Exemption from GST Registration for Small E-commerce Sellers

Introduction

In a significant move aimed at simplifying tax compliance for small-scale e-commerce sellers, the Central Government has issued a notification based on recommendations from the GST Council. The notification [ Notification No.34/2023 Dt:31.07.2023], which comes into effect from October 1, 2023, specifies conditions under which certain individuals or businesses engaged in e-commerce activities will be exempted from the mandatory Goods and Services Tax (GST) registration.

Background

Under Section 52 of the Goods and Services Tax (GST) Act, 2017, electronic commerce operators are required to collect tax at source on behalf of the suppliers who use their platform. However, in an effort to ease the compliance burden on small-scale e-commerce sellers, the government has introduced this exemption. To qualify for this exemption, businesses must meet specific criteria.

Conditions for Exemption

To be eligible for GST exemption, e-commerce sellers must meet the following conditions:

1. Aggregate Turnover Limit: The aggregate turnover of the business in the preceding financial year and the current financial year must not exceed the threshold at which a supplier is required to register for GST in their respective State or Union Territory under Section 22(1) of the GST Act.

2. No Inter-State Supply: The business must not engage in any inter-State supply of goods.

3. Single State or Union Territory: E-commerce sellers must operate and supply goods through electronic commerce operators in only one State or Union Territory.

4. Permanent Account Number (PAN): Sellers must possess a Permanent Account Number (PAN) issued under the Income Tax Act, 1961.

5. Declaration on Common Portal: Prior to making any supply of goods through an electronic commerce operator, businesses must declare their PAN, address of their place of business, and the State or Union Territory where they intend to make such supplies on the common portal. This information will undergo validation on the portal.

6. Enrolment Number: Once validated, sellers will be granted an enrolment number on the common portal.

7. Single Enrolment Number: A seller will only be granted one enrolment number in a single State or Union Territory.

8. No Supply Without Enrolment: Sellers are not permitted to make any supply of goods through an electronic commerce operator unless they have been granted an enrolment number on the common portal.

9. Effect of Subsequent Registration:  In cases where sellers are subsequently granted GST registration under Section 25 of the GST Act, their enrolment number will cease to be valid from the effective date of registration.

Conclusion: This notification represents a progressive step by the Central Government to reduce the compliance burden on small e-commerce sellers, making it easier for them to conduct business. By exempting eligible businesses from the mandatory GST registration requirements, the government aims to promote ease of doing business and encourage the growth of e-commerce in the country. It is expected that this move will benefit small-scale sellers, enhance tax compliance, and contribute to the growth of India’s e-commerce sector.