A cashless economy, and thereby, e-commerce, is considered a beacon of hope for a better tomorrow‘Digital India’-driven start-ups have been touted as the nextdriving force for the Indian economy, by the Government ofIndia on several occasions. During the recent demonetizationdrive, the role of the digital economy for eradication ofblack money and corruption was frequently stressed...
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A cashless economy, and thereby, e-commerce, is considered a beacon of hope for a better tomorrow
‘Digital India’-driven start-ups have been touted as the next
driving force for the Indian economy, by the Government of
India on several occasions. During the recent demonetization
drive, the role of the digital economy for eradication of
black money and corruption was frequently stressed upon.
This strongly indicates as to how the cashless economy,
and thereby, electronic commerce is considered as a beacon
of hope for a better tomorrow by the Government, and
accordingly, influences the policy and legislative decisions.
In India, increased Internet penetration through availability
of smartphones and data network has led to a new world of
opportunities for start-ups through e-commerce. According
to NASSCOM’s latest estimates, India’s e-commerce market
is estimated to be USD 33 billion in the financial year 2017.
For the financial year 2016-17, e-commerce sales reached
USD 16 billion with a projection of a sevenfold growth
within the next two fiscals as estimated by Morgan Stanley.
By 2020, online commerce sales are expected to cross USD
120 billion mark. The number of consumers who purchase
goods and services online is expected to cross 100 million
by 2017 end with the e-retail market likely jumping 65% on
y-o-y in 2018.
The rise of electronic commerce in India has resulted in
conception of online marketplaces among other things.
Online marketplace is an e-commerce platform owned by
the e-commerce operator such as Snapdeal, Myntra, and
Amazon etc., where vendors of any scale can sell directly to
the end consumers. Thus, electronic commerce opened new
avenues for small-to-medium vendors to sell their goods to
a larger base of consumers at a much lower cost.
The bright performance of electronic commerce sector made
it imperative for the taxman to focus on plugging any tax
leakages and to provide a level-playing field to offline
E-commerce in India has witnessed a sudden boom since
the late 90s with the advent of Internet, technology, and
entrepreneurship. Accordingly, keeping in sync with the
technology and to reduce corruption and red-tapism, the
legislature moved to implement GST which is completely
premised on information technology and has a futuristic
approach with a focus on minimum human intervention and
maximum efficiency. GST aims to usher an era of broader
based indirect tax with organized business structure.
The new indirect tax regime has an inbuilt incentive for
compliance abidance, for example, GST regime has the
provision of ‘GST Compliance
Rating’ which will add value to
the business of the honest tax
In the GST regime, all of indirect
taxes are subsumed and tax is
levied on ‘supply’ of goods and/
or services. GST is a destinationbased
consumption tax as
opposed to erstwhile origin-based
tax like Central Excise.
India has adopted a dual GST
model wherein both Centre
and States have simultaneous
power to levy GST on ‘supply’.
Intra-state supply is subject to
Integrated GST (IGST), whereas
inter-state supplies are subject to
both Central GST (CGST) and State
GST (SGST) or Union Territory GST (UTGST). However, rate
of GST for a particular ‘supply’ is same, be it interstate or
For implementation of GST, the Central and State
Governments along with private entities have jointly
registered Goods and Service Tax Network (GSTN) to provide
IT infrastructure services to Central and State Governments,
taxpayers, and other stakeholders. GSTN is responsible to
build and operationalize the GST system.
Taxability of the e-commerce transaction differs from
other trade transactions. Generally, in such transactions,
though the impression is that the e-commerce operator is
the provider of goods/services, the actual provider of goods/
services are third-party vendors. Now these vendors may
either belong to the organized or unorganized sector and
may operate at different scales. Accordingly, taxability
of this bunch is challenging, wherein the legislature is
required to apply intelligible differentiators so as to achieve
Further to this objective, GST has special provisions with
respect to e-commerce operators and vendors selling through
them, such as, special category of return in Form GSTR-8,
mandatory registration, tax collection at source from the
vendors, tax payment on behalf of vendors in certain case
of supplies notified under Section 9(5) of the Central Goods
and Services Tax Act, 2017 (CGST Act), among others.
