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GST’S impact on E-Commerce Marketplace Sellers

Impact of GST on E-Commerce Marketplace Sellers

India’s e-commerce market is estimated to have crossed Rs. 211,005 crore in December 2016 as per the study conducted by Internet and Mobile Association of India. The report further claim that India is expected to generate $100 billion online retail revenue by the year 2020.

The uprising of Electronic Commerce in India has also resulted in conception of online marketplaces. A Marketplace is an e-commerce platform owned by the E-commerce Operator such as Flipkart, Snapdeal and Amazon. Some of the features of a marketplace model are:

  • Marketplace enables third-party sellers to register and sell online on their platform.
  • Marketplace charges a subscription fees/ commission on sale value from listed sellers.
  • Third-party sellers under this model gain access to a larger customer base, registered with marketplace.
  • Customer on the other hand gain access to multiple sellers and competitive prices for desired products.
  • Items purchased on such marketplaces are either shipped by Merchant/Third-party seller directly or through the fulfillment center managed by Marketplace Operator.

Government has also allowed Foreign Direct Investments under such model to promote e-commerce marketplace business model in India.

Marketplaces has provided retailers with additional channel of sales and reach which was unimaginable for an offline seller. Major marketplaces claim to have lacs of sellers affiliated with their platform with millions of SKUs. While the number of sellers and their business have increased significantly, GST has specifically taken up marketplaces and has come out with rules & regulations specific to this segment.

Introduction of these regulations requirements has compelled the online seller community to embrace GST regime. Some of these compliance are:

No threshold for GST registration: Government has specified a threshold limit for all the businesses. A business is liable to register under Goods and Services Tax once such threshold limit is breached. However  such limit is not applicable in case of E Commerce sellers. All the businesses carrying out e-commerce activity are required to get registered under GST irrespective of their turnover.

No Benefit under Composition Scheme: Most of these sellers registered with marketplace operators are small and medium businesses. Government has introduced composition scheme under GST law. This scheme is primarily aimed to reduce the burden of compliance for small and medium businesses. Under this scheme, businesses are required to file returns quarterly instead of monthly and pay taxes at nominal rates up to 2%.

However GST law has explicitly excluded e-commerce businesses from this scheme.

Tax Collection at Source by Marketplace Operator: Under the new tax regime, marketplace operators are mandatorily required to deduct a percentage amount as the GST liability of seller and deposit it with government. This mechanism is being termed as “Tax Collection at Source (TCS)” under  the GST law. Eventually the marketplace seller will have to file monthly return under GST to claim the credit of TCS collected by the marketplace operator. This will also impact the liquidity and cash flow of these sellers.

While all the marketplace operator have already completed the first level analysis of impact of GST on their operations, marketplace sellers are still unaware of these rules.

Need of the hour is to keep themselves aware of the changes that are going to come. Also such sellers should now start planning their transition strategy for GST regime.

Some of the key points that should be kept in mind are:

  1. Get your GST enrollment done on time.
  2. Plan your logistics and warehousing requirement carefully.
  3. Adopt such platforms, technologies which will enable your business to be GST compliant.

Although we are at a very initial stage for GST implementation. But marketplace sellers may not have much luxury of time and it is advised to be proactive in your business decisions for GST transition.

Tally Integration with Ecommerce Marketplaces | One-Click

Tally. ERP9 is one of the leading accounting ERPs in the country today. With over 1.5 Million users, this 30 years old company has helped millions of small and medium enterprises manage their accounting, inventory management, taxation, payroll etc.

A very large population of e-commerce sellers in India use Tally for their e-commerce business. There are several manual tools in the market through which sellers manually update their e-commerce transactions into Tally. Moreover, all of these tools require an external 3rd Party tool to be installed into Tally, which mostly can be used only with one single license of Tally. The key problems of these tools are:

  1. It requires to download excel or csv files from e-commerce marketplaces and then converting them to a standard format which is accepted for an upload into Tally.
  2. Since the nature of orders statuses and other metrics on e-commerce marketplaces is so dynamic, the downloaded excel sheets will always vary every time you download the same. For example: today an order will show in a “Shipped” status and we will enter that into a Sales voucher into Tally. However, after a few days, the status of the order could change to “Returned” , “Cancelled”, “Lost” etc. Now this will require cumbersome vlooksups and other formulae to filter these out manually and revise the entries into Tally.
  3. Payments and Receipts come in an aggregated manner for the various orders fulfilled by a seller. Similarly, the payment entries need to have all the order details and settling off against the sales or return vouchers to get an accuracy on order wise outstanding. This is mostly not available.
  4. Sales Returns need to be adjusted against the original sales. Again a major challenge in manual Tally imports.

