goods and service tax

New GST Rules Empower Small Businesses in E-commerce Sales

Introduction

E-commerce, or Electronic Commerce, refers to the exchange of products and services via the internet. It plays a vital role in reducing transaction costs, which is a significant advantage for businesses, encouraging sellers to engage in online trading.

Recent Developments in E-commerce and GST Regulations

Traditionally, vendors engaging in E-commerce were required to register for Goods and Services Tax (GST), regardless of their annual sales being below the threshold limits of ₹40 lakh for regular category states or ₹20 lakh for special category states.

On December 17th, 2022, the 48th GST Council meeting was held, addressing various GST-related matters, including updates on E-commerce regulations. A key proposal received preliminary approval, which would permit unregistered suppliers to conduct intrastate sales (within the same state) through E-commerce platforms.

This decision is expected to benefit small businesses not required to register under GST due to their turnover being below the threshold limit. They will now have the opportunity to sell products online through E-commerce platforms, provided these sales occur within their respective states. However, those looking to sell outside their home state must obtain GST registration, irrespective of their turnover. The council has recommended that this new scheme will come into effect on October 1st, 2023.

Approximately 5 crore MSMEs in India have struggled to sell online due to the mandatory GST requirements. This decision by the GST council is poised to unlock significant opportunities for these small enterprises, reducing their compliance burdens. This will particularly benefit artisans, weavers, craftspeople, artists, freelancers, and homemakers, enabling them to tap into E-commerce markets without the need for GST registration. Consequently, this move is anticipated to invigorate the Indian economy by expanding the market access for MSMEs, improving operational efficiencies, and facilitating easier access to capital.

Frequently Asked Questions on GST Registration for E-commerce Sellers

  1. What were the rules and regulations regarding E-commerce before the amendments?

    • Previously, suppliers engaged in E-commerce were required to register for GST, even if their total annual revenue was below the established threshold limits.

  2. What are the new E-commerce registration rules?

    • In December 2022, the GST council amended the regulations, stating that no GST registration is needed for E-commerce operators and participants selling products on E-commerce platforms, contingent upon specific conditions. These include that the total turnover must not exceed the threshold limit on a nationwide basis and that the individual does not make taxable interstate supplies.

  3. What is the threshold limit for unregistered suppliers?

    • The GST threshold limit for regular category states is ₹40,00,000, while for special category states, it is ₹20,00,000.

  4. How will the changes in GST registration for E-commerce benefit small business owners?

    • The recent outcome allows small enterprises that are not registered under GST to sell products on E-commerce platforms, even if their revenue is below the established threshold, thereby expanding their market reach.