In this article, we are going to discuss about taxability of persons selling through Amazon, Flipkart, Meesho, Myntra etc. But before that let us understand the whole model of the online marketplace-

Flow of transactions in online platforms

Firstly, it must be clear to all that suppliers selling on e- commerce platform are different from Ecommerce operators (Flipkart, amazon). Amazon, flipkart etc are e-commerce operator and not the persons selling on them. So any rules relating to e-commerce operator doesn’t apply to you. Also, do not select e-commerce operator at time of filing registration form, otherwise, you can get into major problems.

The goods belonging to the actual supplier are displayed on the portals of the ECOs. On placing an order for a particular product by a consumer, the actual supplier supplies the selected product to the consumer.

ECO provides services to suppliers like handling goods and collection of payments and deducts its commission from the payment received from customers. It passes the net consideration to the supplier.

The online seller is selling goods to the consumer and thus it issues invoices to consumer and not to e-commerce operator. Although, all major platforms provide option to auto-create invoice on behalf of online seller.

Since, online seller is invoicing to consumer, its his duty to deposit GST to the government.

Registration requirement

Suppliers who are selling through online platforms are required to take GST registration compulsorily, irrespective of the limits of 10/20/40 lakhs. Sellers are required to register under a normal scheme as composition scheme is not available for these suppliers.

If someone already has a GSTIN then he is not required to take another GST number to make online sales specifically.

In case, an online supplier wants to place their goods in e-commerce operator warehouse then he has to take GST registration in the state or union territory where such warehouse exists. And they also need to add such warehouse as their additional place of business.

Exemption from registration

If a supplier is supplying only those goods which are exempted under GST, then no registration under GST is required.

For example- Shikha book depot is selling books through amazon Ltd. Books are exempted/zero taxed goods. So, Shikha book depot can start selling simply by providing PAN details to register on the website.

Know more about GST Registration

TCS to be collected by ECO

Government has placed a responsibility on ECO (Amazon, Flipkart) to collect TCS @1% (0.5% CGST+0.5% SGST or 1% IGST) from supplier. ECO shall pay the price of the product less the amount calculated @1%. The said amount will be calculated on the net value of goods supplied (after considering returns) through the portal of the ECO. To make it clear we can say that ECO do not actually collect tax from suppliers, they simply retain the amount of TCS and commission and pay the remaining amount to suppliers.

For example- Suppose a certain product is sold @1000 rupees through an ECO by a seller. The ECO would collect tax @1% of the net value of 1000 rupees i. e. 10 rupees.

How seller can claim TCS

Details of TCS furnished by ECO shall be made available electronically on the common portal to each supplier. The amount of TCS shall be credited to the cash ledger of the supplier in particular head in which TCS was deposited by ECO. This amount can be used by the actual supplier at the time of discharging the tax liability or supplier may claim refund of excess balance.

Commission and ITC

As we have discussed above that ECO generates revenue by charging commission from supplier. ECO provides services like payment processing, customer support to sellers and deducts its fees and commission. Platform has to charge GST @ 18% from sellers and sellers can claim input tax credit of this GST.

Place of supply

GST is a destination-based tax. So, the place of supply is where movement of goods terminates for delivery to customer. Simply, where the delivery is made to consumer.

GST Returns

Persons selling through online platforms, are treated as normal taxpayers under GST. So, they also have to file returns like IFF, GSTR-1 and GSTR-3B. And details furnished by ECO are visible to sellers in GSTR-2B.

Important sections