GST Model’s effect over E-commerce sector
Electronic commerce or E-commerce has now turned into a growing trend in the business world. Basically, it evolves with buying and selling of good and services on the virtual electronic platforms seen usually on the internet. The business transactions in case of E-Commerce takes place in business-to-business, business-to-consumer, consumer-to -business and consumer-to-consumer format. As E-Commerce is concept purely applicable to virtual platforms, its barriers always develop to a wider range than all other methods of business.
Understanding Market place and Ecommerce operators– As recently Goods and Service Tax (GST) law was enacted recently, it has also marked a drastic evolution in terms of E-Commerce transactions as a big surprise. As per the law, E-Commerce operators and marketplaces will be responsible for the collection of tax at source at a notified rate from the sellers. Well, to understand this new development we need to first understand what is a marketplace and what do we mean by E-commerce operator. A marketplace is a platform that works as the intermediary medium between buyers and sellers.
With GST coming in, the e-commerce operators will be able to claim the credits on service tax paid on warehousing, logistics, and commissions of service providers, which they are not allowed to levy currently. Also, they will be able to claim credit of VAT paid and with clear cut and uniform VAT model agreed by all states and the center – e commerce business is set to gain stimulus
Roles of Market Place and the E-commerce operator or seller- Ordinarily, marketplaces offer this and deduct a service fee from the sellers but sometimes marketplaces go even beyond by providing transactional support and by ensuring speedy delivery. The scenario goes like this, Customer orders a product from the seller on the marketplace. Now it’s up to the seller whether he wants to deliver it by him/her own self or take support from the marketplace. In this process, marketplace deducts an accountable charge from the seller for its service and it’s absolutely seller’s responsibility to collect all indirect taxes like VAT/CST from the customer and submit it to government authorities.
Responsibility to collect Taxes-Now according to the GST model, marketplaces would also be responsible for collecting a certain part of the tax from the sellers and submit it to the government. Well, the model law has some good insights too for this constantly growing sector. The federal indirect tax structure creates much of the difficulty in the operations of this sector as for the constantly evolving laws and regulations in State government levels and inter-state level business transactional difficulties like road permits, waybills, toll booth permissions etc. currently slow down the ease of doing business considerably much. So, there is need of clear-cut taxation systems. Therefore, the new adoption of this model GST law system, which has dedicated a separate chapter only for E-commerce business, is expected to stimulate this sector and its profitability to a new level.
Ecommerce Operator and Aggregator- Who is According to the chapter, has however defined Electronic commerce operator and aggregator as two separate terms. An E-Commerce operators will include each and every person who, directly/indirectly owns, manages and operates an electronic platform which is engaged in services to supply goods and services, or informative services but is not directly involved in the transactions on their own behalf. Whereas an aggregator is a person who owns and manages a similar type of platform which enables a consumer to connect to particular persons who provide the required services under the brand name of the aggregator.
Which means an aggregator only connects a consumer to the service provider, whereas an E-commerce operator also evaluates the whole process of supply.
How GST Model law would encourage e-commerce- With the GST Model Law segment, it is said that the sector will get a uniform outset of tax regime as to ease up the difficulties and thereby to increase the opportunities for business. Primarily, with the GST, the entities operating in this sector will be able to claim and utilize the credits on service tax paid on warehousing, logistics, commissions of service providers, which they are not allowed to levy currently. Also, they will be able to claim credit of Value Added Tax paid on goods which provide output services. There will also be clear cut and uniform VAT model agreed by all states and the center which will stimulate the business operations, apart from the currently seen VAT confusions of different legislatures. Also, GST is expected ease up much of the troubles witnessed by the countries in cross-state business affairs.
Some confusion between tax liability incidence for B2B and B2C operators- However, for the companies, the output tax rate could turn higher than the current service tax rate. The place of supply for B2C business would be the location of service provider whereas for B2B providers would be the place of the service recipient. However, confusion may occur with inter-state and intrastate dealing and also with the compliance system.
As per the GST model, it is stated that the e-commerce entities will have to pay CGST+SGST in the state where service recipient is situated and there may not be the centralized compliance system applicable under GST. This means that after implementation of this model law, all the e-commerce companies have to register in each and every state where they desire to provide service, primarily, to connect with service recipients from all corners and secondarily, to run their business without any trouble for compliance measures.
If Government addresses some worrisome drawbacks- GST on e-commerce will be resounding success- Alongside all these, implementation of such law may also harm the relationship between sellers and E-commerce operators, as according to GST, any amount paid to the supplier would be subject tax deducted and collected at source at a notified rate. So, altogether, As GST has trustable advantages for the E-commerce sector, simultaneously, it also carries worrisome drawbacks for the same as well