E-Commerce and its nature:
E commerce business in countries like India is consider as fast growing industries, especially which has the pollution of purchase generation and busy schedule of the working class (like youth and professionals). Electronic mode of shopping taking its place from big shopping malls and market in India.
E-commerce activities refer to the activity of buying and selling by the Company through E-commerce platform to both the parties.
E-commerce also functions on two concepts:
1) E-commerce provide the platform to the Company for the purchase-selling activities
2) E-Commerce business purchases the products from the Seller Companies through the E-commerce platform and sells them to the purchaser of the products with the Brand name of the owner of the products. Brand name doesn’t change in this kind of business.
In case 1 as mentioned above,
Business need to get their company registered under the Service Tax regime as the business are providing the services and not purchasing any commodities / products from seller.
In case 2, scenario of the business can be classified as:
Business are purchasing the products / commodities from the seller and selling the same to the purchaser on their own invoices / bills, which make the business liable to pay VAT / CST to the seller and collect the same from the purchaser of the products.
How to justify both the concept of E-commerce in terms of the applicable Taxation laws and the burden of the Compliance pertaining to the same?
Indirect Taxation is classified under various heads of tax like VAT / CST, Service Tax, Custom and Excise Tax. In case of the domestic e-commerce players, Custom and Excise Taxation will not be applicable.
Where E-commerce business provides the platform, they are actually providing the services where seller and purchaser (“both parties”) have an advantage of running their business(es) without hunting for the actual market. Electronic platform are provided by the E-commerce where the entire infrastructure are build up the Company and both parties buy / purchase their products.
VAT / CST are applicable only when the business(es) purchase / sell the products or commodities from any other party(ies). Business can claim the set off of the VAT, from the VAT received from the purchaser of the products and the VAT paid to the seller of the products. Basically, set off in the VAT are facilitated to avoid cascading effect on the same product. E-commerce player will have the burden of maintaining all the records of the small seller. Maintenance of proper records and claiming of set off of the VAT, is very essential key to save taxes.
How GST will have the combined effect on either of the mode of E-commerce business:
Experts have their comments:
1) Large number of small sellers will claim for their set off of the inputs, which is challenging task for the E-commerce players to account for.
2) Maintenance of the large number of the accounting records for the small sellers will generally turn into the administrative activities of the E-commerce.
3) ‘Destination-based consumption tax’ will again have its effects on the movement of the products. Tax will be collected at the place of the consumption of the products and not from the place from where the products are booked / ordered. This increase the additional burden for the E-commerce for maintaining the detailed accounting records of the state-wise, based on the products consumed.
4) GST will be paid to the respective states, and with the concept of ‘Destination-based consumption tax’, liability for the payment of GST will arise at the registered address / shipping address of the Buyer of the products.
Large ‘E-Commerce player’ will have big pain running their business with the small seller in long term PERSPECTIVE!!!
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Do you think CBDT should extend Tax Audit Report and relevant ITR Due Date? Please Comment, Vote, Retweet and Like.— Tax Guru (@taxguru_in) September 18, 2018