GSTLegal Advice

GST for Online Sellers

Are you new to the world of indirect taxation? Or newly transitioning into an online selling model and wondering what the GST implications are? Worry not, we’ve got you covered in this article. 

The Goods and Service Tax (GST) is an indirect tax levied on every type of goods or services, except those which fall under the exempted categories. GST registration is mandatory if the sales of your supplies or services 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 reduce the complexity in filing and paying taxes. Keeping that in mind, let us now see the scope of 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 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. 

TCS is a powerful tool to find out any discrepancy in sales. Pay your taxes carefully to avoid outstanding GST. This is because customers always avoid sellers that fail to report their sales accurately.

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. 

You can use our GST calculator to calculate your fantastic GST previous to registration.

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.

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. 

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 then upload scanned copies of all the necessary documents.
  5. 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. 
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; it is covered 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, he must then deduct it from the amount payable to the supplier for the supplies made by them.

You can use our GST calculator to know how much GST you owe before you register.

The Bottom Line

It is true that CS, Chartered Accountant, and GST professionals may charge a nominal amount for rendering their services. But is is absolutely worthwhile to engage their services while registering for GST online: as there are many complicated legal nuances that need to be understood and applied while registering under the GST Act. 

You can speak to an expert from the Vakilsearch team to get a free consultation on GST. Get in touch with us today!

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