For companies, both domestic and international, India is the biggest bet when it comes to e-commerce. Pegged at $16 billion in 2015, it is expected to cross $100 billion by 2020.
Still, since the beginning e-commerce firms have been struggling under regulatory problems as taxes and duties differ in each state.
For example, for delivery of goods in Uttar Pradesh above the price of ₹5,000 an application has to made to the VAT department. Kerala does not allow cash-on-delivery. States such as Bihar, Assam and Meghalaya charge entry tax or octroi from a seller if he doesn’t belong to that state. Octroi is also charged when trucks laden with goods when they enter municipalities such as Delhi, Mumbai and Bengaluru.
On a whole e-commerce companies face five indirect taxes including service tax, central sales tax (CST), value-added tax (VAT), customs duty and excise duty. At present the centre taxes the sale of services and states tax the sales of goods. Therefore service tax, CST and customs duty have to be paid to the centre while VAT and excise duty have to be remitted to the state governments. After the implementation of GST, it will become simple. Sellers on e-commerce will have to pay tax in the state where the delivery happens.
“In the long-run the creation of a unified marketplace will reduce the tax burden, inventory cost and logistical issues, and ensure seamless movement of goods across the country,” said Hari Menon, CEO, BigBasket.
The biggest change is perhaps easy delivery across the country. “Lakhs of producers and sellers and consumers will have easy access to an all-India market… and there will be development of seamless national supply chain,” said a Flipkart spokesperson.
However, e-commerce firms will have to make significance changes in the ways of auditing and technology is done.
They should be able to provide real-time information to the tax collectors of goods sold in any particular state. “It would be interesting times ahead with considerable changes to the enterprise resource planning (ERP) systems of e-commerce players to accommodate the requirements of GST,” said Sreedhar Prasad, partner, e-commerce, KPMG.
But, there is one problem – firms will have to collect tax at source, in addition to what is being paid in the state. This will be reconciled later. “The draft GST model provides for tax collection at source on payments to vendors . This will lead to working issues for small vendors and needs to be re-examined,” said a Snapdeal spokesperson.