Introducing The GST
Government is planning to launch the Goods And Services Tax (GST) soon, which Industrialists all around the country are waiting with baited breath. Talking about the background, a little – India has no tax laws in place that will regulate the eCommerce Industry. Therefore, the tax imposition is done on the basis of the interpretation of local taxation levies in different states. Hence, the introduction of the GST will truly benefit the booming eCommerce sector in the country. In the absence of a suitable legislation, it is being declared that businesses are suffering due to various interpretations that vary from state to state. GST might prove good for the e-commerce industry as it would eradicate many obstacles in inter-state delivery. GST, being a ‘destination-based tax on consumption’, is also set to address concerns of state governments that the business models of e-commerce firms erode their tax base.
How GST Will Benefit Different Areas
This will make way for a system in which the consuming state will get proceeds of taxes on interstate supply of goods. E-commerce firms build efficient warehouses where merchandise is stored for selling to consumers across the country. They offer an online marketplace, and in some cases a warehousing facility to vendors, and pay service tax to the central government on any fee or margin received for that. The liability of value-added tax (VAT) to be paid to the state government at the business-to-consumer level is on the vendor. GST should put an end to the numerous complaints about online sales and the hefty discounts they come with – which are eroding the sales and profitability of physical retailers as well as state revenues. The objective of the GST is to simplify and streamline the indirect tax regime in India.
GST – A Comprehensive Tax Regime
It is a single comprehensive tax regime that will be applicable across all Indian states on the sale, manufacture, as well as consumption of goods as well as services. This will help eliminate the challenge of the tax being levied on the same product or service multiple times. This also implies that, companies which are designing their strategies just to avoid the current tax regimen – will be able to change the way they plan and therefore devise strategies that are actually in their best interest. Under the new rules, details furnished by e-commerce companies will be verified against the details provided by the merchants, which can reign in discrepancies in payments. Post registration, merchants will have to report sales from online channel separately from their offline sales.
GST And Amazon
Recently, a situation arose as the state tax authorities ordered Amazon to discontinue selling some of the products that were previously stocked by these sellers – those who were supplying the products to Amazon’s warehouse. Pertaining to this decision, the company had no choice but to cancel many order that were received and bear the subsequent losses. Now that the eCommerce industry has taken root in India, the ground situation is that it does not have any eCommerce laws in place. Consequences have arisen and the current standoff is due to the differences in interpretation of the vague laws by Amazon and the state tax authorities.
What Future Holds
The marketplaces are also required to disclose sales and returns data along with merchant details in their filing. This would make it difficult for sellers and online marketplaces to misrepresent their book of accounts. The barriers at state borders, complexity of paying different taxes will ease. Warehousing will become more integrated. The cost of logistics is currently very high in India, costing about 15 percent of GDP. In mature markets, it stands at about 8 percent. According to Care Ratings, the GST is expected to trim logistic costs by up to 20 percent from the current levels.
Author – Pragyan Sharma
Content Writer at Buildabazaar, Infibeam. A passionate writer, always on a lookout for a new mobiles feature, a dog-lover, a huge book-lover. Believes in only one religion – Music. Surrounded by a close-knit, like-minded group of people. Doesn’t hesitate stating her opinion – on important issues.