Tuesday, August 16, 2022

No more mandatory GST registration for small online sellers, but with riders

While this move will bring parity between online and offline sellers, it is subject to certain conditions, Finance Ministry officials said.

Written by Pranav Mukul , Aanchal Magazine | Chandigarh, New Delhi |
Updated: June 30, 2022 9:51:31 am

In addition to the waiver, the GST Council also permitted composition dealers — those with a turnover of up to Rs 1.5 crore who pay GST at flat rates with input tax credit (ITC) — to make intrastate supplies through e-commerce companies.

In what will benefit small online sellers, the Goods and Services Tax (GST) Council has cleared the proposal to waive mandatory registration of such online vendors if their turnover is lower than Rs 40 lakh and Rs 20 lakh for goods and services, respectively. This is likely to come into effect from January 1. While this move will bring parity between online and offline sellers, it is subject to certain conditions, Finance Ministry officials said.

These small online vendors will have to declare their Permanent Account Number (PAN), and principal place of business. Further, unregistered entities will also be restricted to declare their principal place of business only in one state, and will not be permitted to make interstate taxable supplies.

“The challenge for us in online service, a seller can sell through multiple e-commerce operators — Flipkart, Amazon, etc. We want one identity of that seller in the virtual world. So we will take the PAN number, do a KYC…we’ll aggregate and find out that their turnover doesn’t exceed the threshold,” a government official said.

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The recommendations to streamline these processes were made by the GST Law Committee.

Explained

More players

The removal of various compliance bottlenecks for e-commerce sellers will invite more players in the market to route their business through e-commerce websites.

Notably, the issue of differential treatment of offline and online sellers was also flagged by the Parliamentary Standing Committee on Commerce in its report published on e-commerce sector earlier this month.

The Parliamentary Committee had observed that the mandatory registration requirement has placed additional burden on small sellers, increased the compliance and operation costs for such sellers, which negatively affected their margins. It had also said in the report that the dropout rate of online sellers was in the 60-70 per cent range — a point echoed by founder and CEO of social commerce platform Meesho Vidit Aatrey.

He said that in 2022, around 60 per cent of small businesses looking to come online on Meesho dropped off on account of the GST requirement. He added that an estimated 5 crore MSMEs are currently unable to sell online due to compulsory GST requirements.

Flipkart Group chief corporate affairs officer Rajneesh Kumar said: “This decision by the GST Council to bring parity for sellers on e-commerce platforms…will reduce compliance burden for small businesses especially, artisans, weavers, handicraft makers, artists and home makers to access markets through e-commerce and smoothen their on-boarding on these digital platforms”.

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