Ecommerce GST and tax laws in India by prashant mali

1. Adv. Prashant Mali
[MSc(Computer Science), LLB, LLM, Ph.D(Persu.)
High Court Lawyer, Mumbai
@CyberMahaGuru | Mobile : +91-9821763157
Ecommerce & Legal Compliance Practice

2.  E-commerce means the trading or facilitation
of trading in products or services using
computer networks, such as the Internet.
 Typically, it is an electronic platform where
one can list his/her goods and services and
these products can be bought by customers as
per their requirements and specification and
additionally delivery is also mad to them at
their doorstep.
 It employs online shopping websites for retail
sales, provides online marketplace for sellers,
data interchange and marketing to prospective
consumers through emails and newsletters.
www.prashantmali.com 2

3.  In India, we have origin based taxation system,
i.e. tax is attributable to a State from where
goods have been originated causing loss to the
consumption States where goods are actually
consumed.
 As a result of this, most of the States have
started to impose an additional entry tax on e-
commerce transactions causing increase in
price of products.
 Certain States have issued rules through State
VAT Laws and required to obtain registration
and pay tax accordingly.
www.prashantmali.com 3

4. Electronic commerce shall mean supply of goods
and/or services, receipt of goods and/or
services, transmitting of funds or data over an
electronic network primarily the internet or
using any application that rely on internet.
www.prashantmali.com 4

5.  Emails, instant messaging,
 Shopping carts,
 Web services,
 Universal Description Discovery and
Integration (UDDI),
 File Transfer Protocol (FTP),
 Electronic Data Interchange (EDI), etc.
www.prashantmali.com 5

6.  It can be online or through any other option
like Cash On Delivery, Cheque etc.
 Is Cyrptocurrency like Bitcoin included ?
www.prashantmali.com 6

7.  It can be done by operator directly or by the
supplier himself.
 Most of the time delivery of goods is done by
operator on behalf of supplier.
www.prashantmali.com 7

8. 1. Engaged in or
facilitating buying
and selling of goods.
www.prashantmali.com | Ecommerce & GST [ Indian Laws ] 8
2. Engaged in providing
or facilitation of
services.

9.  Under this type of business model, E-
Commerce Portals buys the goods themselves,
hosts the details of the goods on the portal and
supplies it directly to the customers.
 This model is known as direct selling and sale
invoices are raised by the Portal and purchase
invoices are also in the name of the E-
Commerce Portals as they are engaged in
buying and selling of goods on their own
behalf.
www.prashantmali.com 9

10.  Under this type of business model, portals allows
facilitating exchange between the buyers and
the sellers. eg. Amazon, Flipkart, Snapdeal,
Ebay, Craftsvilla, Pepperfry, etc.
 The general modus operandi of operation of such
E-Commerce Portals is that they allow sellers of
the goods to upload their product details.
 Prospective buyers select the products and place
order with portals. The order details are then
forwarded to the seller by E-Commerce portal
and seller then sends the goods directly to the
purchaser.
www.prashantmali.com 10

11.  Invoice towards supply of goods is raised by
the seller. However, payment of the goods is
received by E-Commerce portal.
 E-Commerce portal then raises the bill of
service charges towards the seller and after
deducting the amount due to them towards
their service charges, remits the balance
amount to seller of the goods.
www.prashantmali.com 11

12.  Under this type of business model, E-
Commerce Portal hosts the details of services
supplied by them on the web portal and
supplies services to the customers on their
own behalf.
 This model is known as direct business model
under this case invoice is raised by the Portal
of the services supplied to the customer on
his own behalf.
www.prashantmali.com 12

13.  Under this model, portals operate as a market place
where service providers are allowed to register
themselves and prospective recipient of service
visits the E-Commerce portal, places order with the
E-Commerce portal.
 Order details are then forwarded to service provider
by the portal and he then supplies service to the
service recipient on his own behalf but under the
brand name or trade name of the said Market Place.
 Invoice is also raised using the brand name or logo
of the E-Commerce Portal.
www.prashantmali.com 13

14.  Under this business model, E-Commerce Portal
operate as a place where the service providers
are allowed to upload their details and
prospective recipient of service visit the web
portal, select the service provider and places
order with the web portal.
 The details are then forwarded to the service
provider by E-Commerce portal and service
provider supplies service directly to service
recipient without using the logo or under the
brand name of the E-Commerce portal.
www.prashantmali.com 14

15.  Invoice to the service recipient is raised by
service provider without using the brand
name of e-Commerce Portal. E-commerce
portal charges service charges by raising its
own bill.
 The mode and time of collection of service
charges and consideration towards the
provision of service may be decided as per
the terms of agreement.
www.prashantmali.com 15

16.  Draft GST law has defined term aggregators
which means any person who owns, manages
and electronic platform and by means of some
device connects the customers with providers
of services of a particular kind under brand
name and trade name of said aggregators.
 Eg. radio taxis like OLA, UBER, and MERU
www.prashantmali.com 16

