Transition to Goods and Services Tax: Fewer options for online shoppers for now

Even as larger e-commerce companies such as Snapdeal and Paytm don’t expect to be impacted because of the transition, several e-commerce platforms and city-based start-ups that The Indian Express spoke to said they had temporarily delisted merchants yet to be registered under GST.

Written by Priyanka Sahoo | Mumbai | Updated: July 5, 2017 3:40 am
GST, Goods and Services Tax, GST transition, tax reform, online shoppers, online shopping, The biggest challenge for e-commerce portals so far has been aligning their compliance systems with those of the sellers.

ONLINE SHOPPERS may have fewer options to choose from in the first few months of the roll-out of the Goods and Services Tax (GST), as e-commerce merchants and sellers make the transition to the new tax regime. Even as larger e-commerce companies such as Snapdeal and Paytm don’t expect to be impacted because of the transition, several e-commerce platforms and city-based start-ups that The Indian Express spoke to said they had temporarily delisted merchants yet to be registered under GST. This will leave fewer options for buyers and also restrict some warehouses to state-level transactions, they said, adding that the effect will be short-term.

“As a short-term impact there will be lesser variety on e-commerce platforms. We have temporarily delisted the sellers and merchants who are not registered under GST. This will take a few products off the shelves,” said Harsh Shah, a co-founder of Fynd, an offline-to-online fashion commerce platform.

According to Shah, only those warehouses that have activated their integrated GST capabilities are allowed to do transactions across the country. “The rest can transact within the state making certain items beyond the reach of some consumers,” said Shah.

Sellers and merchants, on the other hand, are waiting for clarity on pricing. Sanjay Thakur, president of e-seller Suraksha, said that most platforms had very few sellers. “Sellers have no clarity on billing and hence they are waiting. Once the prices are clear, the situation will be more clear. We expect business to commence by Monday,” said Thakur.

Sandeep Agarwal, founder of Droom, an online marketplace to buy and sell used cars and bikes, said that following the implementation of GST, rates had risen. “What we are seeing is that rates appear to be going up but effectively, in the long-run, the prices of products will go down,” said Agarwal.

The biggest challenge for e-commerce portals so far has been aligning their compliance systems with those of the sellers. Droom has over 1.5 lakh auto-dealers — small and medium scale — on board. “The transition to a new tax regime requires technology change, compliance change and accounting changes. Moreover, getting vendors and sellers on board and their readiness has been the biggest challenge so far,” said Agarwal.

Used car buying and selling marketplaces stare at a loss in business over the next couple of months. “We are expecting a decline of 15-20 percent in our sales in the month of July. The market will see a short-term correction before things start looking up towards September,” said Agarwal.

Another used-automobile selling platform Truebil, too, expects business to go down in the first few months. “An average ticket size in the used car sector is Rs 3 lakh. Sellers will not get a high price as this will reduce the difference between the rates of a new car and a used one,” said Shubh Bansal, founder of Truebil.

According to industry experts, this is a good time for smaller e-commerce portals to leverage their seller base through better performance over their larger counterparts. “This is the time the smaller portals or start-ups can compete with the larger ones as they won’t need much time to switch to the new regime,” said Sandeep Maurya, founder of Bornbrio — a startup supporting platform.

However, the platforms are hoping for positive reforms within the next two years. “The GST will improve delivery time as the tax system is integrated now. There won’t be hold-ups leading to delay in delivery. Moreover, it will lead to pricing parity,” said Shah.

“The government’s mandate is that when the procurement cost goes down, it should be passed on to the consumer. It is important to see how aggressively the government monitors the reduction of costs,” said Bansal.

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