Complete guide on online sellers on E-commerce platforms under GST

Last udpated: Nov. 4, 2017, 9:12 p.m.

Most of the E-commerce operators or E-commerce platforms such as Flipkart, Amazon, Snapdeal etc. are making loss on their operations, instead sellers who sell online using these platform services are profitable.

Selling online is fast catching business, as per various studies most of the retailers and wholesalers have started selling their products online through these portals.

Goods and Service Tax or GST is an indirect tax that is charged on any goods or services supplied whether online or offline. Major act under GST are CGST Act, 2017 and IGST Act 2017.

This article will cover the various provisions applicable to online sellers or people willing to sell online using platforms such as Flipkart and Amazon among many others.

As an online seller, you will have following doubts.

  • Whether registration under GST is compulsory for online sellers selling goods on portals maintained by E-commerce operators?
  • How much tax will be deducted by E-commerce portals on payments made by them to online sellers?
  • Whether credit of TCS will be available to online sellers in same month?
  • What are the various return to be filed by online sellers?
  • What special provisions should be kept in mind to maintain current profitability?

Whether GST registration is compulsory for selling online?

Yes, registration is compulsory if you are selling goods online through E-commerce portals maintained by E-commerce operators.

Clause (IX) of section 24 of CGST Act, 2017 provides that  a persons who supply goods or services or both, other than supplies specified under sub-section (5) of section 9, through such electronic commerce operator who is
required to collect tax at source under section 52, has to obtain compulsory registration.

Due to this specific provision contained under CGST Act, you have to take registration under GST.

Also it is to be noted that anyone who makes an interstate supply has to obtain registration, so if you are selling goods to other state you are supposed to take registration.

There is a minimum limit of Rs. 20 lakhs, before you reach this limit there is not compulsion to take registration. However you should remember that if you make an interstate supply or you are registered on any online portal to make supplies through it, this minimum limit does not apply.

What is Tax Collection at Source or TCS and whether online sellers can take credit of TCS?

Whenever you sell any goods or services through an E-commerce portal, E-commerce operator will deduct an amount from the payment it collects from customer before paying you. For example, if you sold goods worth 1 Lakh on portal and operator collects 1 lakh from buyer. Then operator will pay you 99,000 and deduct 1% or 1,000 Rs.

Section 52 of CGST Act, 2017 as on the date of writing this article has not fixed the rate of deduction but it will be around 1%.

You can take the credit of TCS within same month of deduction. For example, E-commerce operators after collecting tax on payments have to upload the details on GST portal within 10 days. Once details are uploaded by operators, you will be able to claim the credit for making your tax payment.

What are the returns to be filed by an E-commerce seller?

You have to file all return applicable under GST.

You have to upload details of sales and purchase along with a monthly return. You can read the article returns under GST.

In short you will be filing following information or returns:

  1. Sales and purchase details,
  2. Monthly returns,
  3. Annual return/statement, and
  4. Audit report (if applicable)

Special precautions to be taken by E-commerce sellers to increase profitability and reduce compliance defaults

The first suggestion will be to deal with only registered suppliers. Tax rates under GST will be on upper side, for most of the goods tax rates will be from 12% to 18%, the outflow of tax payments will be huge.

You might be incurring interest expenses if your cash flow is not properly managed.

The reason to advice for dealing with only registered suppliers can be explained with an example.

Suppose you buy goods from an unregistered dealer, you have to make invoice on his behalf, charge tax and pay to government thereafter you can claim the input credit of tax.

You will not be able to enjoy the credit period of tax, you will be burdened with extra compliance of making invoice on his behalf.

You should also understand that GST will be fully depended on technology and human interfere will be minimum. Any mistake on filing of information or filing of returns or non payment of tax either by you or E-commerce operator or your supplier will make you ineligible to claim the tax credit and you have make double payment of tax with interest. This will for a short period hit on your cash flow and directly on your profit margin.

You have to make sure that every month you perform following activities on GST portal:

  • Download the data uploaded by E-commerce operator (in this case portal on which you sell) and match this data with your sale invoices,
  • Double check the amount of TCS to verify correctness and if any mistake is found in data uploaded by operator inform them,
  • Verify the data uploaded by your supplier,
  • Double check the data you will be uploading on GST portal

Whether online sellers can pay tax under composition scheme?

Composition levy is a special provision under the section 10 of CGST Act, 2017. If you want to pay tax under this scheme then you will have to comply with lesser compliance and tax rate will be around not 1% to 2.5%. However input credit of tax cannot be availed.

However, section 10 (2) specifically sets aside the online sellers from this levy. You cannot pay taxes under composition levy.

Section 2(d) of CGST Act, 2017 provides that  any person engaged in making any supply of goods through an electronic commerce operator who is required to collect tax at source under section 52 cannot opt in under this levy.

Posted by Pulkit Sharma under GST

A Chartered Accountant by qualification. Love to code and share knowledge. On a mission to create the largest knowledge library for finance and taxation professionals. Check Profile

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