India has seen an unprecedented increase in e-commerce transactions, as has the rest of the world. So, its introduction of digital taxation at a time appears to be a step in the right direction. In this blog, we discuss e-commerce ecosystem and the necessary GST compliances. Let’s look at why there is a growing need for e-commerce ecosystem in the country.

Need for an E-Commerce Ecosystem

  • It is increasingly necessary for businesses to comprehend and utilise e-commerce to develop trade in India. Entrepreneurs are attracted to e-commerce these days because of the low entry barriers.
  • Geographic boundaries become irrelevant when shopping online through e-commerce platforms. One can offer their products to customers all around the world using the internet.
  • E-commerce taxation is complicated. They fall under various tax jurisdictions that govern how these technology-assisted distribution channels operate.
  • The Indian government has also made quick modifications to the taxes of e-commerce transactions. They are separated into two categories:
    • Aggregator of goods/services and
    • Sellers of goods/services via an e-commerce platform.

Flow of Transactions in the E-Commerce

This chart below explains the flow of transactions in e-commerce.

Seller

  • Sells products/ services to customers
  • Receives order intimation from Ecommerce Operator’s portal

Ecommerce Platform

  • Provides an online platform to connect seller & buyer
  • Collects money from Customer
  • ECO charges commission/other charges & remits back money to Seller

Customers

  • Places order & makes payment to E-commerce Operator
  • Receives the goods/services from the Seller

*ECO – E-commerce Operator

GST Compliances for E-Commerce

This chart below explains GST compliances for e-commerce.

Particulars E-Commerce Operator Seller Buyer
Registration
  • ECO is required to register for GST.
  • The representative must be registered if ECO does not have a physical presence in India.
  • GST also necessitates a separate TCS (Tax collection at Source) registration.
 Unless you are a notified person who provides the following services:

  • Accommodation service
  • Transportation of passengers
  • Housekeeping services

you are obliged to register

 If turnover limitations exceed the threshold limit, registration is required.
GST Liability
  • ECO must collect TCS at 1% under GST on the sales value received from the buyer and pay it to the government in the seller’s name.
  • In addition, pay 18% GST on commissions and other fees received from the vendor.
  • Seller will claim ITC on GST on the commission paid to ECO.
  • ECO will reimburse you for TCS credit.
  • After obtaining the preceding credits, you must pay GST on the sale of goods or services.
  • If the buyer is not registered, they will be responsible for paying GST on the purchase.
  • If the buyer is registered, he can claim the ITC (Input tax credit) on GST paid on the purchases.
Compliance
  • Monthly return for TCS under GST in Form GSTR 8.
  • Monthly return showing outward liabilities (commission) GST in Form GSTR 1 and tax payable in Form GSTR 3B.
  • Annual return filing in Form GSTR 9/9C.
  • Outward GST in Form GSTR 1 to buyer and tax payable in GSTR 3B are shown on the return.
  • To obtain TCS credit from ECO, submit a monthly return.
  • If applicable, file a GSTR 9/9C annual return.
    The return shows outward GST in Form GSTR 1 to the buyer and tax payable in GSTR 3B as a normal taxpayer.

Conclusion

India has been at the forefront of digital economy taxation, and the characteristics listed are quickly becoming the new standard for digital economy taxation. Businesses will need to regularly examine their operating models to assess the impact, identify risks, explore planning possibilities as tax law develops. To comply with these significant changes in law, you need to classify financials connected to in-scope transactions to analyze them from an economic viewpoint.

Why Choose Incorp Advisory?

With years of experience, professionals at InCorp can guide you precisely on various indirect tax levies, including Goods and Services Tax (GST). Our Indirect Taxation and Advisory Team at InCorp provides seamless support with advisory services and assists you in compliance with all applicable rules. We also assist in the effective planning and structuring of your business to ensure compliance with the regulations. To learn more about our services, you can write to us at info@incorpadvisory.in or reach out to us at (+91) 77380 66622.

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