“Navigate the complexities of E-commerce business management and compliance with insights on GST return filing, ITR, trademarks, TCS, and TDS. Learn key steps for efficient order management and strategic pricing. Author: Abhinandan Sethia, CA in Delhi.”
Whether you own an e-commerce portal or you are a seller on portals like Amazon, Flipkart etc. In order to start selling and to meet the compliance requirements, one need to take care of various compliances like GST Return Filing, ITR filing, trademarks, TCS and TDS applicability, etc. All these processes have been discussed below.
The objective of this article is to make the reader understand that undoubtedly, an online business aka an E-commerce business is the most attractive way of conducting business these days and it is seemingly easy provided the business is managed efficiently and compliance requirements are duly met.
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Which entities are classified as eCommerce?
The following two types of entities can be classified as eCommerce businesses:
1. E-commerce marketplace operator: The website or the eCommerce platform with its owner, where the transaction takes place.
2. E-commerce marketplace supplier: The businesses or people who sell goods and services through these eCommerce platforms like Amazon or Filpkart sellers.
Now, let’s first take a brief look at the compliance requirements and then we will discuss about what needs to be done to manage an E-commerce business, so that it runs smooth and the compliance are met efficiently.
You might also be interested in having a look at the most popular form of e-commerce business- Dropshipping. Have a read about it here https://taxguru.in/goods-and-service-tax/tax-implications-drop-shipping-business-india.html
I. GST Return Filing by eCommerce operators:
The following procedure is to be carried by the eCommerce businesses while filing GST Returns:
1. The seller files the GSTR-1 Form supplying the details of the outward supplies made by him in a specific month, by the 10th of the next month.
2. The seller files the month-to-month return Form GSTR-3B by the 20th of the next month giving the details of the assessment and makes the payment.
3. The e-commerce operator files GSTR-8 Form by the 10th of the next month to outfit the details of the supplies processed and TCS collected by them.
4. The yearly return Form GSTR-9 is filed by both the supplier and the operator by 31st December of the next financial year.
Read more about GST returns for online businesses here: https://taxguru.in/goods-and-service-tax/file-gst-returns-online-business.html
II. Income Tax Return Filing
An e-commerce business in India needs to file ITR depending upon their constitution and the scale of business that they are having. An e-commerce can be run as a proprietorship business or one could form a partnership or even a company.
Under Income tax, like any other business, this would be taxable as normal business income. It would be taxable under the head Profits & Gains from Business & profession. An ITR reporting the income from E-commerce business shall be filed.
III. Compliances based on Business Constitution
Any eCommerce business has to meet the compliances according to the business composition it has. For instance, an e-commerce being run as a private limited compliance has to do the annual compliance as per Companies Act over & above the other compliance that we have just discussed about.
Have a read at this article to have a greater insight- https://taxguru.in/company-law/compliance-met-private-limited-companies-incorporation.html
Likewise depending upon the constitution, compliance requirements would vary.
IV. TCS applicability on eCommerce seller
Amazon, Flipkart, and other online marketplaces are required to collect tax at source (TCS), which is fixed at 1% of the value of supplies when making payments to sellers on these entries. It will be levied by the operator and passed to the government.
TCS is applicable just when the operator has received the payment from the customer and is paying to the seller. In laymen terms, this means that as a e-commerce seller, you would get lesser remittances from the E-commerce operators and the TCS has to be claimed back by filing the applicable GST returns.
V. TDS applicability on eCommerce sellers
A new section 194-O was introduced under the income tax act which requires an E-commerce operator to deduct TDS before making payments to the sellers on their portal
The e-commerce operator will deduct income-charge @1% of the gross receipts at the time of payment to such e-commerce member by any mode.
However, where the seller is an Individual or HUF and the aggregate value of gross services isn’t likely to be over Rs 5 lacs, in such a case, TDS is not required to be deducted.
The TDS deducted by the operators would be synced with the Seller’s PAN and same could be claimed by the seller at the time of filing the ITR.
How to make sure the compliance and management of e-commerce is done efficiently
It is pretty evident by now that running & managing an ecommerce business isn’t a piece of cake. One has to understand the various challenges and key areas which warrants special care for a sustainable e-commerce business.
As far as management of E-commerce business is concerned. The two areas which are of utmost importance and could really be a game changer would certainly be Order management and Pricing.
I. Order management:
A e-commerce business is an open and hassle-free market for the consumers, they can place the order easily, make the payment and also cancel or return the order if it doesn’t meet their requirements. Amidst, all of this, there could be a lot happening with a particular order and it needs to be managed otherwise you will not have a track of the order status, the inventory that you actually have, which in turn will hinder you to refill your inventory efficiently and all of these combined could make your dream e-commerce business go hay-way.
Thus, it is very important to have an order management process to be in place with the objective to track each & every order and have a realistic & live view of the order status.
Most of the e-commerce portal have their own set of facilities available which could be used to set the process for an efficient order management. These facilities need to be customized as per the needs to have an efficient order management in place. Also, when you are selling similar products in multiple portals, you need to integrate all the order status to have a complete picture of your orders & Inventory status
II. Pricing
It is an important area as it’s the pricing that will mostly determine whether the goods or services offered by you would be sought by the consumers or not.
Pricing is also important because it decides the margin and wrong prices could run you into losses. It is very important to understand the dynamics of how E-commerce pricing is done and how much margin you would have at a given price and whether the price set by you would meet the expenses and make your business sustainable for a long period.
You might actually think that you have set the right prices, though eventually you might find out the prices set by you do not even recover the commission/fee charged by the e-commerce operators and the other costs and this runs your business into losses.
In order to set an appropriate price, one must do a thorough calculation, considering all the possible costs and then factoring in the target margin required.
Moreover, both these areas are also important to be compliant with the tax laws. By now, you must have an idea of the new compliance that were introduced and made applicable especially on the E-commerce sellers. The sellers need to make sure that the compliance is met properly and the reported figures on various returns reconcile with each other.
Hence, it is pretty evident that an E-commerce business could only prosper when it is managed properly and it is as pertinent as anything else in such dynamic business models to have such important processes in place.
Disclaimer: The above post is only for the purpose of academic discussion and should not be construed as any legal opinion in any matter whatsoever.
The author is a CA in practice at Delhi and can be contacted at: E-mail: [email protected], Mobile: +91-9811741451
Author Bio
E commerce seller ko apne sabhi sell k bill rakhna jarori h? till assessment or few months ?