GST for Online Sellers  

Last Updated at: Jul 06, 2021
GST for Online Sellers  
GST for Online Sellers  
The MSME sector has certain expectations from the upcoming Union Budget 2021 to be tabled on February 1, 2021. Among other things, the sector wants a GST parity between online and offline sellers.

The Goods and Service Tax (GST) is an indirect tax charged on every type of goods or services, except the exempted categories. GST registration is mandatory if sales of your supplies take place through an e-commerce website maintained by e-commerce operators (ECO). There are special provisions to obtain a GST number for online selling under the CGST Act, 2017 and IGST Act, 2017 that reduces the complexity in taxes. Now, let’s see the GST for online sellers.

Online Selling Model

Before proceeding, you need to understand that the way you pay GST depends on the model of online selling you do. There are mainly two ways to make online sales: 

  • The first way is direct sales. When you provide your own products and sell them to users directly via your own website. If that’s how you sell, you need to follow standard GST registration rules.
  • The second method is through e-commerce aggregators like Flipkart and Amazon where you don’t sell your products directly to customers, and therefore, sales on an e-commerce portal get treated differently for GST. 

Tax Collected at Source (TCS)

Here is the important role of Tax Collected at Source (TCS): whenever you sell any goods or services via an e-commerce portal like Amazon, the e-commerce operator (ECO) will deduct an amount from the payment it collects from the customer before making payments to you. This amount can not be more than 1% of the sales, and this tax is to be paid to the government. However, you can claim this tax as a deduction on your GST filings within the same month of deduction. Once the operator uploads details of TCS, you can claim the credit.

Both you and your sellers are required to submit details of all sales to the government. Therefore, TCS is a powerful tool to find out any discrepancy in sales. Pay your taxes carefully to avoid outstanding GST. You should avoid sellers that failed to report their sales accurately.

register for GST online

Threshold Exemption

Under Section 24(ix) of the CGST Act, 2017, one needs to register for GST for online selling irrespective of the value of supply made. No person supplying goods or services through e-commerce is entitled to threshold exemption. 

GST for Online Services

Online Information Database Access and Retrieval (OIDAR) services is a separate provision under the IGST Act that covers the category of online information supply, database access, or retrieval services rendered to consumers from a remote location such as e-books, PDFs, drivers. These are the services rendered via the internet only, and there is no physical interaction between the supplier and the consumer. Other examples are online gaming, retrieving data software, cloud services, intangibles like music through telecom networks, website hosting, electronic data storage, digital content (films, TV shows, music etc.). 

Taxable Under GST

OIDAR services are taxable under GST in India. 

  • If the supplier of online services and the consumer of such services are in India, it would follow the supply rules of India.
  • Moreover, if the supplier of services is from overseas and the recipient is in India; the transaction would be compliant to tax in India.
  • If the user of the services is located outside India and the supplier is in India, the transaction would be compliant to tax in India, even if the consumer is from a non-taxable territory.

GST Registration Online Process

Online sellers can apply for GST online. They need no to visit any government office. No fee is prescribed by the government for GST registration. 

The Process: 

  1. Visit the Goods & Services Tax (GST) | Homepage 
  2. At the top of the webpage from the menu, Select Registration > New Registration
  3. Enter User Credentials and verify OTP.
  4. You should upload the scan copies of all the documents.

Here, you need to select your category from the taxpayer, tax deductor, and tax collector (e-commerce). It is an important step. Apply under the right category to avoid major issues. 

Under Section 51 of the CGST Act of 2017, certain categories of registered persons need to deduct TDS before making payments to the supplier. Some of these categories are the departments of the central government or state governments, municipalities, governmental agencies, and others.

GST TDS is different from TDS under the Income Tax Act, 1961. Under Section 15 of the CGST Act of 2017, if a transaction of goods or services exceeds 2.5 lakhs; and covers under both the GST Act and the Income Tax Act. Further, the seller needs to make both the deductions at the rate of 2%. Further, deduct it from the amount payable to the supplier for the supplies made by them. 

You can take professional guidance to get the GST under the right category. CS, CA, and GST professionals may charge a nominal amount for their services.

You can speak to an expert from the Vakilsearch team to get a free consultation on GST.