The introduction of the GST scheme brought about a large change in the Indian economy. It subsumed all the indirect taxes into a single tax. This scheme was introduced to make it easier for the citizens of India to pay their taxes. The registration for the GST scheme is completely online which means that taxpayers will not have to run around to get themselves registered under the scheme.
E-commerce sellers are now more prevalent than they have ever been before. Selling products and services online has become a very profitable venture. It is mandatory for e-commerce sellers to register themselves under the GST scheme. More details about what sellers have to do and the rules they have to follow to register will be revealed in the article.
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Difference between e-commerce operators and sellers
Many people often get confused between what e-commerce operators and sellers are. E-commerce operators are those that have a platform that they use to help e-commerce sellers sell their products. E-commerce sellers make use of the platforms that are available to them to sell their products. The way that the taxpayer ends up paying their tax is related to the kind of online business that they are running. There are two main types of online businesses that can be discussed in this context.
In the first type of online business, the individual will have to sell their products directly to their customers through their own website. In case they are doing this, they can follow the normal GST regulations.
In the second kind of online business, the individual will have a website which they will use to bring buyers and sellers together. The individual will get a commission for every sale that is made by someone else through their website. Since the products are not sold directly by the individual but through their platform, the way that GST is paid will also differ.
The concept of Tax Collected at Source(TCS) can be employed here. When the individual is handling payment between a buyer or seller on their platform, they will have to deduct 2% from the money they got from the sale before they send it to the seller. The individual must then pay this 2% to the government as tax. The seller that used the individual’s platform can then use this 2% as a deduction on the tax that they have to pay. Both aggregators and sellers will have to report all the sales that they make to the government and ensure that the financial reports all match properly.
Regulations for e-commerce sellers
These are some of the facts that e-commerce sellers need to know more about when it comes to how the GST scheme applies to them:
No threshold limit
In the case of other businesses, they have to only apply for the GST scheme if they reach a particular threshold limit. However, this is not applicable to e-commerce sellers. E-commerce sellers have to register themselves under the GST scheme and pay the tax that is asked no matter what their threshold may be. They will not be able to escape from paying taxes just because they do not make a lot of money.
Composition Scheme
The composition scheme is a feature under the GST scheme that is of great help to small and medium businesses. The scheme was introduced with the aim of reducing the tax burden for businesses that do not earn a lot of money(small and medium businesses). If a taxpayer has a turnover that is less than 1.5 crore, they will be able to apply for the Composition Scheme. In certain states, the threshold is even lower at 75 lakhs. However, e-commerce sellers will not be able to apply for this scheme no matter what they earn.
Place of supply
Under the GST scheme, goods and services will be taxed at the location where they are used and not at the location from which they are sent. This means that if an e-commerce seller is selling their product, then the recipient of it will have to pay the tax for it. Thus, the e-commerce seller must be mindful of where their products are going to. The tax that has to be paid will change depending on what the location is. If the place of supply is specified incorrectly, the incorrect state will collect the tax. It is imperative that the correct state be specified when it comes to collecting the GST.
Types of sales
There are different kinds of sales that can be made and the following examples will help you understand them better:
Intra-state sales
Consider that Mr.Kumar who is in Chennai, Tamilnadu, orders a product from Amazon. The seller of the product is present in Madurai, Tamilnadu. Thus, since the place of supply is the same as that of the place of the supplier, Central GST(CGST) and State GST(SGST) will be charged.
Inter-state sales
Consider that Mr.Kumar who is in Chennai, Tamilnadu, orders a product from Flipkart. The seller of the product is present in Mumbai, Maharashtra. Thus, since the place of supply is different from the place of the supplier, Integrated GST(IGST) will be charged.
Sending to a third party
Consider that Mr.Kumar who is in Chennai, Tamilnadu, orders a product from Amazon for his mother, who is in Madurai, Tamilnadu. The seller of the product is present in Mumbai, Maharashtra. The order will be processed and the product will be sent to Mr.Kumar’s mother. He will be billed for the purchase. Although Mr.Kumar’s mother receives the product, it will be assumed that he did. Since the place of supply is different from the place of the supplier, IGST will be charged.
Tax Collection at Source(TCS)
Under the GST scheme, marketplace operators will have to deduct a certain amount of money from the tax and send it to the government. This is called Tax Collection at Source(TCS). E-commerce sellers that sell their products through platforms like Amazon will have to file monthly returns under the GST scheme. This is to ensure that they get to claim tax credit after it has been deducted and sent to the government by the marketplace operator.
Using Input Tax Credit(ITC)
If someone runs an e-commerce business, they will be able to avail of an input tax credit. This is something that was introduced under the GST scheme so that they would not have to pay as much tax to the government. You can use the following example to understand the concept of input tax credit more effectively.
Assume that you have paid a GST of Rs 200 on getting raw materials. After turning these materials into a product, you then sell it to your customer and ask them for a GST of Rs 250. According to the rules for an e-commerce operator, this Rs 250 should then be paid to the government. This will not have to be done if ITC can be applied.
By using ITC, the Rs 200 that was paid as tax for the raw materials can be deducted from this. Thus, the e-commerce operator will only have to pay Rs 50 to the government in the form of tax. The individual can only make use of the concept of ITC for business use. If they are purchasing something for personal use, they will not be able to claim ITC on it. If the taxpayer makes use of ITC properly, they can reduce their taxes greatly each month.
Role of InstaSpaces
InstaSpaces is a leading virtual office provider in India. We have worked with numerous clients before and helped them get the virtual offices that they needed to help make their businesses a wonderful success. We believe that we can also help you if you require it. We have an excellent selection of virtual offices for you to choose from. We provide offices all across India which means that you will get a great range of options to choose from. We also offer virtual offices at highly affordable prices.
We will also register your business officially and register it under the GST scheme if you want us to do so. We will provide you with all the documents that you need for your GST registration and guide you through the entire process. In case the registration turns out to be unsuccessful, we will provide you with a complete refund.
We hope that you are as excited to work with us as we are with you. We request you to put your complete trust in us as we move forward on this journey together. No matter what happens, we will be there to support you and help you accomplish whatever you need to without fail.
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