Since its inception, the Indian e-commerce segment has witnessed the tremendous growth and success. As per the report submitted by Internet and Mobile Association of India, the Indian e-commerce market is expected to generate the revenue of more than $200 billion by the end of the year 2020.
This uprising in the online selling and electronic commerce market has resulted in a fierce competition between the leading marketplaces across the nation. E-commerce operators like Flipkart, Amazon, and Snapdeal are the most common examples of marketplace model that re prevalent in the Indian retail eco-system.
These marketplaces provide small and large scale retailers a platform to sell their goods online without having their e-commerce set-up or having them as an additional channel for sale. All the major marketplaces claim to have almost lacs of small retailers affiliated to them with millions of their SKU’s live on these platforms. While the number of sellers on the marketplace model is increasing rapidly, the new launched indirect tax system GST is surely going to affect their sales. However, the GST bill has specific rules and regulations for this segment that may help in reducing the sense of fear that has started prevailing.
The new introduced Goods and Services Tax (GST) has made some compulsory rules and regulations for e-commerce marketplaces that they have to embrace, whether willingly or unwillingly. These compliance are:
No Threshold For GST Registration
The GST has specified threshold limit of 19 lac annual turnover for every business entity. Once the threshold is breached the business will become liable to register under Goods and Services Tax. However, there is no such limit applied to e-commerce marketplace sellers. All the businesses involved in online selling and e-commerce activities are liable to register for the GST irrespective of their annual turnover figure.
No Benefit Under Composition Scheme
Most of the retailers registered with the online marketplaces are either small or medium scale businesses. As per the new GST law, there is a composition scheme for small and medium scale businesses, which is aimed to reduce the compliance burden on small business owners. As per the scheme, these businesses need to file their tax returns quarterly and not monthly that too at a nominal rate of up to 2%.
However, this composition scheme is not applicable on retailers associated with online marketplaces.
At Source Tax Collection By Marketplace Operator
Under the new tax regime, it has become mandatory for the marketplace operators to deduct a desired percentage of the amount as a GST liability of their seller and deposit it to the government. The mechanism is known as ‘Tax Collection at Source (TCS)’ as per the new GST law. The market seller is liable to file monthly tax returns under GST so that they can claim the credit of their TCS collected from the retailers. This will have a huge impact on the liquidity and business cash flow of the small sellers.
While most of the online marketplace operators have finished analyzing the impact of GST on their business, some are still unclear of the many compliance and rules that will apply to them under GST.
It is advisable to all the marketplace owners that they must keep themselves abreast of all the changes coming their way and start implementing their GST transition strategy for the smooth functioning of the business. Plan your warehousing and logistics requirements as per GST compliance and make use of technologies and platforms that will allow them to run their business with GST compliance.
Even though it’s a very early implementation stage for GST, the marketplace sellers may not have the luxury of time to make informed business decisions.