Online Selling Business -
Important Things to Know
Going by the present business trend, there are few broad models of business. Namely: Inventory Model. Marketplace Model and Aggregator Model. Here, we will discuss in detail, GST for eCommerce Sellers who deals with the market place model of business.
An online business structure is known as marketplace model. In this model usually, an online store in a marketplace model acts as controller (or administrating for) a group of sellers. Normally, it allows other sellers to showcase their products in the storefronts (in their online place) and gets commission from the sales made by the group of seller attached to it. It allows the sellers to start their business without having to think about many only infrastructure needed to setup their own portal and popularize it.
Goods and Service Tax (GST) has very proper guidelines for taxation on e-commerce sales. This was a grey area in the previous tax regime. With the remarkable growth of e-commerce in India it was needed for the government to bring clear guidelines to avoid future complication between a seller and commercial tax department.
Under GST act, every online sellers has to register themselves and pay GST. Unlike their other peers who do not go through e-commerce route (meaning a traditional store/establishment), who has exemption of an annual turnover of Rs.40Lacs, they must have GSTIN for doing transactions. Also, they need to file proper GSTR (GST returns) as per the prevailing law. GST registration and submission of return is must for all online sellers because of the following two guidelines.
Section 24 – Clause IX: Who supplies goods or services or both, through such electronic commerce operator must get GST registration
Section 24 – Clause I: Anybody making interstate supply must have GST registration
Important facts one should know for doing on line selling:
How and what type of GST to be charged
CGST – Central GST
SGST – State GST
IGST – Inter-State GST
UTGST – Union Territory GST
The GST has to be charged based on the destination of supply. One has to first determine if the supply is a inter-state or intra-state. CGST-SCST/UTGST is applicable in an intra-state transaction and IGST is applicable in an inter-state transaction. To clarify further, if a seller sales product in his own state i.e. the address of customer is in his state only then CGST-SGST (UTGST in place of SGST if the transaction is in and from an union territory region), in the other case, if a seller sales (actually ships) his product to another state (other than his one state) then IGST has to be charged.
Examples are given below:
Case 1. Seller is based in Jaipur(RJ). Customer address is in Bhilwara(RJ) – CGST-SGST is chargeable.
Case 2. Seller is based in Jaipur(RJ). Customer address is in Hyderabad(TS) – IGST is chargeable.
Case 3. Seller is based in Pondicherry(PY). Customer address is in Pondicherry(PY) – CGST-UTGST is chargeable.
What is the rate of GST? How to find rate of GST for your product?
Rate of GST is dependent on the HSN code of a material being transacted.
Where the GST rates are defined?
· India has adopted HSN for identifying tax rate of goods and
· SAC for identifying tax rate of services
GST Rates are published against HSN Code (Harmonized System of Nomenclature). Which is a 8 Digit number. It is written as 0000 00 00
The HSN has been devised by World Customs Organization (WCO) to classify goods in a systematic manner throughout the world.
Please remember e-books are also taxable. GST on e-book sale is to be charged at 5% (the tax was decreased from 12% in July 2018)
The mandatory details to be captured in a GST invoice.
– Name and address, and GSTIN of the supplier (if registered office is different than GST registration address, then the same can be incorporated in the invoice
– Invoice number – this has to be a serial number. Proper record has to be kept for any reversal
– Date of invoice
– Name and address and GSTIN of the recipient (if registered)
– PAN of customer – as per 2018 – 2019 budget speech, if an invoice value is more than INR2.5L then capturing PAN of buyer is mandatory.
– HSN code – as described above
– Quantity and Description of material being sold
– Taxable Value (Net of discount) – Actual price, discount value and Net taxable amount can be mentioned, though showing discount is not mandatory (it is in discretion of seller)
– Category and Rate and GST, Amount of GST
– Final invoice value
What happens if wrong GST type is charged to a customer?
Because of whatever reason, if a seller has charged wrong GST on their invoice. [e.g inter-state supply has wrongly got picked as intra-state supply and CGST & SGST filled instead of IGST]. Then the seller has to pay IGST separately and claim a refund of CGST & SGST in the successive return.
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