Effects of GST on suppliers of e-commerce platforms

According to recent study, it is anticipated that India’s e-commerce industry will cross Rs.11,000 crore by 2020. It is also projected that the sector will grow at a Compounded Annual Growth Rate of over 50%, the highest across all the nations across the globe. The move of currency demonetisation and the recent push towards a digital economy has propelled the growth in e-commerce industry.

These are certainly very exciting times for a supplier that is selling the goods on e-commerce platforms. This platform certainly gives them an access to customers residing in distant geographies. E-commerce certainly provides them with low operational costs and there is a certain level of scalability that is brought to the table. In the present scenario, taxation related to e-commerce transactions has a lot of ambiguity and different states have separate tax structures. With GST set to be in motion, these suppliers would require appropriate GST training.

Let us now try to enhance our understanding about GST on suppliers of various online marketplaces.

  • Availability of input credit
  • Current tax structure

As per the current tax regime, online marketplaces and e-commerce platforms levy Service Tax on a wide-array of services provided to various suppliers on their platform, like logistics, warehousing, platform commission etc. Suppliers of various goods and services on these marketplaces cannot claim input credit on various taxes paid on such services, as it becomes more of a cost.

  • GST regime

There would be a positive impact on the suppliers who have registered on the GST portal as there would certainly be an availability of input credit. Under the unified tax structure, GST, input credit would certainly be accessible on all the given inputs that would be used for taking the business operations in a forward direction. As a result of this, it would lead to a reduction in the overall cost of operations, adding up to their costs.

  • Uniform tax structure across all states
  • Current structure

Under the current regime for indirect taxes, suppliers of goods and services have to keep a tab on the taxation rules for various states, as per the product or service they offer. The same product is levied a tax on different rates in different states. In some of the cases, marketplaces levy multiple taxes on the same product. A majority of the states are levying entry tax for entry of goods sold online.

  • GST Regime

Once GST comes into effect, there would be uniformity in taxes across all the states in India, regardless of the fact whether the product is sold inside a brick and mortar store or through an online channel. A proper GST training module will certainly improve the level of understanding for all suppliers on these e-commerce platforms.

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