taxes on the e-commerce industry. The lack of clarity on the tax treatment of the various types of e-commerce transactions, and new aspects such as e-wallet and cashbacks, has resulted in a chaotic tax environment for the industry.

E-commerce firms are looking forward to the implementation of GST in the hope of greater clarity, and removal of state specific rules and levies. The draft Model GST Law recognizes the need for rules specific to the e-commerce industry. In this blog, we will look at the specific provisions with respect to e- commerce in GST.

  • The e-commerce operator and
  • Suppliers on e-commerce platforms

Let us see in detail the requirements from e-commerce operators and suppliers on e-commerce platforms under GST.

E-Commerce Operator

An e-commerce operator is a person who owns, operates or manages digital or electronic facility or platform for electronic commerce. The requirements from an e-commerce operator under GST are-

1. Mandatory registration
All e-commerce operators are mandatorily required to register under GST. This means that irrespective of their turnover, they must register under GST.

2. Tax to be paid by e-commerce operator on notified services
Certain service categories may be notified, on supply of which, tax shall be paid by the e-commerce operator, and not the supplier. In this respect,

      • If the e-commerce operator does not have an establishment in a state, any person representing the e-commerce operator for any purpose in the state will be liable to pay the tax
      • If the e-commerce operator does not have an establishment in a state, and also does not have a representative in the state, the e- commerce operator should appoint a person in the state for the purpose of paying tax, and this person shall be liable to pay the tax.

3. E-commerce operator has to collect tax at source
Every e-commerce operator should collect tax @ 2% on the net value of taxable supplies made through their platform, where the consideration, with respect to such supplies, has to be collected by the operator.

Net value of taxable supplies = Value of taxable supplies made by all registered taxable persons through the operator, other than notified supplies on which tax is paid by the operator (-) Value of taxable supplies returned to the suppliers

Example: Fast Deals is an e-commerce operator. Rakesh Pvt Ltd and Rohan Pvt Ltd are suppliers on Fast Deals. The following supplies are made on Fast Deals in October ‘17.

Outward supplies register of Fast Deals
Supplier
Taxable supplies (Rs.) Taxable supplies returned (Rs.) Net taxable supplies (Taxable supplies less taxable supplies returned (Rs.) TCS collected @2% (Rs.)
Rakesh Pvt Ltd 1,00,00,000 10,00,000 90,00,000 1,80,000
Rohan Pvt Ltd 2,00,00,000 20,00,000 1,80,00,000 3,60,000
Total 3,00,00,000 30,00,000 2,70,00,000 5,40,000

Here, the net taxable supplies of Fast Deals is Rs 2,70,00,000 and GST collected is Rs 5,40,000.

4. Returns and tax payment process

      • On 10th of a month, an e-commerce operator has to furnish Form GSTR-8 containing details of outward supplies made through the platform in the previous month, including supplies returned. In Form GSTR-8, invoice-wise details of supplies to registered taxable persons and aggregate value of supplies to unregistered persons must be provided. The e-commerce operator also has to pay the tax collected from suppliers.
        GST-Ecommerce-Operator
      • On 21st of a month, any discrepancy between supplies reported by the e-commerce operator and suppliers on the platform is made available in Form GST ITC-1. The discrepancy must be rectified in the return for the month in which it is communicated. In the above example, Fast Deals furnishes Form GSTR-8 for October’s supplies on 10th November ’17. If a discrepancy is reported in Form GST ITC-1 on 21st November ‘17, it must be rectified in the return for November ’17, to be filed on 10th December ’17.

Suppliers on e-commerce platforms

Suppliers on e-commerce platforms are persons who supply goods or services on an e-commerce platform. The requirements from suppliers on e-commerce platforms are-

1. Mandatory registration
All suppliers on e- commerce platforms are mandatorily required to register under GST. Hence, even e-commerce suppliers whose aggregate turnover does not exceed the threshold limit for registration will have to compulsorily register

2. Non-eligibility for Composition Scheme
A person who supplies goods or services through an e-commerce operator will not be eligible for registration under composition Scheme. Hence, even if the person’s aggregate turnover does not cross Rs. 50 Lakhs, he/she does not have the option to become a composition tax payer

3. Returns process
A supplier on an e-commerce platform has to follow the GST return process applicable to a regular dealer. In addition, following are the details to be provided with respect to supplies through e-commerce platforms –

      • On 10th of a month, a supplier has to furnish Form GSTR-1 containing details of outward supplies made through e-commerce platforms. In Form GSTR-1, invoice-wise details of supplies to registered taxable persons and aggregate value of supplies to unregistered persons made through the e-commerce platform must be provided.
      • On 11th of a month, Form GSTR-2A will be made available to the supplier. The aggregate amount of tax collected by e-commerce operators in the previous month will be auto populated, based on Form GSTR-8 filed by the e-commerce operators.
        GST-Ecommerce-Suppliers
      • On 15th of a month, a supplier has to furnish Form GSTR-2, in which the details of tax collected by the e-commerce operator can be accepted or modified. The tax collected will be credited to the supplier’s electronic cash ledger on provisional basis, which can be set-off against the tax liability
      • On 21st of a month, Form GST ITC-1 is made available to a supplier. Any discrepancy in supplies furnished with supplies reported by the e-commerce operator will be shown. The discrepancy must be rectified in the return for the month in which it is communicated. If not rectified and the value of supplies furnished by the operator is more than the value furnished by the supplier, the differential amount along with interest will be added to the tax liability of the supplier for the succeeding month.
        In the above example, Rakesh Pvt Ltd furnishes Form GSTR-1 for October’s supplies on 10th November ’17. If a discrepancy is reported in Form GST ITC-1 on 21st November ‘17, it must be rectified in the return for November ’17, to be filed on 10th December ’17.

