GST is a comprehensive, multi-stage, destination-based tax that has subsumed various indirect taxes, simplifying the tax landscape. For businesses operating in the burgeoning e-commerce sector, understanding, and complying with GST regulations is paramount for sustainable growth and success. Let us delve deeper into the intricacies of GST registration, a fundamental requirement for e-commerce businesses in India.

Why is GST Mandatory for e-commerce business?

We need to understand the logic behind GST and its importance for online business in India:

GST is a destination-based tax, meaning it is levied at the point of consumption rather than the point of origin. This is a significant departure from the previous tax system, which involved multiple cascading taxes.

For e-commerce businesses, the GST regime holds particular significance. Given the rapid growth and widespread reach of online businesses, GST registration is mandatory for e-commerce businesses if their annual turnover crosses the prescribed threshold, which varies depending on the nature of the business and the state in which it operates. This mandate ensures that all players in the e-commerce ecosystem operate on a level playing field, fostering fair competition, and promoting accountability in tax compliance.

Who needs to register for GST?

The criteria for GST registration are not uniform across all businesses. Specific thresholds and conditions apply to e-commerce operators.

The table below outlines who needs to register: (Learn about GST Registration limit)

The GST registration process for e-commerce businesses is entirely online and involves several steps.

It is important to fill out GST REG-01 form and upload required documents as given below:

Post registration, it takes a few weeks to get the approval and once verified, you can download your GST registration certificate. It contains your unique Goods and Services Tax Identification Number (GSTIN).

Also read: GST Registration for MSME in India

Navigating unique GST requirements for e-commerce businesses

E-commerce businesses operate under a distinct set of GST compliance requirements that cater to the digital nature of their operations. These requirements primarily focus on the collection and remittance of Tax Collected at Source (TCS) and the prominent display of GSTIN on invoices.

Tax Collected at Source (TCS)

In the e-commerce realm, TCS acts as an additional layer of tax collection. E-commerce operators are mandated to collect 1% TCS on the net value of taxable supplies facilitated through their platforms. This means that for every transaction that takes place on their platform, a small percentage is collected as TCS and subsequently deposited with the government.

The TCS mechanism aims to ensure better tax compliance in the rapidly growing e-commerce sector. By collecting TCS upfront, the government aims to widen the tax net and curb potential tax evasion. However, it is important to note that TCS is not an additional tax burden on sellers. It is adjusted against their final GST liability, effectively acting as an advance payment of GST.

GSTIN on Invoices

For every sale made through an e-commerce platform, a tax invoice is generated. The GSTIN (Goods and Services Tax Identification Number) of the e-commerce operator must be prominently displayed on these invoices. This unique identification number serves as proof of registration and facilitates the tracking of transactions for tax purposes.

Also read: GST Calculator: Simplifying GST calculations in India

The inclusion of GSTIN on invoices is not merely a formality; it is a legal mandate. Non-compliance can lead to penalties and complications for both the e-commerce operator and the seller. Therefore, it is crucial for e-commerce businesses to ensure that their GSTIN is accurately and clearly mentioned on every invoice issued through their platform.

Benefits of registering for e-commerce businesses?

GST registration offers several advantages for e-commerce businesses:

• Input Tax Credit (ITC): Claim credit for GST paid on purchases, effectively reducing your tax liability.
• Seamless Interstate Sales: Conduct business across state lines without incurring additional taxes.
• Enhanced Credibility: GST registration adds credibility and trust to your business in the eyes of customers and suppliers.
• Access to Government Schemes: Gain access to various government schemes and incentives designed to support businesses.

When can an e-commerce businesses cancel GST registration?

An e-commerce operator can apply for GST cancellation in the following situations:

• Business Closure: If the e-commerce business is permanently closed or discontinued.
• Transfer of Business: In cases of merger, demerger, or transfer of the e-commerce business to another entity.
• Change in Constitution: If there is a change in the legal structure of the business, leading to a change in PAN.
• Below Threshold: If the annual turnover falls below the threshold limit for mandatory registration.

Procedure for Cancelling GST Registration

To cancel GST registration, an e-commerce operator must follow these steps:

• File Form GST REG-16: Log in to the GST portal and file Form GST REG-16, the application for cancellation of registration.
• Provide Reasons for Cancellation: Mention the specific reason for cancellation in the form.
• Clear Dues and File Returns: Ensure all pending GST returns are filed and any outstanding tax liabilities are cleared.
• Verification by Tax Officer: The tax officer will verify the application and documents. If satisfied, they will issue an order of cancellation in Form GST REG-19.