Learn how e-commerce sellers can register for GST, claim input tax credits, file returns, and stay compliant with India’s e-commerce tax laws.
In the digital marketplace, GST registration is a critical requirement for all e-commerce sellers, mandating compliance regardless of their turnover. This registration, necessary for any seller surpassing the ₹40 lakh turnover threshold (₹20 lakhs in special category states), not only facilitates legal compliance but also allows sellers to claim benefits such as input tax credits. Every transaction must be accompanied by comprehensive invoices that include the GSTIN, ensuring transparency in tax collection.
In this blog, we will guide e-commerce sellers through the GST registration process on the GST portal, detailing the required documents like PAN and Aadhaar cards, and business registration proofs. We’ll also cover the essentials of filing GST returns, using forms like GSTR-1, GSTR-3B, and GSTR-8 for Tax Collected at Source (TCS), crucial for maintaining fiscal discipline and compliance with the dynamic GST regulations in India.
GST Registration for E-commerce Sellers
- Mandatory Registration: Generally, any online seller with an annual turnover exceeding ₹40 lakhs must register for GST. This applies regardless of their platform (e.g., Amazon, Flipkart, Meesho).
- Exemptions: There are a few exemptions to the mandatory registration requirement. For example, sellers with a turnover below ₹20 lakhs in the Northeastern states and Himachal Pradesh are exempt. Additionally, sellers dealing exclusively in exempted goods (e.g., agricultural products, non-alcoholic beverages) are not required to register.
- Benefits of Registration: Although registration involves filing returns and paying taxes, it also offers several benefits, such as:
- Input tax credit: Claiming credit for taxes paid on purchases, reducing the overall tax burden.
- Formalization of business: Enhancing credibility and attracting larger customers.
- Access to larger markets: Enabling interstate and international sales.
Place of Supply Rules to Follow for Online Selling
Determining the place of supply is crucial for calculating the applicable GST rate. The following rules generally apply:
- Interstate supply: If the seller and buyer are located in different states, the place of supply is the destination state. The seller must charge the CGST (Central GST) and SGST (State GST) rates applicable to the destination state.
- Intrastate supply: If the seller and buyer are located in the same state, the place of supply is the seller’s location. The seller must charge the CGST and SGST rates applicable to their condition.
Invoicing Rules for Online Sellers
All online sellers must issue invoices for every taxable supply. The invoice must contain the following information:
- GSTIN of the seller and buyer
- Description of the goods or services supplied
- Quantity of goods or services
- HSN/SAC code of the goods or services
- Unit price of the goods or services
- Total taxable value
- Applicable GST rate (CGST and SGST/IGST)
- Total amount of GST payable
- Payment terms
Online Selling Model
Before proceeding, you need to understand that the way you pay GST depends on the model of online selling you partake in. There are mainly two ways to make online sales:
- The first way is through direct sales. When you provide your own products and sell them to users directly via your own website. In that case, 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 made on an e-commerce portal get treated differently while calculating GST.
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 the seller. 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. In fact, as soon as the operator uploads details of TCS, you can claim the credit.
Both the e-commerce operator and the sellers are required to submit details of all sales to the government.
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 provided to consumers from a remote location, such as e-books, PDFs, and drivers.
These are services provided solely through the internet, with no physical interaction between the supplier and the consumer.
Other examples include online gaming, data retrieval software, cloud services, intangibles such as music delivered via telecom networks, website hosting, electronic data storage, and digital content (films, TV shows, music etc.).
Taxable Under GST
OIDAR services are taxable under GST in India. In the sense,
- 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 with tax in India.
- Additionally, if the user of the services is located outside India and the supplier is in India, the transaction would be compliant with tax in India, even if the consumer is from a non-taxable territory.
Commission and Its Input Tax Credit
Online platforms usually charge sellers a commission, which is a portion of the transaction price, when they make sales. The particular rate varies based on the category of items sold and the platform.
