Impact of the GST bill on Indian eCommerce

Impact of the GST bill on Indian eCommerce



The GST Bill is one of most significant tax reforms that independent India has ever taken up. This bill, when implemented will remove all the confusion over the multiple taxes that prevail at the national level and in various states.

In today’s post, will try to understand the impact that the proposed GST bill will have on Indian eCommerce industry.

Current issues prevailing in the industry

The eCommerce industry in India has seen a phenomenal growth over the past few years and is poised to become the second largest online market after China.  The new age tech-savvy customers are demanding personalised attention and unique shopping experiences which is forcing the eCommerce industry to come up with unique and innovative products and experiences.

Due to the ever increasing demand, multiple domestic and foreign transactions, the eCommerce ecosystem in India has turned out to be highly complex in nature.  Due to this complexity, the industry is facing various issues such as:

  • Determining the role of the online market places while computing their tax liabilities

  • Liability for undertaking the waybill compliance: market place or seller

  • Liability for Deposit Entry Tax

  • Provisions under the prevailing VAT for discounts, bundled offers, returns , cancellations and replacements

  • Provisions under the current VAT for the sale of digital content such as eBooks and software products

  • Determining the state in which the sales has happened, especially in cases where the products have to be moved between states before reaching the end customer

  • Complexities associated with credit blockage

  • Service tax and other compliance related issues

Impact of the Proposed GST Bill on Indian eCommerce Industry

The Central Government of India has proposed the GST bill with the intention of creating one nation market place and that means that the bill is a huge boon for the Indian eCommerce industry. It is set eliminate all the complexities involved in their transactions.

According to a report released by Price Waterhouse Coopers, here is the impact of the GST on the Indian eCommerce sector:

Pricing impact

The output rate of tax could be higher for the company compared to the current service tax rate. However, the companies should have a higher credit pool than they do in the current regime, which could reduce the prices of their services.

Place of supply in case of B2C

Place of supply in case of B2C transactions would be the location of the service provider

Place of supply in case of B2B

In case of B2B transactions, the place of supply would be the location of the service recipient. It will be important to examine whether there would be rules to define inter-state service or intrastate service. This could be important to understand additional compliance requirement for e-commerce companies.

Compliance Requirements

Currently, e-commerce companies discharge their output service tax liability through centralised registration. Under GST, the centralised registration option may not be available. Hence, e-commerce companies would need to as such obtain registration in each state where they have their place of business, resulting in increased compliances.