E-Commerce: GST and Indirect Tax Issues

E-Commerce: GST and Indirect Tax Issues

Tuhin Banerjee (Alliance University, India)
Copyright: © 2018 |Pages: 12
DOI: 10.4018/978-1-5225-3787-8.ch010

Abstract

The growth of e-commerce in India has been substantial in the last decade. The growth of the sector has been affected by the number of issues in indirect taxation. The introduction of goods and service tax (GST) is expected to smooth the taxation for e-commerce operators. This chapter examines the key aspects of GST including existing taxes which would be replaced by GST, registration in GST, taxable event under GST, valuation in GST, payment process in GST, refund and audit in GST, and compliance process in GST. The chapter concludes that GST will ease doing business for e-commerce operators by providing a unified framework for indirect taxation.
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Introduction

India is emerging as a major E-Commerce market. The sector in India has grown by 34% (CAGR) since 2009 to touch 16.4 billion USD in 2014 (PWC, 2015). In 2016, the sale of physical goods via digital channels in India amounted to 16.08 billion U.S. dollars in revenues (www.statista.com). The sector has grown and has been challenged with the complexities of the indirect taxation rules in India. The Goods and Services Tax (GST) aims at removing the ambiguity and allow e-commerce to flourish in India. This chapter examines the key aspects of GST in relationship to e-commerce in India.

Indirect Tax Issues Affecting E-Commerce Sector

The indirect tax laws in India have has the following issues affecting the e-commerce sector:

  • One of the key indirect tax is VAT, which is based on physical presence of entities or goods. In the case of e-commerce transactions, determining the jurisdiction of VAT becomes an issue regarding the physical presence of entities or goods.

  • Compliance of service tax also is an issue. Certain fees like listing fees by vendors to portal owners are non-creditable against VAT.

  • E-commerce retailers receive VAT or CST demands in various states in the supply chain.

  • Entry tax and Octroi is being demanded/ collected on the movement of goods.

GST Act

This GST Act is called the Central / State Goods and Services Tax Act, 2016. It extends to the whole of India / State’s name. It shall come into force when the Central or a State Government notifies in the Official Gazette. GST is expected to be implemented from 1st July 2017.

Definition of E-Commerce Under GST

Electronic Commerce means the supply or receipt of goods and/or services, or transmitting of funds or data, over the internet. The applications used by E-Commerce may include e-mail, online messaging, shopping carts, web services, universal description Discovery and integration (UDDI), File Transfer Protocol (FTP) and Electronic Data Interchange (EDI). The payment can be online or offline. The ultimate delivery of the goods and/or services maybe be done by the operator.

Definition of E-Commerce Operator

Every person who, owns, operates or manages an electronic platform to enable the supply of any goods and/or services is an E-Commerce operator. Also, persons providing any information or any other services about such supply of goods and services through electronic platform would also be an E-commerce Operator. Examples include Amazon as they are facilitating actual suppliers to supply goods through their platform.

A person supplying goods/services on his own account would not be considered as an E-commerce operator. Thus, Raymonds selling clothes through its own website would not be considered as an e-commerce operator. Thus, Flipkart will not be treated as e-commerce operators for those supplies which they make on their own account.

All E-Commerce operators must be registered for GST irrespective of turnover.

Definition of Aggregator

A person, who owns and manages an electronic platform, and by means of the application and communication device, allows a likely customer to connect with the persons providing specific service under the brand name or trade name is called an aggregator. For example, Uber would be an aggregator.

All aggregators must be registered for GST.

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