Online buying or selling transactions are referred as e-commerce. A person or company who owns, manage or operate an online platform to sell goods or services electronically known as an electronic commerce (e-commerce) operator. Companies such as Paytm, Myntra, Flipkart, Amazon, Ola, Uber fall under the category of e-commerce players. In India, e-commerce market is growing at a fast pace. In current regime there are multiple indirect taxes are levied on the online transactions. In these indirect taxes, some of the taxes are collected by State Government, and some are collected by Central Government. There is a complex tax environment for the e-commerce which brings ambiguity and disputes but now new GST taxation will affect the fundamentals of tax in e-commerce. The first time Indian Government has taken the initiative to regulate the e-commerce business. There are some issues in the current regime such as
1. Who will pay the Tax –
In an e-commerce transaction, there are multiple parties involved, so it becomes difficult for the tax authorities to identify who is the actual seller and who will pay the tax.
2. Waybills –
For the inward and outward of goods in a state generally, the e-commerce operators have to produce waybills for the movement of goods. Waybills compliance restricts the free movement of the goods within India, and it is a regulatory burden on VAT authorities as well as e-commerce operators.
3. it’s hard for the tax authorities to track the discounts on every product.
4. There is a high rate of returns and cancellation of the orders in the e-commerce industry. It is also a difficult task to track every order for the tax authorities.
5. E-commerce has a complex transaction structure which leads a credit blockage at every stage it translates the higher cost for e-commerce operator as well as the customer.
The introduction of GST will simplify the highly complex tax environment due to multiple taxes, tax cascading, convoluted compliances and extensive litigations. GST will streamline all the indirect taxes and will be lined with international tax practices. There are three kinds of taxes under GST –
- Central Goods and Service Tax (CGST) – It will be collected by Central Government.
- State Goods and Service Tax (SGST) – It will be collected by State Government.
- Integrated Goods and Service Tax (IGST) – It will be collected by Central Government.
Nature of Supply of Goods and Services –
In e-commerce interstate and intrastate both kinds of transactions occur, so it becomes important which kind of tax will be levied. On intrastate transaction, CGST and SGST will be imposed, and on an interstate transaction, IGST and additional 1% tax will be levied on the sale of goods and services for two years. This additional tax will be levy only on the sales not on the stock transfer.
Threshold Limit –
There is no threshold limit for the e-commerce industry. All the e-commerce businesses have to obtain a GST registration.
Composition Scheme –
The composition scheme is to reduce the burden of compliances for small and medium business operators, but this scheme will not cover the small and medium seller of e-commerce.
GST Registration –
Now the businesses under GST have to register new GST Registration Online in each state where they are supplying their goods and services.
Tax Collection at Source –
Under the tax collection at source, e-commerce operators have to cut some percentage from e-commerce seller to submit the GST to Government and sellers can file the GST claim every month for the credit TCS collected by the e-commerce operator.
A Comparison of Current Tax Regime and GST
Advantage of GST on e-commerce
- GST will replace 17 indirect taxes, so it will become easy and cheap to follow the compliances.
- The tax rate will be the same for each product, so there will be no hassle to calculate different tax on different products.
- There will be no intrastate tax so that things will become cheaper.
- Inventory cost and the logistic cost will fall because of reduced warehouses.
Though there will be an improvement in the current tax structure after GST but e-commerce require lots of reform to make the process simple and smooth. With the implementation of GST e-commerce businesses and consumer, both will be benefited.