Benefits of GST (Goods and Services Tax) – How the Tax Regime will Impact your eCommerce Business.
With digital transformation India has witnessed some improved opportunities for e-commerce players; the government has consistently tried to help the start-up community. The government of India with an ambitious plan has implemented the revolutionising tax regime “The Goods and Service Tax”. With a majority of exuberant entrepreneurs probing about the ambiguity of this tax reform, let’s discuss few benefits of GST and how the tax regime will impact your eCommerce business.
Benefits of GST – Which Industries will Gain more Traction
With India becoming the second largest startup community in the world, the government of India was constantly under pressure to leverage some incomparable support to the new breed of entrepreneurs.
Goods and Services Tax has been rolled out and everyone is sitting on the edge of their seats contemplating, how it is going to benefit them. Well! A lot of businessmen and political parties are certainly opposing the implementation of Goods and Service Tax but the e-commerce section has a lot to be delighted about.
The Goods and Service Tax Council has created four slabs 5%,8%, 12% and 18% under which the goods and services will be taxed. Based on the new reform taxes are levied upon the final source of consumption. So the actual price or the “transaction value” will comprise of a consolidated tax (indirect and direct tax), commission, packing cost, and other expenses till sales.
#1) eCommerce: With Modi government giving utmost importance to digital transformation, this sector seems to attract higher benefits. A common tax law across the nation has wide implication when comes to interstate online transactions and merchandise management.
Benefits of GST for Online Sellers
- Higher transparency when comes to state wise tax regimes.
- Pan-Indian rate structure
- Removing Cascading tax effect
- Simplification of tax procedures
- Smoother interstate logistics management with common a tax
- Lesser trade barriers
- Uniform tax structure helps to price and margin properly regardless of where it’s being shipped.
- Addresses challenges and concerns, Similar to tax evasion by Amazon and few of its sellers
- A coherent flow of Input tax credit.
Concerns related to Goods and Service Tax
- Does cancellation of online order will impact the operator’s cash flow
- Complications on returned orders (defect) for which tax has been paid
- MSME’S Interstate stock transfer will be affected under IGST
- Is Tax Collection at Source (TCS) a direct conflict with Make in India vision
- Discourages sales through marketplace model
#2) Manufacturing: Article published in Times of India, clearly details how the domestic electronic manufacturers will benefit from GST. In the article, the publisher points to the joint study conducted by NEC Technologies and Assocham. Where the study concluded that there will be a significant cost reduction in the domestic manufacturing of electronic components. Where consumers will benefit with a higher price reduction with the Goods and Services Tax reform.
Write-up by Mr.Ashutosh Shyam, published on Economic Times highlights that FMCG companies with integrated storage hubs will benefit higher when compared to other verticals of merchandise management. The tax claimed on white goods, paints and chocolates will be comparatively higher when compared to other segments like soap, toothpaste, hair oil, coal and lignite, etc
Benefits of GST- Experts Opinion
Saahil Goel, CEO & Co-Founder, Kraftly
“Implementation of Goods and Services Tax brings some major advantages for the Indian Startup ecosystem. The ‘one nation one tax’ policy is set to amalgamate taxation regime, aid movement of goods across states, abrogate red-tapism, implement hub & spoke model and ease doing business in India. In a seller based e-commerce set up like Kraftly’s, we can expect a minor slowdown in the business as a majority of the small-sellers are oblivious of the GST framework & documentation process. However, this slowdown will be momentary as soon these sellers will recognise the significance of Goods and Services Tax and become fully equipped to operate under the new taxation regime.
Avinash J Nishant, CEO and Founder, Shopnix
As an eCommerce service provider, I believe the new reform has presented us an opportunity to interact and engage with people across the nation in a hassle free environment. Which is a big step for entrepreneurs who run an eCommerce store. The streamlined and consolidated tax system makes it more palpable for entrepreneurs to comply with tax regulations and compete in a market where trade barriers are lessened. The government support with composition schemes and stipulated digital book-keeping practices will invigorate fintech organisations to get easy digital access to fast-growing ventures and provide additional support to grow their business. The transformation is more focused on economic development, what a developing country like India in the brim of digital transformation needs the most. Also, the reform will play a significant role in boosting our GDP.
In Detail How Goods and Services Tax will Benefit eCommerce
We are going to traverse through the benefits of GST in regard of e-commerce one by one and help you understand, why it is a move towards a better tomorrow:
The new tax regime has opened gates of e-commerce marketplace for everyone: Literally gone are the days when a seller on e-commerce platforms required varied documents like VAT, CST, and TIN, today a seller with a turnover of 2 Million INR requires none of these. Yes! You heard it right; the government has waved off the restrictions related to state boundaries by removing CST and VAT for small sellers.
VAT and CST Registration required an investment of almost 10,000 INR, which can now be used by new sellers to set-up a small business on e-commerce marketplaces like Amazon, Flipkart and eBay.
Amazon and Flipkart are now aligning with government policies to support small sellers: Earlier e-commerce marketplaces like Amazon and Flipkart didn’t care for the welfare for small sellers but with the new reform in place, they cannot stop anyone from entering the online market and selling their products. Removal of VAT and CST will empower more and more sellers. This is certainly one of the biggest benefits of GST, which will be registered by people only with the passage of time.
Forget e-commerce marketplaces, now you can start your own e-commerce: A lot of sellers joined popular marketplaces like Amazon because it saved them from getting into the legal hassles; Amazon and Flipkart ensured that all CST and VAT queries are solved without troubling the sellers but with the removal of these compulsions, government has leveraged the sellers with power to start their own e-commerce stores and earn more profit.
Authors and artists can now turn their website into e-commerce stores, add payment gateways powered by PayTM, PayUmoney and PayPal and run their business from the comfort of their homes.
The introduction of this new regime has turned India into One Market with One Tax system, which discarded the requirement of a check when crossing the borders of varied states, leveraging the businessmen with a power to do things at a better pace without involving a lot of tax related hassles.
Goods and Services Tax is implemented for the greater good of the people in the e-commerce sector; the whole country is going to stand in the admiration of Goods and Service Tax when they realise how it is going to put things in a straight line and also remove corruption. Benefits of GST are going to become tangible with every product becoming cheaper and services becoming faster.
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