The impending Goods and Services Tax (GST) regime has disrupted many businesses. Those in ecommerce are no exception. Online sellers have pointed out that the new tax will affect sellers in more ways than one. Marketplaces have also said that the tax will push small proprietors away from ecommerce. This is mainly because GST compliance is mandatory to sell on online marketplaces.
Amazon has only 1/3rd sellers compliant with the tax, while Paytm boasts of 70% GST compliant sellers. What will happen to the rest of those selling online? Will marketplaces be forced to forfeit sellers?
Why so many non-taxpayers in ecommerce?
Online marketplaces are required to collect tax on any payments made to suppliers. This makes it vital for sellers to be registered under the tax network. But, etailers have a variety of sellers. Just look at Amazon’s 2 lakh seller base. Out of all those selling online, most are small businesses that operate from home. Many of them fall below the GST threshold. That’s why they are not registered with Central or State tax authorities.
Another significant number of sellers offer products exempted from tax on online platforms. As a result, these vendors have also not registered with the tax department. And, those not registered will be pushed out of ecommerce platforms by 1st July.
Registration for new taxpayers
The tax regime’s technological backbone, GST Network (GSTN) allowed tax enrollment only for existing VAT, Service tax and Central excise duty payers so far. The second round of registration under GST ended on 15th June 2017.
Pratik Jain, leader, indirect tax at PwC said, “It will be good if new registration starts immediately so that vendors can be compliant from July 1 itself.”
“Alternatively, the government may want to consider giving a relaxation to vendors to obtain the registration after GST is implemented till say the first GST return is filed,” which will be on 10th August, 2017.
After industry representatives met with the Finance Ministry officials to discuss the matter, they were informed that registration would begin for new taxpayers soon, an ecommerce executive mentioned.
GSTN will begin tax registration for fresh registrants by the end of this week. This is expected to avoid ecommerce disruption. This third round will commence from 25th June 2017 for new registrations.