Impact on E-commerce post GST Bill

The long over-due Goods and Service Tax Constitution bill was passed in Rajya Sabha on August 3^rd, 2016 by a full majority and approved by the Lok Sabha on August 8^th, 2016 Prime Minister Narendra Modi expressed that GST was crucial to put an end to tax terrorism and reduce corruption and black money. The Government will implement this long pending reform by April 1^st, 2017. GST Bill would be one of the most significant business reforms of the recent times.

Startups are now relaxed after the passage of the GST bill, although now they will need professional help to ensure that they comply with the provisions of the GST norms. E-commerce firms have often complained about the soaring taxes and the GST Bill has come in just in time in the form of a much needed breather.

Startups entrepreneurs quit well-paying jobs to work on their startup projects. They use their personal funds to setup and establish their startups. At this stage additional taxes could be quite a burden. A uniform set of policies and exemptions proposed under GST is expected to make things easier for startups.

GST is not just a method devised for calculation of taxes, it is more like a streamlined process and sorted infrastructure related to the taxation process. It will also eliminate the cascading effect of taxes on customers which will bring efficiency in product costs.

A number of new age e-commerce transactions are unspecified under tax laws, for e.g. e-wallet, gift vouchers, COD etc. With inter-state transactions turning tax neutral in regard to local sales under GST, the warehousing and logistic strategy of E-commerce companies might have to be restructured focusing on client proximity needs and not be driven by tax consideration. On the positive side product pricing and profitability would be more predictable and sceptic to the location of the customer.

For e-commerce companies deal with stocks for e.g. buy stock, store inventory and sell, in place of 12.5%, excise they will have to shell out 17-18% GST thus shooting up the prices. They will also be taxed on unsold/ stocked inventory.

Schedule III of Model GST law makes it mandatory for E-commerce Operators as well as individuals who supply goods and/or services, other than branded services, through any E-commerce operator to secure registration under GST laws irrespective of any threshold limit on turnover of the Assesse.

By the above schedule it will be mandatory for every Assesse transacting in or through E-commerce to undergo a registration under GST laws even if their turnover is Rs. 1/- only.

GST brings uniformity and simplifies the process of centralized registrations for startups. It would help reduce the burden of taxes, cost of logistics and inventory aiding effective movement of good. The money thus saved can be used towards business. This will ensure a positive impact on sales and profitability.

After the GST bill, the process of filing taxes would be more efficient and less time consuming. It will also positively affect incorporation and registration of companies. Saving a lot of time and effort of startups working with shoe-string budget and minimal staff.

Under the GST bill the government is expected to move swiftly to simplify procedures and build a world infrastructure to support the fast growing Indian economy and provide a firm foundation to the Honorable Prime Minister’s ‘Make In India’ initiative. The new indirect taxation regime, which will subsume 7-13 taxes, which shall help put an end to corruption as business owners will be compelled to give proper bills. It will benefit small business and consumer will be ‘King’. GST will aid transparency of all taxation procedures.

Authored by: Anand Jain , Co-founder, Clevertap