Initial compliance costs may be high

Even though the new tax regulations under GST would streamline the e-commerce industry, companies would have to bear the brunt of initial compliance costs.
Initial compliance costs may be high

BENGALURU: Even though the new tax regulations under GST would streamline the e-commerce industry, companies would have to bear the brunt of initial compliance costs. GST implementation is also likely to slow down seller registrations in the coming quarter, experts said.

According to Saahil Goel, CEO and founder, Kraftly, a C2C e-commerce platform for homepreneurs, GST will have a huge impact across industries and e-commerce is no exception.“The first month after the rollout will witness major variations as the sector attempts to adopt and implement GST. We can expect a minor slowdown in seller sign-ups as a majority of them are oblivious to the GST framework and documentation process.” said Goel.

However, this slowdown will be momentary as soon these sellers will recognise the significance of GST and become fully equipped to operate under the new taxation regime. Therefore, although the first quarter can create hurdles, seller registration will eventually increase as online is still an enormous business opportunity for every seller, he added.

Initially, the compliance costs will outweigh the benefits, said Prabhakar Sunder, chief financial officer of Voonik Technologies. “In the long-term, GST would increase transparency and fair trade.”
The seller ecosystem would also benefit as the GST on commissions will be a pass-through compared to the service tax of today, which is a cost to the sellers, added Sunder.

The new regime has the potential to streamline the e-commerce sector, which is ridden with severe tax compliance issues, said Dinesh Agarwal, executive director, Khaitan &Co. “Currently, vendors who are operating on e-commerce platforms are not discharging their tax liability properly.  They have ensured the e-commerce operator obtain a registration under the GST.”

More importantly, GST mandates that every vendor pay tax irrespective of his turnover.
Agarwal said, “Under GST, there is a threshold limit of `20 lakh turnover for paying tax. But, if you are supplying through an e-commerce operator, such threshold will not be applicable and the vendor will be liable to pay.

There is a detailed invoicing and reporting requirement. Each sale will get reported to GST authorities. This will eventually help the e-commerce operator as earlier they struggled with a lot of tax liabilities for defaulting dealers. If the dealer had not paid VAT, then the department was asking e-commerce operator to pay tax.”

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