January 25, 2023
Shreeja Ray

Impact of GST on E-Commerce Marketplace Sellers

India imposes an indirect tax known as the Goods and Services Tax (GST) on the delivery of goods and services. It is a thorough, multi-stage, destination-based tax, thorough since it has absorbed nearly all indirect taxes, with the exception of a few state taxes. The GST's adoption has a significant impact on India's e-commerce market. The implementation is being heralded as the biggest reform the nation has yet to implement. The government is adopting GST as part of its efforts to establish a single market for the entire country.

What is an E-Commerce Marketplace?

A marketplace is an online shopping site that is run by an online retailer, like Flipkart, Snapdeal, or Amazon. The following are some attributes of a marketplace model:

1. Marketplace allows independent vendors to sign up and conduct online sales on their site.

2. Marketplace charges listed merchants a subscription fee or commission based on the sale price.

3. Under this arrangement, third-party vendors have more access to customers who have registered with the marketplace.

4. On the other side, customers have access to numerous merchants and affordable pricing for desired goods.

5. On these marketplaces, items are either dispatched directly by the merchant or third-party seller or through the platform operator's fulfillment facility.

Key Impacts of GST On E-Commerce Sellers

1. Tax-Credit

Since they are registered as traders and are therefore unable to claim a service tax credit, the service tax paid on commission by online sellers to marketplaces currently becomes their cost. Once GST is in place, service tax amounts can be used as input credits, increasing their margin of profit. Additionally, more people will start selling online as a result of this.

2. Transparency

With the implementation of GST, it will be simpler to sift out phony, subpar, and non-compliant sellers, making room for sincere, tax-compliant sellers. Reduced competition will also be advantageous. This would provide transparency among numerous different online marketplace income schemes. Instilling trust in a still-evolving system and accelerating change are both facilitated by transparency.

3. Providing equal opportunity for all vendors throughout states

Mobile phones are currently subject to a 5% tax in Karnataka and a 13.5% levy in Maharashtra. This arbitrary pricing structure will be replaced with a more consistent and reliable system once GST is in place. Additionally, it will hasten local retailers' adoption of internet marketplaces in order to boost sales.

4. Tax cascading elimination

The disagreement over the classification of goods and services will be resolved once a single uniform tax is in place. It will allow for the withdrawal of exemptions or the conversion of exemptions into reimbursements. However, the most value will be added once seamless tax credits are implemented throughout the entire value chain, minimizing tax cascading.

5. Simple business procedures

Presently, creating documents as straightforward as invoices is fraught with complexity. When GST is implemented, these procedures will be simplified to a single step or two. At every point of the transaction, for instance, the invoices now require a description of the products. Only an HSN (Harmonized System Nomenclature) would be included on invoices under GST in order to distinguish sales of various items across platforms. It will no longer be necessary to describe each product in detail. Since creating invoices is a significant portion of their business, this will be extremely helpful for online retailers.

6. Limiting product resale (specially B2B)

Online marketplaces make significant investments in finding new customers in order to bring in profitable sales for the vendors who use their platform. Customers who purchase items at a discount and then resale them offline have a significant negative impact on online wholesale. Input Tax Credit for GST will be a very effective way to stop this wrongdoing. The provider in the transaction must submit returns on a monthly basis with the GSTIN (GST Identification Number) of the buyer in order to collect Input Tax Credit on any products or services. The Input Tax Credit on such transaction will only be permitted after the GSTIN has been disclosed. Mismatch tracking will become incredibly straightforward. Online sellers will be able to successfully file monthly reports by utilizing customer GSTINs, even for clients wishing to use it for personal use.

FAQs on E-commerce Sector Under GST

Could the inward supply of ECOs (obligated to reverse charge) in GSTR 3B be listed as the supplies of the restaurant services paid for with ECOs?

No, the recipients of the restaurant services provided by them would not be ECOs. These wouldn't be listed as inbound supplies because they aren't input services for the ECO (responsible for the reverse charge).

Whether the restaurant or ECO provided the restaurant service, who is responsible for providing the invoice?

The invoice for the restaurant service provided by ECO pursuant to section 9 will be issued by ECO (5).

Would ECOs be in charge of reporting the taxes related to the provision of restaurant services paid for by unregistered business entities?

Yes, an ECO would be required to file the GST on any restaurant services provided by them as well as the unregistered person.


Comparison Between GST in India and Other Countries, Is GST Registration Mandatory for E-Commerce, GST: Payment Process and Refunds 

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