eCommerce has is a fast-growing sector in India and the model GST legislation recognized this and create special provisions specifically to address eCommerce operators. ASSOCHAM predicts eCommerce will be a $38 billion market in 2016 which is up from the $23 billion in revenues generated in 2015. eCommerce is a developing area and it is subject to special challenges with indirect tax, everyone is aware of the changes imposed in Karnataka regarding eCommerce. Along with this there are other issues which affect eCommerce such as the classic issues between services and goods and the lack of credit between VAT and Service Tax.
The GST legislation is designed to make India’s indirect tax regime more business friendly and it balances certain requirements of Centre and State relations which are unique to India. The new tax regime creates a system of continuous reporting of tax specific data which is used for compliance. Correct and accurate data will be the currency for a business to successfully recover input tax credits in this system and avoid penalties, audits, and fines. For an eCommerce operator, the law creates a tax collection at source and reporting obligation for sales data which must be furnished to the government.
The benefits of the law for eCommerce providers have an opportunity to expand the value they provide customers using their platforms. Presently, eCommerce providers deal with a fractured tax system of different Central and State levies. The GST will sweep this away and replace it with a single set of taxing rules across India and will create clear rules for how goods and services are taxed.
The simplification of the tax rules in turns leads to a simpler supply chain, which means eCommerce operators can expand operations to serve more locations without having to dramatically expand warehousing and storage facilities. Presently, the movement of goods between two states can attract a non-refundable tax but under the GST this is no longer the case. Interstate stock transfers are a taxable event but these are fully creditable under the GST. A simpler supply chain means lower costs and this can make the business more competitive.
eCommerce providers are already able to track the sales all their customers are making on their platforms but now the sales have to be reported along with tax information into the GSTN. A one way the eCommerce provider can drive value and efficiency is to provide an offering which combines tax calculation, recording, storage, analytics and finally compliance for all its customers. This way the customers benefit from having the compliance taken care of for review and the eCommerce provider meets it statutory compliance obligation.
For example, eCommerce operators must note all the B2B sales which are made through their system and the way B2B is indicated is through both the supplier and recipient GSTIN noted on an invoice. If eCommerce providers have to request all of the invoices from suppliers, then this creates an additional step in their compliance process and eCommerce providers have to provide their outward details on the 10th of the following month. eCommerce operators also must complete their standard compliance requirements found in GSTR1, GSTR2 and GSTR3 for their normal business operations.
Therefore, eCommerce operators must file GSTR1, GSTR2, GSTR3 and GSTR8 on a monthly basis for their operations. The first three returns will report data on the transactions relevant for their operations and GSTR8 which could be much more detailed will report all the details for their customers’ transactions.
eCommerce operators are marketplaces which make money in providing services to help sellers deliver goods and services to their customers. Marketplaces charge for the services they provider to their sellers such as order processing, fulfillment, and tracking. Another service that they can offer is tax determination and compliance because if they can offer the service to gather all the data then it is easier for the marketplace to meet its statutory obligation.
If the operators wait for the suppliers to provide the tax relevant data then this can impact their ability to provide the statutorily required information and remit their Tax Collected at Source obligations, which can lead to the operator facing fines and penalties. Rather if the eCommerce operator will offer the suppliers within their platform tax determination and GST compliance then the data processing becomes much easier because the tax data the eCommerce provider needs lies with the eCommerce provider rather than with the suppliers.
Udyog which is a leader in Indian Tax Technology has a solution for tax determination and compliance which allows eCommerce providers a way to give a single offering to their customers to solve the problems. Our tax determination offering, AddTax, is ready to calculate tax through REST APIs and our GST compliance offering, enComply, can process and transform data to create GST returns. eCommerce providers will save time and money by adopting a solution which makes tax determination and tax compliance automated which in turn saves your customers’ time and money..
The automated solutions can make it easier for suppliers to add new items or make shipments from different locations without the operator having to code and test for multiple locations. As the supplier, can select from a predetermined list items to match tax treatments for then if there are changes the tax automation system will update the values rather than the eCommerce operator tracking it. The automated compliance system makes sure data is classified and reviewed correctly before compliances are filed and if there are changes in the compliance requirements the automated compliance system will take care of those changes.
Contact us for more details about how an eCommerce platform can become tax intelligent with an automated determination and compliance solution for the GST.
by Anil Kuruvilla.
He is an international Taxation Expert and Chief Content Officer at Adaequare (Parent company of Udyog Software).