The intricate tax system in India – with multiple direct and indirect taxes – that made it difficult for new businesses and startups, is all set to change on 1st July 2017. GST (Goods and Services Tax), an indirect tax, will be implemented throughout India to replace all the taxes levied by the Central and State Governments. This is to provide for a single and streamlined process.
Defined as the game changer for India’s economy, GST is being designated as the biggest change in the Constitution since India’s independence. It presents India as a unified market to business owners and also aims at bringing a lot of black money back into the mainstream economy.
How will GST affect ecommerce?
- A single unified market will allow free movement and supply of goods across India.
- Achieving product costs efficiency will be easier in the absence of double taxation (cascading effects due to separate taxes on manufacturing, distribution etc.)
- There will be an increase in administration, documentation workload for ecommerce firms and push up costs due to the tax collection at source (TCS) guidelines in the GST regime.
It will be a dual GST structure with the Centre and States simultaneously levying it on a common tax base. Similarly, Integrated GST (IGST) will be levied and administered by the Centre on every inter-state supply of goods and services.
- When GST is implemented, there will be 3 kinds of applicable taxes:
- CGST: GST levied by the Centre on intra-State supply of goods and/or services where the revenue will be collected by the Central government.
- SGST: GST levied by the States on intra-State supply of goods and/or services where the revenue will be collected by the State government.
- IGST: GST levied by the Centre on inter-State supply of goods and/or services where the revenue will be collected by the central government.
In most cases, the tax structure under the new regime will be as follows:
- GST will be levied at multiple rates ranging from 0% to 28%.
- The GST Council has finalised a 4-tier GST tax structure of 5%, 12%, 18% and 28% with lower rates for essential items, highest for luxuries and de-merit goods would attract an additional cess.
- GST will include the multitude of cess currently in place, including the Swachh Bharat Cess, the Krishi Kalyan Cess and the Education Cess.
- Only the Clean Environment Cess is being retained, revenues from which will also fund the compensations.
For whom is GST registration mandatory?
You would be liable to register for GST for the below:
- If you are supplying goods or services more than Rs. 20 Lakh (Rs.10 lakh for north east states including Sikkim).
- If you are purchasing or selling goods outside the state.
- If you are receiving or providing services outside the state.
- If you are required to pay tax under reverse charge.
- If you are a non-resident taxable person. Irrespective of the limit (Rs. 20 Lakh)
- Input service distributor.
- If you are an aggregator who supplies services under his brand name or his trade name.
- Every ecommerce operator like Flipkart, Amazon, etc.
- If you supply goods and services through ecommerce i.e. if you want to sell on Flipkart, Amazon, then you will need to register yourself first. (*NOTE – Small businesses with less than Rs. 20lakh turnover are not required to register immediately. Stay tuned for more GST updates.)
- If you are required to deduct TDS under GST.
Taxes included in GST
GST would replace the following taxes: