Centre likely to ease GST norms for online sellers
NEW DELHI: Small online sellers may soon be exempted from having to register for goods and services tax (GST), a government official aware of the discussions said, marking a structural shift in India’s five-year-old indirect tax regime.
The central and state governments believe such a move would vastly expand the potential reach of small enterprises through e-commerce, the official said on condition of anonymity.
Currently, physical sellers need GST registration only if they have annual sales of more than ₹40 lakh, while all online sellers compulsorily need GST registration irrespective of turnover. The proposal, if approved, will bring online and offline sellers on par as far as GST registration is concerned.
“Representations have come from the industry and trade to bring parity between online and offline sellers on the issue of GST registration, saying that the current norm comes in the way of small businesses reaching a larger customer base. Discussions are on between the central and state governments. The law committee of the GST Council will examine the matter before a decision is taken,” the official cited above said.
India has over 6.3 million unincorporated, non-farm micro, small and medium businesses accounting for a third of its economic output. Of this, over 2.3 million are traders and close to 2 million are manufacturers.
However, small businesses are vulnerable to economic shocks. Making procedures easy for small businesses to tap the potential of e-commerce is expected to benefit this segment and help save and create jobs.
Enterprises with a ₹40 lakh annual turnover would have monthly sales of around ₹330,000. Assuming a 20% profit margin, they would be making a monthly profit of barely ₹66,000.
Experts said the current practice of excluding online sellers from the ₹40 lakh registration exemption threshold is an artificial segregation of businesses, and that many small firms do not sell online because of GST registration requirement.
“With extensive focus on supporting the growth of micro, small and medium enterprises, it would be very beneficial if the GST thresholds for them are kept at par with other businesses even when they are engaged in supplying through e-commerce platforms,” said M.S. Mani, a partner at Deloitte India.