Impact of GST on E-commerce
Parul Madaan 26 Dec 2019

Impact of GST on E-commerce


Goods and Services Tax (GST) is an indirect tax levied on the supply of goods and services in India. It's a comprehensive, multi-stage, destination-based tax: comprehensive as it has subsumed almost all indirect taxes except for a few state taxes. Multi-stage as it is, the GST is levied on all stages of the production process but is supposed to be reimbursed to all parties at different stages of production other than the final consumer and as a destination-based tax is collected from the point of sale and not from the point of origin like previous taxes.

The implementation of GST has a major impact on the e-commerce sector in India. The implementation is being hailed as the country's largest reform so far. As part of its efforts to create a single market for the entire nation, the government is implementing GST.

Previously, business and consumers both interacted with the Indian economy's diverse segmentation, which is being dealt with within GST. The idea of a single supply tax has reduced the need for sellers to register with various tax channels and to file different returns.

According to the study conducted by the Internet and Mobile Association of India, India's e-commerce sector is estimated to have reached Rs 211,005 in December 2016. The report also claims that by 2020, India is expected to generate $100 billion in revenue from online retail. Electronic Commerce's rebellion in India has also led to online marketplace architecture.  Big players like Amazon or Flipkart, as well as small retailers and sellers, make the e-commerce industry in India. The GST has a significant impact on the industry, the effects on e-commerce are that it allows third-party sellers on their platform to register and sell online, Marketplace pays the selling value of a subscription fee / commission from listed sellers. Under this model, third-party vendors gain access to a larger marketplace-registered customer base.

Under such a scheme, the government also allowed Foreign Direct Investments to promote the business model of e-commerce in India. Marketplaces provided additional revenue and distribution outlets for sellers that were impossible for an offline seller.

The implementation of these regulatory requirements has forced the population of online sellers to adopt the GST regime. Such as a threshold cap has been set for all companies by the government. Once such a threshold cap is crossed, a company is liable to file for Goods and Services Tax. Nevertheless, this cap does not apply in the case of sellers of e-commerce, Most of these marketplace listed sellers are small and medium-sized enterprises. Under GST regulation, the government introduced a composition system. The primary objective of this scheme is to reduce the compliance burden for small and medium-sized enterprises. Under this scheme, firms must file returns on a quarterly basis instead of a monthly basis and pay taxes at nominal rates of up to 2% and under the new tax regime, marketplace operators are expected to deduct and deposit with government a percentage sum as the seller's GST liability. This mechanism is referred to under the GST legislation as "Tax Collection at Source (TCS). The marketplace seller would finally have to file monthly returns under GST to claim the marketplace operator's TCS credit. This will also affect these sellers ' liquidity and cash flow.

Where E-commerce is defined in the Model GST Law (MGL)?

E-Commerce is specified as such in Section 43B(d) of the MGL (Model GST Law) – E-Commerce means the supply or reception of goods and/or services or the transmission of funds or data via an electronic network, primarily via the Internet, using any of the Internet-based applications but not limited to e-mail, instant messaging, shopping carts, web services, universal definition Discovery and integration, File Transfer Protocol and Electronic and Data Interchange whether or not the payment is made electronically and whether or not the user makes the final delivery of the goods and/or services.

 GST has implemented a system of ' one country one tax, ' but its implications on different industries are slightly different. Based on whether the industry is concerned with manufacturing, distribution and retailing or providing a service, the first degree of distinction will come into play.

Effect on Manufacturers, Distributor, and Retailers of GST

GST is a boost to competitiveness and performance. Declining exports and high spending on infrastructure are just some of this sector's concerns. The administrative costs for manufacturers and distributors had also been increased by multiple indirect taxes, and with GST in place, the compliance burden has eased and this sector will grow more strongly.

But it will now have to file because of GST activity that was not previously under the tax bracket. This will result in less tax evasion.

Effect of GST on the service providers

 Much of the tax burden is borne by sectors such as IT, telecommunications, insurance, business support, banking and financial services, etc. Such pan-India businesses are already working in a single market and will see the pressure of compliance rising. But each place of business in each state will have to be reported separately.

India's e-commerce market has grown by leaps and bounds. GST will support the continued growth of the e-commerce sector in many ways, but the long-term effects will be particularly interesting as the GST law specifically proposes a system for Tax Collection at Source (TCS), with which e-com companies are not too pleased. The current rate of TCS is at 1%.


Some of the key areas of GST impacting the e-commerce sector-

Improved e-commerce reach

The GST has opened up new avenues to compete with larger companies for small and medium-sized sellers. Because of the looming tax rates in different states earlier, sellers were usually confined only to their states, limiting their free reach to far-flung areas. E-sellers will be relieved from varying tax structures by introducing GST.

Registration must be mandatory

The government defines a registry company if it has a maximum of more than 20 lakes. Around 10 lake rupees dropped this cap for northeastern states. The situation is different for the e-commerce sector as all sellers must be licensed even if their threshold does not reach 20 lakes. This is a limitation which if removed would allow more sellers to become a part of an online community.

Tax Collected at Source (TCS)

E-commerce marketplaces must subtract, apart from vendor liability, 2 percent of TCS net-value revenue and will be billed to government. In addition, it is important to count the sales announced by the marketplaces and the seller's sales per month. If any inconsistencies remain, the seller will have to pay the extra number. The goal of this measure is to root out fraudulent online marketplace activities and decrease the amount of tax evasion, building confidence between marketplaces and sellers.

Composition is not exempt

As part of GST acts, e-commerce sellers are not eligible to receive compensation. The composition scheme would have allowed sellers with a turnover of approximately 75 lakhs to file tax returns on a quarterly basis rather than on a monthly basis. The tax amount would have been a mere 2 percent, but for sellers the system was kept out of control.

Credit rise

The GST introduced e-commerce marketplace input tax credit, creating a direct contact between the input product and the final product. They will be able to take advantage of input tax credit.

Cash on delivery refund

Cash-on-delivery is a more popular option for users in developing countries such as India. After a period of 7-10 days, refunds are given on such orders if the taxes have already been paid. Under GST, this troublesome problem was taken care of.

Tax returns are filed

The method of filing the government's tax returns was made in the same way that brick-and-mortar stores bill. The form GSTR-1 must be submitted by 10th of each month, containing descriptions of outward supplies. By 11th of each month, the seller will receive the GSTR-2 form, details of the e-commerce marketplace's taxes. The seller will return the form by the 15th of each month after the analysis. It was necessary to resolve any inconsistencies by the 20th of each month. Until filing returns, this particular agency allowed sellers to collect their data from different sources.



The GST would definitely have a positive impact on our country's e-commerce market. The system would reduce operating costs by about 20 percent, which will also minimize distribution and warehousing costs. The move would enable sellers to maintain and operate warehouses efficiently at strategic locations. The cost of end-of-mile distribution will be lower due to quicker movement of goods, the profit can be passed on to the consumers. E-commerce markets will now be free to import products from small and medium-sized enterprises, thus enriching product quality. The long-term GST would create a level playing field for marketplaces in e-commerce, streamlining their offerings and enhancing business growth.

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content is really good and informative .kindly add gst data on e.commerce

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