17.  Schedule III of the draft GST Law provides that
a) Aggregator: A person classified as aggregator would be
required to be registered under GST irrespective of the
threshold limit.
b) Electronic Commerce Operator: Every electronic
commerce operator would be required to be registered
under GST irrespective of the threshold Limit.
c) Persons who supply goods and/or services, other than
branded services, through electronic commerce
operator: Persons who supply goods and/or services,
other than branded services through electronic commerce
operator, would be required to get themselves registered
irrespective of the threshold limit.
www.prashantmali.com 17

18.  Section 9 of the Draft GST Law provides that taxable
Person means a person who carries on any business at
any place in India /State of __ and who is registered
or required to be registered under Schedule III of this
Act.
 Section 7(2) of the Draft GST Law provides that The
CGST/SGST shall be paid by every taxable person in
accordance with the provisions of this Act. Thus, every
taxable person would be required to pay taxes in
accordance with the provision of the law.
 Any person once covered under any of the above three
categories would be required to be registered under
the law irrespective of the threshold limit and once
required to be registered under the law, would be
required to mandatorily pay taxes under the law.
www.prashantmali.com 18

19.  Under GST Law, identification of correct place
of supply becomes critical as the payment of
taxes whether IGST or CGST/SGST will depend
on it.
 Place of supply of goods by vendors to
customers through logistics of e-commerce
operators shall be the place where movement of
goods terminates for delivery. This has come as
great relief for suppliers of goods since place of
supply would be easily identifiable.
www.prashantmali.com 19

20.  Place of supply of services from e-commerce
operators to suppliers of goods and/or services
shall be the location of recipient of services and
this is applicable for all kinds of services being
provided by operators to these suppliers.
 This is again a welcome move both for supplier
and recipient of services irrespective of which
kind of services being provided like listing
services, payment collection services, logistics
services and so on.
www.prashantmali.com 20

21.  Under the existing regime of VAT and Service tax
both operators and suppliers of goods suffers
huge loss of Input Tax Credit.
 The operators make investments in various assets
on which VAT is charged whereas input tax on
services received by vendors from operators is
again nonadjustable.
 The proposed law has allowed such cross
offsetting of ITC for both operators as well as
vendors which is good news for industry as a
whole. Further availability of ITC will make
industry more profitable and prosperous.
www.prashantmali.com 21

22.  Liable to collect TCS (Tax collected at Source) on
the supplies of goods and/or services made by the
supplier.
 Responsible to file monthly and annual Returns.
 Matching the details of returns with that of
suppliers.
www.prashantmali.com 22

23.  Additional burden of collection of tax.
 Though the rate of TCS would be kept at
very low but still it is not desired as it will
increase the compliance burden on e-
commerce operators.
 This will block the working capital of
suppliers of goods & services.
www.prashantmali.com 23

24.  The provision of Tax Collected at Source, in case
of narrow margins may invite situations of credit
buildup in the books of suppliers and as a result,
situation of refunds can also arise.
 This provision of TCS might cause certain
problems for operators as well as suppliers of
goods and services hence require
reconsideration.
www.prashantmali.com 24

25.  E-commerce in India has a return or
cancellation rate of about 15-18%.
 More than 2/3rd of transactions in the
country are on cash on delivery.
 The cash reconciliation for e-commerce
operators happens about 7-15 days later.
www.prashantmali.com 25

26.  Deducting TCS would require e-commerce
operators to bear the tax amount from their
own capital and later seek refund from
government in case of returns and
cancellations.
 E-commerce operators will have to plan their
accounting and cash reconciliation cycles
accordingly.
www.prashantmali.com 26

27.  Schedule I of draft GST law will bring certain
transactions under ambit of supply. The popular
sales strategy of “buy one get one free” will be
taxable under GST.
 This will adversely impact the business strategy
of certain companies which are using this as
promotional activity to increase the sales.
 Actionable claims will also be taxable as supply
of services at the time it is offered to customers
and apprehensions cannot be ruled on taxability
of recharge of cash wallets whether it is
covered by term money or not.
www.prashantmali.com 27

28. It is a welcome law for e-commerce industry as the
era of double taxation by State Govt. will no longer
be continued. Due to the complexity and taxation
burden some big e-commerce operators have
started to discontinue delivery in certain States
like U.P, Karnataka etc. Now the draft GST law has
clearly drawn a line between compliances to be
done by an e-commerce operator and its vendors
who supply goods and services through their
platforms.
In totality Concept of TCS is one which needs very
serious consideration and adequate representation
to policy makers would be panacea to this issue.
www.prashantmali.com 28

29. ADVOCATE PRASHANT MALI [ MSc(Computer Science), LLM]
Email: cyberlawconsulting@gmail.com
Web site: www.prashantmali.com
Contact Details: +91-9821763157
Point of Contact:
Prashant Mali Law Offices
Advocate Sweety Tajane [ B.Com(Accounting & Finance), LLB]
Ecommerce Tax & Legal Compliance
Tel: 022-25401515
www.prashantmali.com 29