Marketplaces bar sellers non-compliant with GST; a sales dip likely to occur?

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To ensure the smooth roll-out of the Goods and Services Tax (GST), the government deferred TDS and TCS under the tax. This meant that persons selling through ecommerce operators liable to collect TCS would not be required to obtain registration immediately. As a result, merchants had more time to register under the tax avoiding seller depletion.

But, it looks like the impact of GST is causing marketplaces to bar non-GST compliant sellers temporarily.

Why is this happening?

Marketplaces Amazon India and Flipkart made it mandatory for sellers to register under the new tax to keep selling on their platforms. Sellers were requested to obtain GST Identification Numbers (GSTIN) by July 1. Unfortunately, many sellers haven’t been able to meet this requirement due to various reasons. Others have tapped out of the ecommerce ring as they see very little business prospects under the new tax regime.

Will marketplace sales drop?

With the reduction in their seller bases, marketplaces will be falling short of products in certain departments. But, marketplaces claim that this will not disrupt sales.

Flipkart mentioned, “We don’t foresee any impact on sales. Some of the selection may get lost… (but) due to tax being lowered in many categories like fashion, we expect the sellers to pass the benefits to our customers.”

At the same time, the etailer is confident that those not compliant with the tax will be back soon on the platform.

The company said, “Close to 95 percent of our sellers who contribute to our sales have become GST-compliant. The rest are in the process of obtaining GSTINs from the government as in certain states there is a delay in getting the same.”

Compliant list

  • Flipkart – 95% out of 100,000 sellers
  • Paytm Mall – 80% of seller submitted GSTINs
  • Snapdeal – 92% of top sellers sent in GSTINs

Amazon, however, did not disclose its GST ready seller proportion. But, based on a previous report, the etailer had only 1/3rd of sellers prepared for the tax. The foreign ecommerce firm only stated,

“We believe GST is good for the ecommerce industry as it would eliminate hurdles in inter-state delivery and subsume the entry tax introduced on ecommerce shipments by some states.”

What do sellers think?

According to assessments by the All India Online Vendors Association, many online sellers want to continue selling under this tax.

A spokesperson for the group of 2,000 online sellers said, “Some of the categories will have to be marked up on price due to GST. Those sellers have chosen not to go ahead (and register). However, the GST rollout has been smooth.”

What about you, are you on the same page as GST? If not, here’s how you can be.

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