Bengaluru, Jun 2, 2017
India's largest online retailers are lobbying hard against requirement to register in each state under the proposed goods and services tax (GST) regime,
which may not allow them to accept products from small dealers with annual turnover of Rs 20 lakh as they have been kept outside GST.
If an ecommerce firm still sells products of an unregistered dealer, it will have to pay full tax without the benefit of input tax credit. Meanwhile, India's ecommerce giants such as Amazon, Flipkart, Myntra and ShopClues have conveyed to the finance ministry and GST Council that they will have a tough time with compliances if they have to register in individual states. The GST regime will also remove any incentive for an online portal to sell the product of an unregistered dealer, said a state VAT official. Revenue secretary Hasmukh Adhia, too, has called out trades and businesses to deal with those dealers with a GST identification number (GSTIN). If a small dealer wants to sell his products on an ecommerce portal, he will have to take a voluntary registration, the official said.
These roadblocks will keep small traders away from digital marketplace, said Sanjay Sethi, CEO of ShopClues. "We are going to keep out all those small dealers who don't have a GSTIN, while at ShopClues, we want to provide digital marketplace access to people like weavers, potters, artisans and those engaged with the cottage industry," he said.
The mandatory registration would, in some sense, discourage small merchants to sell through the ecommerce platform, said Priyajit Ghosh, Partner Indirect Tax, at KPMG India. "They are the ones who need the ecommerce operator's platform, perhaps the most, to access the larger market before they grow their business and then take on the burden of tax compliances," he added.
Etailers are trying to reason with the government to save them from having to register in each of the 29 states and seven union territories under the GST regime. In fact, this is an issue a Flipkart representative raised at an interaction with the revenue secretary in Bengaluru on Tuesday that went unanswered. The Flipkart executive requested Adhia if the GST Council could consider doing away with multiple registration, and facilitate a sort of single-point registration. They don't need to take such registration in individual states under the VAT regime. Amazon India, however, has not accepted Karnataka's interpretation that it is a "dealer", and maintained that it is only a technology company providing a digital platform for buyers and sellers to carry out transactions.
A senior VAT commissioner handling GST migration said an ecommerce company need to have GSTIN in both the state of origin of trade, and the destination state where an item is consumed or resold so that the entire chain of transaction is visible. This is necessary for transfer of tax revenues to the end-state as GST is a destination-based tax, and not origin-based tax as in the VAT regime. If a transaction originates in Bengaluru and terminates in Delhi, the buyer in Delhi would like to claim input tax credit against the purchase if he is a dealer himself.
An official explained it thus: If an ecommerce firm sells products from 100 dealers from its fulfilment centre in Bengaluru, and deducts 1% tax at source, the buyers in dozens of other states can claim credit for the tax already paid only if the firm has registration in each state where it is engaged in buy or sell transaction.
Flipkart and Amazon declined a comment. An Amazon executive, however, confirmed that they have appealed to the government to facilitate remittance of GST through registration in a single state. Under the current VAT regime, he added, only Karnataka and Gujarat have been particular on registration in their respective states for tax collection at source (TCS).
"Multiple registrations across states is unfair," said an Amazon executive, who did not wish to be identified. "Our representation said that we will file the returns but should be allowed to register in a single state. This is unfair on part of anyone who works on an inventory model. It will be difficult for our large sellers who have their products at our fulfilment centres," he said.
[The Economic Times]