Flipkart applies for GST Suvidha licence to offer tax benefits to sellers

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Online marketplaces are all for the goods and services (GST) even though 1% tax collected at source (TCS) is a must. The new tax reform might just be a solution to tax woes in ecommerce, say experts. But some online sellers claim that the tax will create major inconveniences for online retail. Others are excited about the uniform tax.

Flipkart is pro-GST these days and to encourage the tax further the etailer has applied for a licence to become a GST Suvidha Provider (GSP). This is mainly a strategy to increase its seller base, revealed a source aware of this move.

How will Flipkart benefit as a GST Suvidha Provider?

  • As a GSP, Flipkart will have direct access to the GST Network (GSTN).
  • A GSP licence gives companies (in this case Flipkart) the advantage of uploading more than 2 billion invoices in a month.
  • With a GSP licence, the etailer can access technology solutions for taxpayers and other stakeholders. This will allow them to connect to the GST system for compliance from stage one which is registration till the end cycle that is uploading details and filing returns.
  • A GSP licence will enable in-house invoice processing, eliminating the need for outside services, thus controlling costs associated with TCS.

Many are worried that GST will bring higher tax, increasing prices and as a result causing inflation which will force small businesses to close down or switch from ecommerce to offline retail.

However, with regards to this move by Flipkart, the head of the developer ecosystem at India Stack, Nikhil Kumar said, “More small and medium businesses will be encouraged to sell on marketplaces like Flipkart post-GST if it can simplify their taxation for products across India. These platforms can use the GSP licence to acquire more sellers.”

GST preparation

Flipkart has been preparing for GST for a while now. The ecommerce platform made changes to its ERP system and rolled out GST Genie to clear tax related confusion among online sellers. Now, with its application for GSP it should be able to lure more vendors onto its etail channel.

The etailer is one from approximately 200 applicants to be received in the second phase by GSTN, which is a nodal agency that takes care of technology infrastructure for GST, mentioned the source.

This agency has 34 GSPs shortlisted in the first stage. These include Tally, EY, Delloite, Tata Consultancy Services and Reliance IT Park (a Reliance Industries subsidiary). The last and final list of GSPs will be revealed once the demonstration of GST solutions is done by those shortlisted.

“Many GSPs are looking to become providers of application program interface (APIs) for other application service providers (ASPs), while some are looking to be captive GSPs, developing solutions for their own processes and partners. Flipkart could become a captive GSP, building solution for its merchants and partners,” said a policy expert at software products think tank iSPIRT, Sudhir Singh.

As an ASP companies can develop their very own solutions customising them for their business or a particular sector.

If Flipkart can attain its GSP licence, new sellers may flock to the etailer and existing sellers may favour doing business on Flipkart instead of other platforms. However, does the ecommerce company have what it takes to win this privilege? Stay tuned to IOS to find out.

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