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Impact of GST on E-Commerce Sector with examples


With GST coming in from 01.04.2017 e-commerce sector will have to see major changes. As per the provisions of the law person supplying goods/services through an e-commerce operator or an e-commerce entity itself both have to take the registration under GST irrespective of the turnover.

The law prescribes that when an e-commerce company makes a payment to the supplier of goods/services it has to deduct certain percentage as Tax at Source and deposit the same by the 10th of next month. It also has to file a statement with every month regarding the supply made by the supplier through their channel. This supply will be matched with the outward supply shown by the actual supplier under his GSTR 3 (monthly return). If there is a mismatch the complete onus shall lie on the actual supplier.

The tax deposited by the e-commerce operator shall be reflected in the cash credit ledger of the actual supplier. The final GST Liability of the supplier will be worked out and adjusted with the cash ledger account. Anything payable after that shall be the final liability payable by the actual supplier. If the goods are returned by the customer in such a scenario the appropriate debit/credit notes shall be raised to reverse the position. In all circumstances there shall be no loss either to the actual supplier or the e-commerce operator.

Let us understand this by way of example:

Mr. Ramu of Delhi is a dealer of Woodland jackets. He is also registered with flipkart in Bangalore as the assured vendor. Now a customer in Delhi places an order for a jacket at flipkart for Rs. 1,000. Now Flipkart in turn places the order with the vendor in Delhi, who supplies the goods to the customer and charges GST on same. If the invoice is made directly in the name of the customer and the transaction is cash on delivery, there shall arise no question of tax deduction at source by flipkart. In such a case flipkart will issue another invoice for convenience charges and charge GST on the same. If Flipkart has already received the payment through debit/credit card which it further remits to Ramu, in this case TDS shall be deducted and deposited in the account of Ramu. The details of such supplies by Ramu shall be reported by flipkart.

The same scenario shall come in case of aggregators like ola cabs etc. In case of trade networks like ebay, olx, the seller is an individual and whatever he is selling is his personal effect and hence he shall not be required to take registration under GST Law. If the person is involved in regular trade i.e purchase and sale of a particular item , in that he has to take registration and charge GST on the sale made by him through olx and the same shall be reported by the e-commerce entity.  This can be substantiated with the definition of supply which says that any transfer would be treated as supply on when it is the course or furtherance of business, If the transfer is out of the personal effect, it shall be no means be treated as Supply.

Other than the above there are few procedural aspects related to e-commerce.
1.   They have to take registration by filing the appropriate registration forms.
2.     E-Commerce operator has to file four monthly returns i.e. GSTR-1,2 ,3 & 8 along with one annual return. These sums up to 49 returns in a year.
3.    Supplier who is supplying through e-commerce entity has to file 37 returns annually irrespective of his turnover.
4.   Proper books of accounts have to be maintained at each location of operation  

Looking at the heavy compliance which entities related e-commerce activities have to do, it is quite certain that they have to pay heavy costs for the same.  There should be threshold limit relief to the vendors supplying through online portals in order to reduce their compliance costs.

by:

Keshav R Garg
(B.Com, FCA, CS, ISA (ICAI))
Faculty for GST: Indirect Tax Committee of ICAI
Author: Bharat's GST Ready Reckoner
            A Handbook on GST
Adviser for GST: Industries Association of Chandigarh 
Member: Indirect Tax Committee of CII, PHDCCI, MyGst.MyTax Foundation
Address: 3328, Sector 27 D, Chandigarh, India - 160 019
Phones: +91-172-461-3328, +91-98880-90008

Mails: mygst.mytax@gmail.com, keshavgarg@kdai.in   

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