Is there a solution? Well, yes ! Evanik OneWorld Suite has developed a proprietary tool which works through a chrome extension. All the metrics of marketplaces get into the eVanik OWS tool and get processed and sequenced through it’s powerful algorithms. After this, the chrome extension pushes data into the user’s Tally. ERP9 software. There are various advantages:

  1. Tally sync through eVanik works on a one-click. Absolutely no requirement of any downloads / uploads of excel and csv sheets
  2. There is no requirement to install any module into Tally and affect the speed and performance of Tally
  3. All dynamic statuses in the e-commerce panel get real time updated into eVanik OWS and thereby into the user’s Tally software
  4. Being a 5 Star Sales and Implementation partner of Tally Solutions, all the data which gets into Tally is GST compliant and with zero mismatches
  5. Returns and Payments get adjusted against individual order IDs
  6. Evanik provides a reconciliation dashboard and a detailed list of all the entries which have been imported or not imported in the user’s Tally software.
  7. Evanik takes care of syncing Sales (Orders) | Sales Returns | Payments | Marketplace Fee and Taxes into Tally.
  8. All ledgers, SKUs (Products) get automatically created in Tally
  9. And all of this takes just a few seconds.

View the Video of Evanik’s Tally Integration Module and take a test drive today.

Amazon Seller Connect with eVanik OneWorld Suite | 4th September 2017 at Hotel Pullman

 Amazon India had hosted it’s second Seller Connect event on 4th September 2017 at Hotel Pullman, Aerocity, New Delhi. Over 1000 biggest online sellers from all over the country were invited to the event and were addressed by key note speakers and the leadership team of Amazon India.

eVanik had co-hosted the event and had provided a booth on the seller street to address the Reconciliation, Accounting and Inventory Management issues of Online Sellers.

The event was a full day one and a roaring success for eVanik.

E-Commerce Sellers – How GST Matters

E-commerce has greatly impacted the aspect of customer outreach, like never before. Irrespective of geographical locations, buyer and seller are bonding online, and given the unprecedented success sellers are finding online, the typical brick-and-mortar model is indeed facing a challenge.  Add to that, the additional impetus by the Government, and this is one marketplace, suppliers will be flocking to even more, in the days to come.

Which is why, it is all the more important to understand how GST matters to E-Commerce Sellers:

Mandatory registration
Similar to e-commerce operators, all suppliers on e- commerce platforms are mandatorily required to register under GST, irrespective of turnover. In other words, even if an e-commerce supplier’s aggregate turnover is less than INR 10 Lakhs (in Special Category States) or INR 20 Lakhs (in rest of India), registration will be mandatory. This will definitely imply an increase of compliance activity, and associated costs. However, with the adoption of the right technology, a more disciplined approach to maintain accounts and records, and careful planning of cash-flow – the pain can be mitigated.

Non-eligibility for Composition Scheme
An e-commerce supplier will not be eligible for registration under the composition scheme. Hence, even if the person’s aggregate turnover does not cross INR 1 Crore, which is the revised composition scheme limit as per the latest GST meet on 6th October, he / she does not have the option to become a composition tax payer.

Negative impact on Cash flow
E-commerce suppliers generally operate on thin margins. Once a sale is made through an e-commerce platform, the e-commerce operator collects the money from customers and remits it to the supplier, after deducting the marketplace commission. Under GST, e-commerce suppliers will primarily face 2 challenges:

  • Their cash flow will be affected by the tax collected at source i.e. TCS at 2% by operators. This tax paid will be available as input credit to the supplier on 15th of the next month, which means cash blockage of 30-45 days.
  • The ITC available to e-commerce suppliers will be dependent upon their vendor’s compliance – as ITC can be availed only if the vendor has filed the monthly return and made full payment of the tax due. In case of non-compliance by the vendor, the e-commerce supplier will lose the eligible ITC.

However the good news is that TDS and TCS have been deferred till 31st March, 2018, and thus this gives ample time to e-commerce players to settle in their operations in the GST era, and be better equipped to meet this challenge.

Seamless availability of ITC
In the previous regime, e-commerce platforms would charge service tax on the services provided to suppliers on their platform – such as warehousing, logistics, marketplace commission etc. Suppliers were unable to claim input tax credit on the service tax paid, which would become a cost. But, in the GST era, ITC will be available on all inputs used in the course of or for the furtherance of business. In effect, this will result in reduced cost of operations for suppliers as they will now be able to take the credit of tax paid on inputs, which was until now adding up to their cost.

Returns process
An e-commerce supplier has to follow the same GST returns process applicable to a regular dealer – which means adherence to GSTR 1, GSTR 2 and GSTR 3 – each of which need to be processed diligently. In addition, the details specific to e-commerce transactions will need to be specified. Adherence to these forms, will ensure that the right ITC gets availed by the E-commerce suppliers.

One Nation, One Market
In the previous regime, suppliers had to keep track of the State-wise taxation rules relating to the products they deal in as often, the same product would be taxed at different rates in different states. In some cases, due to ambiguity in dealing with the models of e-commerce business, multiple taxes were imposed on the same product. Many States also imposed entry tax on the entry of goods sold online to their states. However, under GST, goods and services have fixed rates across the nation, irrespective of whether they are sold at physical stores or online. Hence as an e-commerce supplier, it definitely would mean opening up of the entire nation as one united market.