🤔 A New Law to Boost E-commerce?
The government has been working hard to boost both e-commerce and small businesses. Here's one law that will kill two birds with one stone.
By ReadOn & TaxShorts
The future is digital.
And the Indian government knows this very well.
Which is why it is pushing to make digital payments easier and quicker.
And this has also helped the Indian e-commerce market boom.
This space is set to grow up to $200 billion by 2026.
But despite this boom and cheap internet, a lot of small-scale sellers and suppliers are still not going online.
The reason? GST law.
⚖️ The GST Law
Normally under the GST law, a supplier is not required to register and charge GST until their turnover crosses a certain limit. (Rs. 20-Rs. 40 lakhs). The move aimed to support small scale traders and make their lives easier.
However, there was a catch for sellers selling their products through e-commerce platforms: they were compulsorily required to register under GST irrespective of their turnover.
The impact of this? They would be required to charge GST, file returns and comply with a plethora of rules. They had to go through all of this hassle even if they sold a Re. 1 worth of a product through an e-commerce platform. So, this extra compliance discouraged a lot of small scale suppliers to enter the e-commerce space and go digital.
These rules stopped 60% of businesses looking to register and list themselves online on major e-commerce platforms.
What's more, 5 crore MSMEs, who want to sell online are currently unable to do so because of the GST requirements.
So, why isn't the government doing anything?
Well, it is now.
⚡ The Government's Latest Move
The government has now realised how this rule had been impacting small-scale sellers, whom it wanted to promote.
So, it has decided to make things easier for them and give them the same exemption it gives to offline suppliers.
Meaning sellers with a turnover less than the designated limit will not have to register and charge GST.
The move, tentatively expected to be implemented from January 1, 2023, is set to benefit over 120,000 small traders.
This comes as the government has launched the Open Network for Digital Commerce. What's that you ask?
ONDC is kind of like the government's version of a super app.
After it is launched, you can just use one app to browse products from Flipkart, Amazon, Zomato, Grofers and all the other apps.
This open network has been designed to make sure small-scale sellers can find the same amount of visibility as the large-scale ones.
You see, apps like Flipkart and Amazon run a very tight ship and often don't allow a lot of small sellers and stores to register on their platform.
So, you can't find them and order from them.
But ONDC will give these sellers a platform and allow you to find them through Amazon, even if they are not on Amazon. Great, right?
But the move would only work if sellers actually wanted to sell online. So, the new rule kills two birds with one stone.
The launch of this network plus the new GST registration relaxation could be a gamechanger for small traders and MSMEs.
But again, there's a catch.
📜 The Fine Print
The new benefit will not be available for inter-state taxable transactions. So, if these suppliers make inter-state sales of goods they will have to get registered under the GST law and deal with a plethora of compliances.
This complicates things as most e-commerce transactions are usually inter-state with the e-commerce operator acting as a facilitator and delivery partner. Intra-state deliveries make only a fraction of the transaction. So, the rule will limit the scope of business of these small sellers and prevent them from growing big.
Further, since it will be difficult for the government to track whether any small-scale supplier has crossed the threshold level, it is expected that this will only elevate the reporting risk of e-commerce players who need to be ready with appropriate infrastructure to meet such reporting requirements.
So, the move solved one problem but has created another.
While some small sellers who just want to gain more visibility in their state may welcome the move, it is yet to be seen how the rest of the industry responds to this move and if it will actually bring about a momentous change.
⚡ In a line: The new GST law wants to improve conditions for small players but it may fall short.
💡 Quick question: Do you think this law will make a difference?
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