GST for Indian Sellers: A Comprehensive Guide for Amazon, Flipkart, and Marketplace Sellers
India’s Goods and Services Tax (GST) has transformed the way businesses operate, especially for eCommerce sellers on platforms like Amazon, Flipkart, and other marketplaces. Understanding and complying with GST regulations is crucial for any seller who wants to avoid penalties and ensure smooth business operations.
In this guide, we’ll walk you through the essentials of GST for Indian eCommerce sellers, including registration, filing, invoicing, and compliance requirements, tailored specifically for those selling on online marketplaces.
What is GST?
The Goods and Services Tax (GST) is a comprehensive indirect tax levied on the supply of goods and services in India. It replaced multiple indirect taxes like VAT, service tax, and excise duty, bringing uniformity to the taxation system across the country.
For eCommerce sellers, GST applies to both the sale of goods and services, and platforms like Amazon, Flipkart, and others are required by law to collect and remit GST on behalf of sellers under certain conditions.
Why GST is Important for Marketplace Sellers
- Legal Compliance: As an online seller, GST registration is mandatory if your turnover exceeds ₹40 lakhs (₹20 lakhs for service providers) or if you sell across multiple states.
- Input Tax Credit: You can claim input tax credit on purchases related to your business, reducing your overall tax liability.
- Marketplace Obligations: Platforms like Amazon and Flipkart deduct Tax Collected at Source (TCS) on sales, which sellers need to account for while filing GST returns.
- Access to Wider Markets: With a valid GST registration, you can sell across India without facing state-level tax barriers, enabling you to expand your business nationwide.
GST Registration for Online Sellers
1. Who Needs GST Registration?
GST registration is mandatory for:
- Sellers with an annual turnover exceeding ₹40 lakhs (₹10 lakhs in special category states).
- Sellers who engage in inter-state sales (selling to customers in other states).
- Those selling through eCommerce platforms like Amazon, Flipkart, Myntra, etc.
- Businesses involved in exporting goods and services (though exports are zero-rated, registration is mandatory to claim refunds).
2. How to Register for GST?
GST registration can be done online through the GST Portal. The process involves:
- Providing business details, PAN number, address proof, and bank account details.
- Uploading supporting documents like the business registration certificate and identity proofs of the proprietors or directors.
- Once registered, you will receive a unique GSTIN (Goods and Services Tax Identification Number).
For eCommerce sellers, it is essential to link your GSTIN with the marketplace platform to ensure compliance with TCS (Tax Collected at Source) provisions.
Invoicing Under GST
1. Mandatory Invoice Details
Every sale made on platforms like Amazon or Flipkart must include a GST-compliant invoice. The invoice should contain:
- Seller’s name, address, and GSTIN.
- Buyer’s details (if available) and GSTIN (if the buyer is registered).
- Description of goods or services, quantity, and price.
- Applicable tax rates (CGST, SGST, or IGST) and the total tax amount.
- HSN (Harmonized System of Nomenclature) code for goods or SAC (Services Accounting Code) for services.
2. Tax Collected at Source (TCS) by Marketplaces
Amazon, Flipkart, and other marketplaces are required to deduct 1% of the total sale value as TCS under GST regulations. This TCS is then remitted to the government, and sellers can claim this amount as a credit while filing their GST returns.
How TCS Works:
- The marketplace deducts 1% of the net sale value as TCS.
- Sellers must declare the TCS collected by the marketplace while filing their GST returns.
- The TCS amount is reflected in the GSTR-2A form and can be claimed as a tax credit against GST payable.
Filing GST Returns
1. Types of GST Returns
Sellers are required to file regular GST returns to stay compliant. The key returns to be filed include:
- GSTR-1: Monthly/quarterly return for outward supplies (sales). It details all sales transactions, including those made on eCommerce platforms.
- GSTR-3B: Summary return showing total sales, tax liability, and tax paid for the month.
- GSTR-2A: Auto-generated form showing inward supplies (purchases) and TCS details deducted by the marketplace.
2. Return Filing Frequency
- For sellers with a turnover of less than ₹5 crores, GST returns can be filed on a quarterly basis under the QRMP (Quarterly Return Filing and Monthly Payment) scheme.
- For sellers with a turnover above ₹5 crores, returns must be filed monthly.
3. Late Filing Penalties
Failing to file GST returns on time can result in late fees and interest penalties:
- Late fee of ₹50 per day for delayed returns (₹20 per day for nil returns).
- Interest at 18% per annum on any unpaid tax.
Claiming Input Tax Credit (ITC)
1. What is Input Tax Credit?
Input tax credit allows sellers to reduce their tax liability by claiming credit for the GST paid on business-related purchases. This is especially useful for sellers who buy goods from suppliers or import materials for resale.
2. Conditions for Claiming ITC
- The purchase should be from a GST-registered supplier.
- A valid GST invoice should be available.
- The goods or services purchased should be used for business purposes.
- The supplier must have filed their GST returns and the transaction should reflect in your GSTR-2A form.
GST for Exporters
1. Zero-Rated Exports
For sellers exporting goods or services, GST applies at a zero rate. This means no GST is charged on exports, but the seller can still claim a refund on the input taxes paid.
2. LUT/Bond for Exporters
To export goods without paying GST, sellers must file a Letter of Undertaking (LUT) or provide a bond. This ensures that no tax is payable at the time of exporting goods.
3. Claiming Refunds
Exporters can claim a refund of the GST paid on input goods or services by filing RFD-01 through the GST portal. Refunds are typically processed within 60 days of filing the application.
Common Challenges Faced by eCommerce Sellers
1. Multiple Registrations for Multiple States
If you are selling across different states, managing GST compliance in each state can become challenging. Sellers need to ensure that they are filing the right returns and maintaining compliance for each state.
2. Reconciliation of TCS Data
Sellers must regularly reconcile the TCS collected by marketplaces with their GST filings to ensure there are no discrepancies. Any mismatch can result in errors while claiming input tax credits.
3. Complexity in Filing Returns
The GST filing process can be complex, especially with multiple returns required each month or quarter. Sellers often use accounting software or hire tax professionals to manage their GST compliance effectively.
Conclusion
For sellers on platforms like Amazon, Flipkart, and other eCommerce marketplaces, understanding and complying with GST is vital to ensuring seamless operations and avoiding penalties. From registering for GST to invoicing, filing returns, and claiming input tax credits, every step is crucial for maintaining legal compliance and optimizing your tax savings.
By staying updated with GST regulations and leveraging input tax credits, sellers can reduce their tax liabilities and focus on growing their business.