GST: Impact On E-commerce Marketplace
By Advocate Aashish Srivastava / 2017-06-12
GST has impacted various sectors and industries of the country, some in a positive way and some others in a negative way.

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With the rapid growth of e-commerce business & ever-evolving regulatory landscape in India had posted a very significant question on the twilight prior to the enforceability of Goods & Service Tax (“GST”) which is to be effective from July 01, 2017- What will be the impact of GST on e-commerce? Unlike, brick & mortar business models, where e-commerce business is working on various different business models, will the impact be same or differ for e-commerce business- a question which is yet struggling to find the answer and keep many of the players hinged on the pivot.

The growth of any business is good news for the economy and it’s been expected that to keep the same path of growth, there has to be clarity on taxation matters and ease of doing business. Of lately, there are several apprehensions in the business world- Whether GST is a more hurdle rather than a catalyst for growth?

Issues under VAT & Service Tax faced by Ecommerce business:

  1. Firstly, e-commerce sector dealing in trading of goods have experimented with various business models. Starting with the traditional 'stock-and-sell' model, the e-commerce companies have transformed into a multi-model platform over time by introducing 'marketplace' and/or services model, thereby having to grapple with a more complex tax framework involving VAT / CST, excise, and/or service taxes. However, the indirect tax laws have not been able to recognize and accommodate the evolving business models and hence have become an impediment to the operation of the newer marketplace or services model.
  2. Secondly, the e-commerce sector is having a hard time categorising their offerings into 'goods' or 'services' for charging either value-added tax (VAT) / Central Sales Tax (CST) or service tax. This situation aggravates in the case of digital downloads involving software, music, e-books etc. wherein it becomes challenging to assess whether the transaction is for sale of goods attracting VAT / CST or a provision of service that should be charged to service tax. Both VAT and service tax authorities exercise right over such digital transactions leading to disputes and never-ending litigations.
  3. Thirdly, inter-state movement of goods from one state to another is a nightmare for an e-commerce operator. The requirement of statutory forms, way-bills, road-permits etc. and the recently contemplated imposition of local registration requirements for the e-commerce marketplace entity by certain States under the VAT / CST legislations for entry or sale of goods into the state has made the inter-state transaction an awkward experience for the sector.
  4. Fourthly, the non-fungible VAT and service tax results in significant non-recoupable tax cost impact for the e-commerce sector.

In addition to the above, the tax laws in India have also failed the e-commerce sector by not providing enough clarity / guidelines on taxation and documentation management for typical e-commerce sector transactions like e-wallet (advance deposits by consumers), cash-on-delivery (payment collected at the door-step of the consumer), gift vouchers, drop-shipment (direct delivery of goods from the e-commerce company vendor to the e-commerce company customer) etc. The absence of specific direction on the treatment of the above transactions under various tax legislation has led to diverse practice being adopted by the e-commerce sector.

GST has impacted various sectors and industries of the country, some in a positive way and some others in a negative way.

Have a Legal Issue?

Get connected to the Best Lawyers and Chartered Accountants Near You!


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