The platform is required to charge 18% GST to sellers for this fee; sellers are eligible to receive an input tax credit for this GST. The platform can also provide credit notes for additional fees or commissions. To determine the amount of input tax credit that can be claimed, the GST on these credit notes is subtracted from the GST on the invoice.
In addition, bills for services like shipping fees, advertising costs, and other charges could be sent by the platform. It is also possible to claim input tax credits for these costs.
GST Return Filing
For both online and offline merchants, the requirements for filing a GST return are the same. GSTR-1 and GSTR-3B returns have to be filed, either on a monthly or quarterly basis, based on your QRMP preference option. Furthermore, you might be asked to file an invoice furnishing facility (IFF) if you choose to file quarterly returns.
It’s important to keep in mind that even if there haven’t been any transactions during the registration month, GST reports still need to be completed. Stated differently, NIL returns must be filed; otherwise, fines may apply.
GST Registration Online Process
Online sellers can apply for GST online. They need not visit any government office. No fee is prescribed by the government for GST registration online.
The Process:
- Visit the Goods & Services Tax (GST) Homepage
- At the top of the webpage from the menu, Select Registration > New Registration
- Enter User Credentials and verify OTP.
- You should then upload scanned copies of all the necessary documents.
- Next, 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. You can take professional guidance in order to ensure that you have applied for GST under the right category.
Click here to know in detail: GST Registration Process
The Bottom Line
Ensuring compliance with GST regulations is essential for e-commerce sellers to operate successfully in India’s vibrant digital marketplace. By securing GST registration and diligently submitting GST returns, sellers can leverage benefits such as input tax credits and maintain their business credibility.
It’s crucial for e-commerce operators to understand the nuances of GSTIN, turnover thresholds, applicable GST rates, and the specifics of TCS. Staying informed and compliant helps avoid penalties and fosters a healthy financial environment, promoting business growth and customer trust.
FAQs on GST Registration for Online Sellers
What is GSTIN and why is it important for e-commerce sellers?
GSTIN (Goods and Services Tax Identification Number) is a unique number that identifies a business registered under GST. It is crucial for e-commerce sellers as it legitimizes their business for tax purposes, enables them to collect GST, and claim input tax credits.
Who needs to register for GST in the e-commerce industry?
All e-commerce sellers, irrespective of their annual turnover, must register for GST. This includes individuals and businesses selling goods or services online through their platforms or third-party platforms.
What are the turnover thresholds for GST registration for e-commerce sellers?
E-commerce sellers must register for GST regardless of their turnover. The usual exemption thresholds of ₹40 lakhs (or ₹20 lakhs for special category states) do not apply to them.
What documents are required for GST registration for online sellers?
Documents needed include PAN card, Aadhaar card, proof of business registration, bank account details, and address proof.
How often do e-commerce sellers need to file GST returns?
E-commerce sellers are required to file GST returns monthly using GSTR-1 for outward supplies and GSTR-3B for a summary of transactions. Additionally, GSTR-8 must be filed quarterly for reporting Tax Collected at Source (TCS).
What is TCS and how does it affect e-commerce sellers?
TCS (Tax Collected at Source) is a tax that e-commerce operators collect from the sellers on their platform, typically at a rate of 1%. It must be remitted to the government and is meant to pre-collect a portion of the sellers' tax liabilities.
What are the penalties for non-compliance with GST regulations for online sellers?
Penalties include fines and interest on unpaid taxes. Non-compliance can also lead to legal actions and affect the seller’s ability to claim input tax credits.
What GST rates apply to e-commerce transactions?
The applicable GST rate depends on the type of products or services sold. Rates vary but generally fall between 5% to 28%, based on the item classification under GST.
Can e-commerce sellers claim input tax credits?
Yes, e-commerce sellers registered under GST can claim input tax credits for the GST paid on business-related purchases and expenses, which helps reduce their overall tax liability.
What is the process for GST registration for new e-commerce sellers?
The process involves visiting the GST portal, completing the registration form, submitting the necessary documents, and receiving a GSTIN. The entire process is online, making it accessible for new sellers to comply with GST regulations efficiently.
