E-commerce transactions to fall under GST: Here is why it’s both good and bad

Clarification has been received by the Center that GST will engulf all transactions on e-commerce portals too, beginning 1st April 2017. While the new GST bill will bring mounds of relief to e-commerce platforms, it will also ruffle some feathers in the process.

The GST bill states that all goods and services will attract a unified tax at the first point of transaction, which for e-commerce sites will be the time the good or service is sold by the supplier.

The new reform will enable e-commerce sites to pay a streamlined tax which is currently governed separately by the State and the Center and differs across geographies. For example, the State Government Assam, Bihar, and Uttarakhand imposed a 10% tax on entry to the State for online goods. GST will help e-commerce operators avoid such arbitrage.

What could make things difficult for e-commerce platforms?

While there will be a marginalized improvement on the tax governance, it could also make things difficult. Many suppliers on e-commerce sites receive returns or refund requests. With the GST tax already paid by the e-commerce company at the time of sale of the good or service, the difficulty will arise in filing a refund for the tax paid on the returned good or service sold.

While the GST bill will unify Central and State Government taxes like Central Sales Tax, Value Added Tax, and Service Tax, many e-commerce sites have been struggling with what to categorize some of their offerings as; either goods or services. Digital assets like music, e-books, and streaming subscriptions cause confusion as being both a good and service.

Lastly, every e-commerce operator would need to provide a complete inventory of their goods and services in order for a tally to be conducted against the GST tax paid for the sales inventory filed.

The GST law further states that tax will be applicable for individuals/operators of e-commerce industries with an annual turnover of over above Rs. 10 lakhs (Rs. 5 lakhs for north-eastern states). Additionally, e-commerce entities with a turnover of less than Rs. 50 lakhs annually will attract a levy of not less that 1% as compositional tax.