GST in E-Commerce: Impacts, Advantages, and Challenges

After initial hiccups and difficulties, the GST (Goods and Services Tax) is proving a successful indirect tax reform, making the Indian economy more dynamic and competitive. Since its implementation on 1 July 2017 to July 2023 the number of GST Registrations has increased 14% compounded annually, resultant in 2018 the GST revenue was ₹8.76 trillion that increased to ₹13.25 trillion in 2022-23at a compounded annual growth rate of11% approximately. From streamlining tax processes, eliminating double taxation to enhancing tax compliance, there are numerous benefits of GST. Although, the GST has also had a profound impact on e-commerce market, this blog aims to shed light on impact of GST on e-commerce market, advantages,and challenges of GST on e-commerce market.

Impact of GST on E-Commerce Marketplace Seller:

Increased compliance requirements have put profound impact on e-commerce marketplace seller. Under GST, imperative for e-commerce marketplace sellers todo GST Registration, file GST returns, and maintain detailed records of their transactions. Such complicated procedures become administrative burden for small and medium e-commerce marketplace sellers who have insufficient resources to comply with these requirements. In addition, mandatory for e-commerce marketplace sellers to obtain a unique GST identification number (GSTIN) and display it on their websites. In case of failure to comply with these requirements can result in significant penalties and fines.

Under the GST, mandatory for e-commerce marketplace sellers to pay an additional tax of 1% on their gross turnover, in addition to the GST on the products they sell.This has increased the tax burden on small and medium marketplace sellers who sell low-priced items.

Due to increased compliance requirements and changes in tax rates, small and medium e-commerce businesses are facing financial and administrative burden thereby profit has reduced and business operation coast has increased. Therefore, hard for them to survive in the market and compete with larger businesses. In addition, complicated and time-consuming process in GST refund further reduced their profitability.

Advantages of GST For E-Commerce Marketplace Sellers:

• GST has simplified taxation system that make it easier for e-commerce marketplace sellers to comply with tax laws.
• GST has enhanced transparency wherein digital system for invoicing and filing returns thereby possibility of tax evasion has reduced manifold.
• GST has improved competitiveness in e-commerce market eliminating the cascading effect of taxes that allows e-commerce marketplace sellers to offer goods and services at a lower price.
• The GST has replaced indirect taxes, including the Value Added Tax (VAT), Central Sales Tax (CST), and service tax thereby e-commerce marketplace sellers can sell their products and services in other states without paying additional taxes that help them to expand their market.

Challenges Due to GST in E-Commerce Market:

Existing rules for GST registration, GST refund, and filing GST return are quite complicated and time consuming thereby e-commerce marketplace sellers face difficulties to understand and comply with the complex rules and regulations of GST that leads to error and penalties.

Small and medium e-commerce marketplace sellers have insufficient IT infrastructure to comply with the digital system for invoicing and filing returns as required under GST.

Present GST structure is confusing wherein e-commerce marketplace sellers face difficulties in understanding the different GST rates for different goods and services that lead to errors in invoicing and tax payments.

GST has put significant impact on e-commerce marketplace sellers. One side GST has simplified the tax systemand provided a level playing field for small businesseson the other side due to GST compliance costs and operation cost has increased. Hiring GST lawyers from top law firm, e-commerce marketplace sellers can take advantages and opportunities provided by GST. If you are an e-commerce marketplace seller in India and are looking for GST consultancy and GST Registration, Global Jurix is a top law firm in Indiafrom where you can get valuable and productive legal services for business like trademark registration, company registration, FDI consultancy services, etc.

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