Mandatory Registration for E-commerce Operators and
their Vendors: Under the GST regime, a specific threshold
limit of aggregate turnover is prescribed for registration,
i.e., INR 20 lakhs in general and INR 10 lakhs for specified
States. However, the threshold limit is not applicable in
case of e-commerce operators.
Further, even the sellers who
supply goods and/or services
through an e-commerce operator
are required to get registered
under GST, irrespective of the
threshold limit. However, there
are two exceptions whereby
suppliers selling through
e-commerce operators may
avail threshold exemption:
(a) where e-commerce operators
are liable to pay tax on behalf of
the suppliers, or
(b) if the supply is made through
such e-commerce operator that
is required to collect TCS.
GST provides for state-specific
registration, and therefore,
all e-commerce operators will
have to register in each state
from where it is making a taxable supply of goods and/or
Tax Collection at Source (TCS): The e-commerce operator is
required to collect an amount at the rate of one percent (0.5%
CGST + 0.5% SGST) of the net value of taxable supplies
made through it, where the consideration is collected by
such operator. The amount so collected is called as TCS.
TCS is required to be deducted in each state and deposited
accordingly. This brings in significant compliance challenges
to sellers and may discourage sales through online portals.
The key purpose of this particular provision is to encourage
compliances under GST and provide a mechanism for the
Government to track suppliers who sell through e-commerce
No benefit of composition scheme: Sellers who are supplying
goods and/or services through an e-commerce operator are
not allowed to opt for composition scheme under the GST
Matching Concept and Increase in Compliances: The
e-commerce operator is required to report all supplies made
by the seller and the TCS collected on a monthly basis. TCS
collected by the e-commerce operator from the vendors can
be set-off against the overall GST liability of such vendors.
The sales reported by the e-commerce operator will have to
match with the sales declared by the supplier himself at the
end of every month, and difference, if any, will be added to
the turnover of the supplier and consequently be liable to
discharge GST on such additional turnover.
Efficiency of elaborate GST provisions depends upon the
efficacy of GSTN, more so for the e-commerce sector as “the
Internet economy does not pit the big against the small. It’s
about the swift against the slow”. However, undertaking
compliances on GSTN has not been a smooth walk in the
first 75 days of GST implementation.
not pit the big
against the small.
It’s about the swift
against the slow
Under the GST regime, much like e-commerce sector, revenue
and disclosures are dependent upon efficient functioning of
GSTN. GSTN is also part of the Digital India scheme of the
Government of India to boost technology-driven growth and
GSTN in its initial face has faced much criticism from
certain quarters for errors in filling returns and uploading
of information. On September 12, 2017, a Group of
Ministers (GoM) was constituted to monitor and resolve
the IT challenges faced in the implementation of GST.
GSTN crashed on September 4 and September 9, owing to
unforeseen data/invoices uploads. Infosys, the blackened
service provider of GSTN, blamed one unnamed large bank
that uploaded a massive number of invoices in a way the
system was not designed to accept.
Government has been frequently extending the deadline
for submission of returns, acknowledging the technical
glitches faced by the taxpayers in the wake of new system.
The economic leverage hoped by taxpayers in the long run
is keeping them optimistic about the new regime. The large
corporate houses have more or less equipped themselves to
be GST ready and small taxpayers are coping up.
Digital India is the most celebrated agenda of the
Government of India; however, it has ended up in creation
of additional trade barriers for e-commerce operators under
GST. In this regard, it is yet to be seen whether GST is able
to keep harmonious balance between offline and online
vendors including e-commerce operators and help them to
achieve organized and all-inclusive growth.
The onus to discharge GST has shifted to the e-commerce
operator and they are faced with the difficulties of
classification of supply and disclosures. Further, increased
cost of compliance in each state is a huge deterrent for
small scale e-commerce operators.
All these issues pertaining to GST implementation are
being brushed aside as teething problems by
the optimist and criticized by the skeptics.
Nevertheless, GST is now and here for good,
so the best recourse is to accept, learn,
move on and make the most of it.
GST and e-commerce trade both have
the potential to disrupt the market in
the most positive way, given that
the attitude of the stakeholders
is towards acceptance and
Disclaimer – The views expressed herein
are strictly personal to the author(s) and
should not to be construed as a legal
opinion. The author(s) is not responsible
or liable for any loss or damage caused to
anyone due to any interpretation, error,
omission pertaining to this article.