GST: THE GAME CHANGER FOR E-COMMERCE SECTOR
By: – CANeha Somani
Goods and Services Tax – GST
Dated:- 30-5-2017
Introduction:
In today's new economy, knowledge and information have become the main production factor. In this context, innovation and technical progress have a major contribution to the durable economic development. The electronic commerce is the key for enterprises' competitivity in this informational era, insuring the access to new market segments, increasing the speed of developing business, the increased flexibility of commercial policies, decreasing the provisioning, sale and advertising costs, simplifying the procedures etc. The impact of the electronic commerce upon the companies and upon society will be of great importance both as extent and as intensity. This study aims to establish the ways of making the Internet trade activities more effective and the possibilities by which this kind of activity contributes to the economic development and bec
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, reduction of exemptions, enable better compliances etc. thereby resulting into formation of common national market for goods and services .
Present Tax Scenario
Presently, e-commerce companies face five indirect taxes including service tax, central sales tax (CST), value-added tax (VAT) and customs duty. At present the centre taxes the sale of services and states tax the sales of goods. Therefore service tax, CST and customs duty have to be paid to the centre while VAT has to be remitted to the state governments. After the implementation of GST, it will become simple. Sellers on e-commerce will have to pay tax in the state where the delivery happens. In the long-run the creation of a unified market place may reduce the tax burden, inventory cost and logistical issues, and ensure seamless movement of goods across the country. Many producers, sellers and consumers will have easy access to an all-India market as there will be development of seamless national supply chain.
In case of
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Source (TCS) provision for e-commerce operators with respect to goods sold or services supplied through their portal which shall significantly increase the compliance burden on the industry.
E-Commerce:
Section 2(44) of the CGST Act, 2017 defines an Electronic Commerce to mean the supply of goods and/ or services, including digital products over digital or electronic network.
Thus, the scope of e-commerce is as follows:
* Supply of goods and/ or services
* Such supply or transmissions shall be over digital or an electronic network (primarily internet)
E-Commerce Operator:
* Section 2(45) of the CGST Act , 2017 defines an Electronic Commerce Operator (Operator) as every person who, owns, operates or manages digital or electronic facility or platform for electric commerce.
Transactions carried out by an e-commerce operator
Following transactions / events take place generally, when a transactions carried out by an e-commerce operators:
* Various products and services availa
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) every electronic commerce operator;
Tax Collection at Source (TCS) provisions to be applicable:
* Section 52 of the CGST Act , 2017 provides that the e-commerce operator not being an agent is required to collect (i.e. deduct) an amount at the rate of one percent from the net value of taxable supplies made through it where the consideration with respect to such supplies of goods and / or services is to be collected by the operator. The amount so deducted/collected is called as Tax Collection at Source (TCS).
* 'Net value of taxable supplies' shall mean the aggregate value of taxable supplies of goods or services other than the services on which tax shall be paid by the e-commerce operator made during any month by all registered taxable persons through the operator reduced by the aggregate value of taxable supplies returned to the suppliers during the said month.
* E-commerce operators will have to collect tax at source (TCS) in addition to what GST is payable in the states in
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been prescribed in the GST Rules.
Actual suppliers can claim credit of the TCS:
Such TCS which is deposited by the operator into Government account will be reflected in the cash ledger of the actual registered supplier (on whose account such collection has been made) on the basis of the statement filed by the operator. The same can be used at the time of discharge of tax liability in respect of the supplies by the actual supplier.
E-Commerce operator required to furnish information to the Government:
* Section 52(12) of CGST Act , 2017, provides that an officer not below the rank of Deputy Commissioner by serving a notice either before or during the course of proceedings , may require the operator to furnish details relating to:
(i) supplies of goods / services effected through the operator during any period;
(ii) stock of goods held by actual supplier making supplies through such operator in the godowns or warehouses belonging to the operator and registered as additional pla
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ed.
* Such supplier would be liable to pay tax along with interest at the rate specified under section 50 on the amount so added from the date such tax was due till the date of its payment.
Likely Impact in GST regime:
Based on the provisions of CGST Act, 2017, e-commerce companies shall be impacted, both positively and negatively under the GST regime.
* The e-commerce companies may have to revamp the current models, as the VAT rate arbitrage available in the current law may not be available in GST. Tax Collection at Source (TCS) provisions have been introduced on e-commerce operators in the GST Act. However, there are no provisions relating to collection of tax at source under the current tax regime.
* The procedure for all the invoices / receipts towards inward and outward supplies will become cumbersome as each one of them will have to be uploaded in the system.
* The frequency and number of returns to be filed will go up.
* Mandatory registration to be taken by the e-c
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nal supply chain.
Major challenges in GST:
GST poses multifarious challenges to e-commerce sector. Some of them are as follows:
Sales Return
Under CGST Act , 2017 , once the goods are being supplied, suppliers need to charge the GST on the bill and the same need to be paid to the Government. But if the goods are being returned back from the customer, whether the assessee can claim the credit of the same or can apply for refund. Certainly, there is no provision enumerated in the Act in this regard. As per section 54 of the CGST Act , 2017, refund can be apply only when there is unutilized credit on account of exports or when there is credit accumulation on account of rate of tax on inputs being higher than the rate of tax on outputs. Taking into fact that around 30% of the products are being returned in online retails, it's going to hit the sector very hard.
Books of account
As per section 35 of the CGST Act,2017, every registered person shall maintain books of account at his pri
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n his statement should be matched with the corresponding details of outward supplies furnished by the concerned supplier in his valid return filed for the same calendar month or any preceding calendar month. If the above do not match within a reasonable time, then the supplier would be liable to pay tax along with interest at the rate specified under section 50 on the amount so added from the date such tax was due till the date of its payment.
Discounting
The Vendors Offer a lot of discounts post invoicing which may not be known at the time of invoice and may be innovative and different from trade norms. As per the CGST Act , 2017, these discounts may not be allowed as deduction from transaction value on which GST would be calculated as section 15 of the CGST Act , 2017 allows only such post-supply discount which is established as per the agreement and is known at or before the time of supply and specifically linked to relevant invoices. Moreover, there is a concept of sizable discou
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ould immediately do?
* Review of existing business models
* Review of supply chain management
* Vendor training modules to ensure compliances and harmony with e-com's procedures / documentations
* Standardization of documents, invoices etc.
* Vendor contracts / documentation
* Review / change of ERP / operational software
* Accounting changes
* Impact analysis
* Supply chain / logistics analysis
* Staff training
Conclusion
GST is surely going to be a game changer for e-commerce businesses as there are no provisions relating to collection of tax at source under the current tax regime. In order to mitigate the challenges being posed by e-commerce transactions, the Act endeavors to establish a compliance mechanism to ensure that the appropriate taxes are discharged by the actual suppliers supplying goods or services through electronic portals.
Reply By Anoop Dubey as =
We qualified as GST Suvidha Provider and we aim to deliver pre-and post GST rollout to our
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