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14 Comments

  • In case of E-Commerce Operator if they will collect in form of TCS@2% and they will file under GSTR8 in this case supplier of goods can see under GSTR2A and can claim input credit but Input available how it can be claim against CGST? SGST? or IGST?
    If I am supplier and I am using E Commerce platform to list my product and while supplying goods I will charge GST to particular buyer accoring to state supply and not to E Commerce Platform company is it correct????

  • STOCK TRANSFER FROM MANUFACTURING UNIT TO BRANCH WITHIN THE STATE AND SALES EFFECTED FROM THE BRANCH:

    IS THERE A TAX LIABILITY THAT ARISE ON STOCK TRANSFER TO BRANCH, IF SO

    IS THE INPUT TAX ON PURCHASE OF RAW MATERIALS AND CAPITAL GOODS FOR MANUFACTURE- REQUIRED TO BE SET OF AGAINST THE OUT PUT TAX CALCULATED ON THE STOCK TRANSFER OF FINISHED GOODS TO ITS OWN BRANCH WITHIN THE STATE OR CAN THE INPUT TAX BE SET OFF AGAINST OUTPUT TAX ON BRANCH SALES AS IN VAT REGIME

    KINDLY CLARIFY..

  • I want to sell computer, mobile parts and home appliances through e-commerce websites, however I don’t have vat or CST tin number. Should I go for GST registration first or do I need to get vat or CST tin number first…? Please help

    • You have to enrol under the Law applicable when you are starting your business. Currently, VAT is applicable. Once GST is implemented, you will need to register under GST. Under GST, e-commerce suppliers have to mandatorily register, irrespective of turnover.

    • Supply through own website is not an e-commerce supply. This will be taxed as a regular supply. It is just that the mode of supply is online.

  • Question remain unanswered are

    1. Is there any solution for e-commerce sellers which work on Mobile ?
    2. Is there any scope for small e-commerce seller or small portals surviving compliance shocks in GST regime ?
    2. Is there any way out to protect MSME from the continuous shortage of funds because return process of e-commerce portal can’t improve overnight .

    This will bring chaos in terms of TCS matching , output GST liability and unavailability of GST Credits on returns .
    Is there any accounting guidelines issued for various e-commerce portals in terms of booking Sales return on behalf of Sellers and basis of accounting followed for various deductions, charges , fees or compensation recorded in Seller’s Book.

    How it will impact Income Tax TDS liability in the hands of E-Commerce Seller ?
    How the classification and rate disputes or valuation disputes in case of warehouse to warehouse stock transfer by E-Commerce Operator will be resolved ?

    How E-Commerce Seller ( small one) will be able to utilized his/her all input credit spread across States and how this process with work with his existing version or future version of ERP system.

    regards
    GSTStreet
    Tax | Technology | Training | Hiring

    Play E-Commerce level -1 Quiz @GSTStreet and share your feedback at info@GSTSTreet.com

  • SIR CAN YOU PLS EXPLAIN PURCHASE OF CEMENT FROM COMPANY BY A DEALER AND SUPPLY TO END CUSTOMER WHO CAN BE REGISTERED UNDER GST OR END USER LIKE SELF CONSTRUCTING OWNERS HOW DO WE SHOW AND CALCULATE GST AND WHAT ARE THE PROCEDURES.
    THANKS

  • Thanks for explaining in simple steps. This is a great place to seek GST knowledge.

    I have a concern if my understanding is right – All suppliers on e-com portal should mandatory register and they are not eligible to take composition scheme route. What happens to very small traders especially individuals artisans who are looking e-com as medium of sales?

    Eg. An artisan at Dharavi – Mumbai who is into pottery today is selling her produce on e-com portal. On implementation of GST should she register with GST to list her product and sell online?

    I believe this move will hinder individuals to take advantage of technology and geography? This will encourage middlemen to operate for no reason and snatch away % margins.

    Is there a representation to relook this mandate?

    • It is good to the artisan pottery maker because 1) he/she directly enter into supply chain – middlemen cannot play a role thus profit goes to the maker. 2) can enter into more volume and value thus enhace business 3) assured of getting her sale price from e com operator and not to depend on agent- only for compliances she/he need to depend with professional

  • WHEN WILL THE SAME BE APPLICABLE FROM ?? DOES TALLY ERP9 IS CAPABLE OF HANDLING GST ?? WILL I GET PROPER TIMELY SUPPORT FROM TALLY ??

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