Impact of GST on E-commerce Market Place Sellers


The increasing size of E-Commerce in India has also resulted in the conception of online marketplaces. A Marketplace is an E-commerce platform owned by E-commerce Operators such as Amazon, Flipkart, and Snapdeal. Features of a marketplace model are:

  • Online Marketplace enables 3rd party sellers to sell online on their platform.
  • online marketplace charges a subscription fee/ commission on sale value from listed sellers.
  • 3rd party sellers under this model gain access to a larger customer base registered with the marketplace.
  • Customers gain access to multiple sellers and competitive prices for desired products.
  • Goods purchased on such marketplaces are either shipped by Merchant directly or through the fulfillment center managed by Marketplace Operator.

The government has also allowed Foreign direct investment (FDI) under such a model to promote the e-commerce marketplace business model in India.

The number of third-party sellers on the E-commerce marketplace has increased exponentially, such sellers are now skeptical about the compliance requirement that Goods and Services (GST) is bringing under the new Indirect Tax regime.

No Threshold for GST Registration

The government has specified a threshold limit for all the businesses. A business is liable to register under Goods and Services Tax (GST) once such a threshold limit is exceeded the exemption limit. However, there is no such limit in the case of E-Commerce sellers. All the businesses carrying out e-commerce activities are required to get registered under GST.

Relevant to note that the Government has amended the CGST Act so to provide that mandatory registration under GST in respect of e-commerce operators shall apply only to such electronic commerce operator who is required to collect tax at source under section 52.

Similarly, mandatory registration would be applicable for persons who supply goods or services or both, other than supplies specified under sub-section (5) of section 9, through such electronic commerce operator who is required to collect tax at source under section 52;

No Benefit Under Composition Scheme

The composition scheme was introduced to reduce the burden of compliance for small and medium businesses. Most of the sellers registered with marketplace operators are small and medium businesses. The composition scheme has introduced by the government under GST law. Under the composition scheme, businesses are required to file returns quarterly instead of monthly and pay taxes at nominal rates up to 2%. However, the Goods and Services Tax (GST) law has excluded E-commerce businesses from this scheme.

Registration in Each Individual State

Under the Goods and Services Tax (GST) law, every business involved in E-commerce is required to get registered in each state in which they are supplying goods. In the E-commerce business model, the seller expects orders from all the states, therefore, they are liable to obtain registration in all the states.

Tax Collection at Source by Marketplace Operator

Under the Goods and Services Tax (GST) regime, marketplace operators shall deduct a percentage amount as the GST liability of the seller and deposit it with the government. This mechanism is being termed as “Tax Collection at Source (TCS)” under the GST law. Eventually the marketplace seller will have to file monthly return under GST to claim the credit of TCS collected by the marketplace operator. This will also impact the liquidity and cash flow of these sellers.

While all the market place operators have already completed the first-level analysis of the impact of GST on their operations, marketplace sellers are still unaware of these rules.

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