The Impact of GST on eCommerce Sector



Foreword :

India is set to roll out the Goods and Services Tax (GST) from July 1, which is expected to pare the costs borne by logistics and e-commerce startups face in India.

The e-commerce players that depend heavily on third-party logistics firms to transport goods to the customer’s doorstep have largely welcomed the new GST regime, which they say will ease the hassle of inter-state ferrying of goods under a centralized tax regime.

Also Read: GST Impacts Analysis and Outlines by Experts | FinPlus

Under the new rules, details furnished by e-commerce companies will be verified against the details provided by the merchants, which can reign in discrepancies in payments. It also mandates that all merchants supplying goods and services to online marketplaces to register under GST, irrespective of their threshold. Post registration, merchants will have to report sales from online channel separately from their offline sales.
The marketplaces are also required to disclose sales and returns data along with merchant details in their filing. This would make it difficult for sellers and online marketplaces to misrepresent their book of accounts. The e-commerce players are also suggested to maintain internal seller rating, which will help them identify merchants who are diligent in making their tax filings.

For e-commerce platforms, this can be a positive given the constant tussles with sellers. The new system will introduce effective tracking and ensure that all supplies are captured within the tax system.


Positive Effects:

  • GST is good for the e-commerce industry as it would eliminate hurdles in inter-state delivery and subsume the entry tax introduced on e-commerce shipments by some states. Apart from easing the hurdles in transporting goods across states, the uniform tax will also bring down costs of warehousing. There will be a move to create bigger distribution centers, as Indian companies would now need fewer warehouses.


  • The barriers at state borders will ease. The complexity of paying different taxes in 29 different state territories will also ease. Warehousing will become more integrated


  • The GST is expected to trim logistic costs by up to 20 percent from the current levels, according to Care Ratings. The cost of logistics is currently very high in India, costing about 15 percent of GDP. In mature markets, it stands at about 8 percent. With GST, multiple layers of tax will reduce thus bringing down the overall cost. In the long-term, it will also help reduce the unorganized element in the logistics sector.


Also Read: New Update on GST for eCommerce Sellers.


  • One direct provision in GST that is expected to directly impact the online retailers is Tax Collection at Source (TCS) by marketplaces. The GST regime has mandated all online marketplaces to deduct 1 percent tax from the proceeds given to merchants and suppliers, which is expected to impact the cash flows of the sellers.


  • TCS would result in a capital lock-down of about Rs.400 Crores per annum and may discourage merchants, especially small-scale sellers, from selling online. It can put up to 1.8 lakh jobs in the industry at risk, where small and medium retailers using the marketplace will be the worst affected as the lock-in will impact their working capital.


  • According to analysts, it could also lead to procedural hassles for e-commerce companies who will now have to follow additional compliance.



Source :


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