If you want to start an eCommerce business, read this article to understand GST, TDS, and TCS under GST, as well as the registration process.
Section 2(44) of the CGST Act, 2017 defines e-commerce as the supply of goods or services via an electronic network. Under Section 2(45) of the CGST Act, 2017, an e-commerce operator (ECO) is a person who directly or indirectly owns or manages an electronic facility, platform, or GST for e-commerce.
E-commerce in India has been on an upward growth route. It is expected to reach US$99 billion by the year 2024 and become the second largest e-commerce market after the US. Global players Facebook and Google have also made huge investments in the Indian e-commerce market. Additionally, the Central Board Of Excise & Customs (CBEC) has considered its high growth potential and tax complexity, hence, providing special provisions for e-commerce GST registration.
Goods and Services Tax (GST)
GST is an indirect destination-based tax applied on goods and services at the end place of consumption. Moreover, it is collected at every stage of sale or purchase. Hence we can say that it is a multistage, comprehensive, destination-based tax.
Except for exempted categories, irrespective of their turnover all e-commerce dealers/traders/aggregators selling goods/services online are required to register for GST under Section 24 (ix) and (x) of the Central Goods and Service Tax Act, 2017. They must collect and deposit a 1% tax (0.5 percent CGST + 0.5 percent SGST) on each transaction.
To understand the GST eligibility criteria, one needs to also understand TCS and TDS on GST along with Section 2(44) and Section 2(45) of CGST Act, 2017, defining e-commerce business and e-commerce operators.
Tax Collected at Source (TCS)
An e-commerce operator (ECO) is responsible for collecting TCS. As per Section 52(1) of the CGST Act of 2017, every ECO shall collect tax at a maximum of 1% of the net value of taxable goods or services from the supplier making supplies through the operator’s online platform Additionally,
- If ECOs are operating through their own website and dealing in their own products, then they need to register GST for e-commerce under the category of the taxpayer (normal). For example, Oppo owns, operates, and manages its own website by itself. The company is selling its own products through its own website.
- Moreover, on the other hand, if an ECO gets supplies from suppliers to sell on their own online platforms, then they need to apply under the category of the tax collector (e-commerce). For example, Oppo sells products through Amazon, Flipkart, snap deal, etc.
Hence, there are two models for e-commerce GST
- Registration for ECO
- Registration for person supplying through ECO
Tax Deducted at Source (TDS) Under GST
TDS collection in GST is done by depositing with the government. Section 51 of the CGST Act, 2017, requires deducting TDS at a rate of 2% (1 % CGST+1% SGST) before making payments to suppliers. If the transaction value exceeds ₹ 2,50,000. Additionally, some of these categories are departments of the central government or state government, local authorities, governmental agencies, etc.
How to Calculate Net Value of Taxable Supplies
Section 52 (1) of the GST Act defines the net value of taxable supplies as the difference between the ‘total value of monthly taxable supplies [except services mentioned under Section 9(5)]’ through the ECO and the ‘total value of monthly taxable supplies returned to the suppliers.
How to register GST for e-commerce
The GST registration process is completed online. There is no need to submit any hard copies of printouts or proofs for enrollment. The steps for GST registration for an e-commerce seller are as follows:
Go to GST registration official website available at – https://www.gst.gov.in/
Go to the ‘Services’ tab at the menu bar on the left side > Select Registration > New Registration.
You are then redirected to the GST registration online form. Select your category, i.e., either as the taxpayer or the tax collector (e-commerce).
|Note: It is best to seek advice from a CA, CS, or GST practitioner before deciding on a category. You can seek advice from the Vakilsearch team, which is proficient in legal matters.|
Permanent account number (PAN), Aadhar number, address proof, proof of business registration, bank account statements, legal name of the business, email address, and mobile number are all required to be uploaded to obtain GST registration.
Once the relevant documents have been uploaded, an Application Reference Number (ARN) will be sent via SMS and email to confirm the registration.
In case you complete the GST Registration procedure online, no fee will be levied. You may however need to pay nominal fees for the professional services availed to obtain GST registration.
The Bottom Line
GST is required for all types of businesses, and the majority of business owners require assistance when applying for GST. You can contact Vakilsearch to resolve any issues you are having with applying for GST registration.