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The GST bill and the ecommerce sector

Saheli Sen Gupta | Aug. 8, 2016
Now that the GST bill has finally been passed by the Rajya Sabha, analysts speak on what it means for the ecommerce sector.

The GST bill and the ecommerce sector

The GST bill or the Goods and Services Tax Bill was finally passed in the Rajya Sabha yesterday, after a decade of debate, with 66 percent majority. Now, it will be reviewed by the Lok Sabha and at least 15 states will ratify the amendments. Following that, the Bill is expected to be rolled out by April next year.

The GST bill or the Goods and Services Tax Bill was finally passed in the Rajya Sabha yesterday, after a decade of debate, w it h 66 percent major it y. Now, it will be reviewed by the Lok Sabha and at least 15 states will ratify the amendments. Following that, the Bill is expected to be rolled out by April next year.

So, what does this mean for the ecommerce sector and how will it affect their operations? Bipin Sapra, tax partner at EY India thinks that it will be a mix of both good and bad for the industry. " It means increased compliance both for the marketplace and the seller because of tax collected at source and the complex it y on account of place of supply rules as against a free flow of goods across states," he said.

Sreedhar Prasad, partner - ecommerce at KPMG India believes it will impact the industry significantly. Currently the sector thrives on a model where the tax is allotted to the state where the physical movement of goods originate.  However, post GST, the place of consumption will receive the tax allocated w it h any goods bought on marketplaces, irrespective of where the vendor or the buyer is from.

That is, if an online shopper in Mumbai is purchasing something through a marketplace which is headquartered in Bangalore from a Delhi based vendor, for someone in Kolkata, the place of consumption will be state of West Bengal who will get the allocated tax for this sale.

Prasad said, "The e-tailers need to adapt to the new model wherein the state where the package is delivered gets the respective tax for the sale and not necessarily from where the order is booked."

This essentially means that companies will now have to supply the necessary data of where the actual consumption is taking place while filing the GST returns. " It would be interesting times ahead w it h considerable changes to the ERP systems of E-commerce players to accommodate the requirements of GST," he said.

Kunal Wadhwa, partner - indirect tax at PwC India thinks the s it uation will be particularly grim for the smaller players in the industry. "For the small & medium enterprises (SMEs), it is a draconian provision and could actually lead to a complete wash out of the SMEs from selling through e-commerce portals ," he said.

 

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