The ultimate guide to understanding Ecommerce under GST

India witnessed yet another great change at the stroke of the midnight hour on 1st July 2017. GST- one India one tax- is finally implemented subsuming a variety of cascading indirect taxes levied by the central and state authorities.

With the biggest tax reform now in action, it is obvious that every sector of the Indian economy including the online merchants are curious to understand how this new tax regime would work. To understand GST impact on ecommerce industry,

let us begin from scratch and answer some FAQ about GST and E-commerce:

Question 1 ) What qualifies as E-commerce as per new GST rules?

Answer: E-commerce is the supply or receipt of goods and/ or services, or transmitting of funds or data, over an electronic network, primarily the internet. This can be done by using any internet based applications like email, instant messaging, shopping carts, web services, Universal Description Discovery and Integration (UDDI), File Transfer Protocol (FTP) and Electronic Data Interchange (EDI) etc. 

The payment for such goods and services can be done online or offline and the ultimate delivery of the goods and/or services can be done by the operator or any other service provider. 

Question 2) What are the criteria to be called an e-commerce operator under GST?

Answer: Every person who is engaged directly or indirectly in the ownership, management and operations of an electronic platform that facilitates the supply of any goods and/or services is called ecommerce operator.

Any person providing information or other services related to the above type of supply of goods and services through electronic platform also qualifies to be termed as an Operator. However, a person supplying goods/services on his own account does not qualify to be considered an Operator.

For example; a multi-vendor ecommerce marketplace is an e-commerce operator as it allows other vendors and suppliers to come together on the platform to sell. However, it would not be called e-commerce operator if it has products are selling supplies made under their brand name.

Question 3) Does every E-commerce operator needs to be registered?

Answer: Yes, it is mandatory for every Ecommerce operator to get registered.

Question 4) Is there any threshold exemption for E-commerce operators?

Answer: No, there is no threshold exemption in case of e-commerce operators. It is mandatory for every Ecommerce operator to get registered irrespective of the value and volume of supplies made by them.

Question 5) Are the suppliers also liable to registration if they are supplying goods and services through e-commerce operator?

Answer: Yes, the suppliers also need to be registered if they are supplying through an e-commerce operator. 

For example, all vendors and logistics providers on an e-commerce multi-seller marketplace need to be registered under the GST law.

Question 6) What is TCS?

Answer: It is obligatory for the e-commerce operator to deduct an amount as tax out of the total amount being paid/ payable to the supplier of goods and services. The deducted amount is TCS or Tax Collected at Source. 

Question 7)  When are these deductions made by the E-commerce operator?

Answer: These deductions can be made at the earlier of the following two instances:

(i) the time of credit of any amount to the account of the actual supplier of goods and/or services.

(ii) the time of payment of any amount in cash or by any other mode to such supplier.

Question 8) What is meant by IGST, CGST, and SGST?

Answer: GST rate in India is pegged at 5%, 12%, 18% and 28%. GST is a single tax on the supply of goods and services and is of 3 types:

Central GST (CGST) – Levied by Centre and is applicable on sale and purchase of goods and services the within the same state (Intra-State).

State GST (SGST) – Levied by State and is applicable on the sale and purchase of goods and services within the same state (Intra-State).

Integrated GST (IGST) – Levied by Central Government on the sale and purchase of goods and services in different states (Inter-State).

Question 9) What is GSTIN?

Answer: Simply put GSTIN is GST identification number.

Each taxpayer will be allotted a state-wise PAN-based 15-digit Goods and Services Taxpayer Identification Number (GSTIN). This would be required for 

1.The first two digits of this number will represent the state code.

2.The next ten digits will be the PAN number of the taxpayer

3.The thirteenth digit will be assigned based on the number of registration within a state

4.The fourteenth digit will be Z by default

5.The last digit will be for check code

Question 10) What is HSN code?

Answer: HSN stands for Harmonized System of Nomenclature. This system codifies all the trading goods into various sections, each chapter having the commodity of similar nature.

HSN coding system allots a code for each class of tradable commodity that might be known by different names in different languages. This classification simplifies the understanding of commodity classes and gives them a unique HSN code which is required to file GST. This helps in deciding GST rates item wise.

Question 11) What is SAC code under GST?

Answer: SAC is the unique unified code allotted for each type of service to help with the recognition, measurement and taxation of such services. 

Question 12) Does StoreHippo provide GST compliance?

Answer: StoreHippo has overhauled its tax rules to provide comprehensive solutions under GST on the e-commerce platform. StoreHippo's enhanced tax engine covers the different components like CGST, SGST and inter-state IGST in detail. The implementation also covers marketplaces where various sellers and buyers come from different states. 

Question 13) Does StoreHippo offer GST compliant invoices?

Answer: Yes, StoreHippo offers GST compliant invoices.

Question 14) Does StoreHippo offer guidelines on different components of GST?

Answer: You can refer to StoreHippo Help Center to learn How to set up GST for your Ecommerce store.

Is your Ecommerce business ready for GST?

GST is finally a reality and the sooner you start moving in this direction, the simpler it would be for you to file your returns and keep your accounts hassle free.

The flexible ecommerce platform of StoreHippo has made comprehensive changes to accommodate the GST requirements of its clients. Our pledge to make the online journey of our patrons smoother has taken a few steps forward with the incorporation of comprehensive features of GST for online sellers. We are working to make our tax-engine even better in coming days to accommodate the nuances of GST.

Keep visiting our blog section as we are going to publish more details on GST and e-commerce in the days to come.