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  • GST Impact on Ecommerce
    GST India
26 June

GST Impact on Ecommerce

GST India

The Goods and Services Tax (Called as GST) is an indirect tax reform which aims to remove tax barriers between states and Centre. So, This will create a single market. Once this step is taken, the tax barriers between states and Centre and states will disappear.  The main objectives of reducing tax evasion and making a tax payment to the taxpayers are the main aims of the government through GST. There are cases in which the Government can not find tax evasion and tax returns in the existing tax structure.

GST India

The rising of Electronic Commerce in India has also affected in the conception of online marketplaces. A Marketplace is an e-commerce platform owned by the E-commerce Operator such as Amazon, Flipkart, Snapdeal, Ebay, Mantra, Jabong etc.
Some of the features of a marketplace model are:

  1. Marketplace enables third-party sellers to register and sell online on its own platform.
  2. It charges subscription fees from listed sellers.
  3. Third-party sellers under this model gain access to a larger customer base, registered with the marketplace.
    The Government has allowed Foreign Direct Investments(FDI) under such model to promote e-commerce marketplace business model in India. 
    e-commerce is a transaction of buying or selling online. E- commerce draws on technologies such as supply chain management, mobile e-commerceInternet marketing, E-commerce Advertising, Digital payment services, electronic data interchange (EDI), Online transaction processing, Inventory management systems, and automated data collection systems.

 e-commerce businesses may be applied all or some of the following:

  1. Online shopping websites for retail sales direct to consumers providing in online marketplaces, which process third-party business-to-consumer(B2C) or consumer-to-consumer(C2C) sales
  2. Business-to-business(B2B) buying and selling
  3. Using relevant demographic data through web contacts and social media 
  4. Business-to-business (B2B) electronic data interchange
  5. Marketing to prospective and established customers by e-mail or fax (for example, with newsletters)
  6. Engaging in retail for launching new products and services
  7. Online financial exchanges for currency exchanges or trading purposes

Online buying or selling transactions are referred as e-commerce. A person or company who owns, manage or operate an online platform to sell goods or services electronically known as an electronic commerce (e-commerce) operator. Companies such as Flipkart, Amazon, Ola, Uber, are fallPaytm, OLX, Fall under the category of e-commerce players. In India, e-commerce market is growing at a fast pace. In current regime there are multiple indirect taxes are levied on the online transactions. In these indirect taxes, some of the taxes are collected by State Government, and some are collected by Central Government. There is a complex tax environment for the e-commerce which brings ambiguity and disputes but now new GST taxation will affect the fundamentals of tax in e-commerce. The first time Indian Government has taken the initiative to regulate the e-commerce business.

There are some issues in the current regime such as

1. Who will pay the Tax –
In an e-commerce transaction, there are multiple parties involved, so it becomes difficult for the tax authorities to identify who is the actual seller and who will pay the tax.
2. Waybills –
For the inward and outward of goods in a state generally, the e-commerce operators have to produce waybills for the movement of goods. Waybills compliance restricts the free movement of the goods within India, and it is a regulatory burden on VAT authorities as well as e-commerce operators.
3. it’s hard for the tax authorities to track the discounts on every product.
4. There is a high rate of returns and cancellation of the orders in the e-commerce industry. It is also a difficult task to track every order for the tax authorities.
5. E-commerce has a complex transaction structure which leads a credit blockage at every stage it translates the higher cost for e-commerce operator as well as the customer.

The introduction of GST will simplify the highly complex tax environment due to multiple taxes, tax cascading, convoluted compliances and extensive litigations. GST will streamline all the indirect taxes and will be lined with international tax practices. There are three kinds of taxes under GST –

  1.    Central Goods and Service Tax (CGST) – It will be collected by Central Government.
  2.    State Goods and Service Tax (SGST) – It will be collected by State Government.
  3.    Integrated Goods and Service Tax (IGST) – It will be collected by Central Government.

Advantage of GST on e-commerce Industry

  1.  GST will replace 17 indirect taxes, so it will become easy and cheap to follow the compliances.
  2.  The tax rate will be the same for each product, so there will be no hassle to calculate different tax on different products.
  3.  There will be no intrastate tax so that things will become cheaper.
  4.  Inventory cost and the logistic cost will fall because of reduced warehouses.

Though there will be an improvement in the current tax structure after GST e-commerce requires lots of reform to make the process simple and smooth. With the implementation of GST e-commerce businesses and consumer, both will be benefited.

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Communications and information technologies have the most potential for enhancing reserve component capabilities contrasted with the capacities of the active components.