The government has announced that the much feared and much loved Goods and Services Tax (GST) will be hitting the stands on 1st July 2017.
But do you know everything there is to this new law? Are you aware of how it will affect you and your online selling business? What are some of the impacts you will endure? Let us take a look at how this tax will change day-to-day ecommerce.
The following table (courtesy PwC) sums up how things are at present, and what will change under GST for both the seller and the marketplace.
GST influenced changes in Indian ecommerce
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Discounts have to be clearly mentioned. The discount amount has to be specified to calculate the value on which the tax is to be levied. The GST has defined discounts as – pre-supply discounts and post supply discounts. The pre-supply discounts are the ones included in the amount initially. This will not be included in the value of the product. Post supply discounts are calculated in the value of the product.
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Easy movement of consignments across the country. Earlier there was a lot of burden on ecommerce companies with different states levying entry tax. However, GST will ensure that companies can move and store parcels in different states without any hassles as it eliminates the need for other cascading taxes, and consolidates everything in a single umbrella. This would mean quicker delivery.
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Reduced burden of tax on the consumers. As all taxes will be unified in the form of GST, it will reduce the cost of goods, thereby ensuring that shoppers are not handed out the additional tax burdens.
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An overhaul of your IT system. This will be quite a task. Flipkart began the process of updating its systems and offering training and support to its sellers on incorporating the necessary modifications. You will need professional help to make the technical updates.
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A simplified process for tax payments and filing returns. While earlier sellers had to file separate returns for VAT (in each state) and service tax, now the process of paying taxes and filing returns will be centralised under GST.
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GST will be accompanied by Tax Collection at Source (TCS). Marketplaces will have to levy TCS on their sellers, who in turn will have to file a monthly return to get the credit back.
PwC has pointed out in its study that there is ambiguity on the applicability of the tax in case of returns, replacements and discounts. The products that are returned can travel across states, and the replacement could go from a different state. The GST has not provided for such situations that are common in ecommerce.
Experts note that the GST will ensure greater taxes for the government, due to the removal of the limit of the taxable amount (everyone, irrespective of their scale, is being brought under GST).
The confusion that CST brings in
In February, leading online marketplaces Amazon, Flipkart and Snapdeal had held a joint press conference to protest against TCS. However, online sellers had reacted to this by saying that only those who evaded taxes need fear TCS. At the same time some sellers said that reclaiming the TCS paid in case of product returns can be a tiresome process.
The full impact of the benefits and pitfalls of GST can be gauged only once it is functional. Until then, all parties in ecommerce don’t have much choice other than to prepare themselves for the change.
We hope you have registered, as it is mandatory. If you need any help in understanding GST in detail, call Browntape. We are India’s largest ecommerce service provider, and can help you out with any of your needs.
