From small businesses to large businesses everyone stands to operate their business online. The online store is evolving as a favourite medium for buying a product and selling goods or services.
As an online store owner, it is important to understand the different types of GST that are applicable to your business. Goods and Services Tax (GST) is an indirect tax levied on the supply of goods and services in India.
It has replaced multiple taxes like sales, services, excise duty, etc. With the growth of e-commerce, the government has made provisions for online businesses to comply with GST law. GST for e-commerce websites has rules in place.
In this article, we will explore the types of GST applicable to online stores.
Before exploring the types of GST for e-commerce websites let’s have a look at the GST registration rule for the online seller.
For online sellers, the Indian government mandated mandatory GST registration with yearly exemptions. A person who registered under GST is issued with the GSTIN number. For both goods and services, the basic exemption cap for e-commerce vendors is 40 lakhs and 20 lakhs. That means an online vendor who earns less than Rs. 40 lakhs and Rs. 20 lakhs annually are exempt from GST registration.
Let’s have a look at registration requirements in different scenarios.
If the seller is already registered under GST there is no need for any intimation, notice, or change in registration. They can continue their registration. But if a person registers under the composition scheme then they must take registration under the normal scheme.
A person selling exempted Goods comes under e-commerce without GST. They are not required to take GST registration and can register under an online platform without GSTIN.
Online sellers are required to take GST registration in every state where they sell the products. You can check our guide on GST registration to know more about it.
The GST for an e-commerce website has several categories that apply to the online store depending on the supply location. The place from which you supply the goods or services and the place where they are consumed is known as the place of supply.
GST is a destination-based tax, meaning that goods and services are subject to taxation only when they are utilized or consumed.
GST can be collected in the states where they are consumed. Whether a transaction is considered interstate or intrastate under the GST depends on the location of the supply of the goods. Wrong supply location determination will lead to tax collection from the incorrect state.
Following are the type of GST applied according to the place of supply
CGST is levied on intra-state transactions i.e. transactions that occur within the same state. E.g. If an online store based in a state sells the product in the same state.
SGST is also levied on intra-state transactions but the revenue goes to the state government instead of the central government.
For example, If an online store based in Maharashtra sells a product to a customer based in Maharashtra SGST will be applicable to the transaction.
IGST is levied on the inter-state transaction i.e. transactions occurring within two different states.
For example, if an online store based in one state sells the products to customers based in another state, IGST is levied on such transactions.
UTGST is similar to SGST but it is applicable when goods or services and both are consumed by the territory regions of India including Andaman Nicobar, Dadra, and Haveli, etc.
If you are an online store owner importing goods from other countries, you will be required to pay IGST on the imported goods. IGST is levied at the time of import and is calculated on the value of the imported goods plus any customs duty, landing charges, and other charges.
If you are an online store owner selling digital products and services such as software, e-books, or online courses, you will be required to pay GST. The rate of GST for digital products and services is 18%.
If you are an online store owner charging shipping fees to your customers, you will be required to pay GST on the shipping charges. The rate of GST for shipping charges is 18%.
It is important to understand Tax for e-commerce businesses and the type of GST applicable to their transaction. Failure to do so results in penalties and legal actions. Additionally, online stores should maintain online invoices and proper maintenance to ensure smooth compliance and GST regulation.
In examining GST Tax for e-commerce businesses, the subject of who is responsible for paying Tax comes up.
The answer to this question is sellers, whether they operate an e-commerce site or not. The online retailer is only the commission agent between the seller and the customer. GST is liable to the seller because the seller sold goods to them.
As a result, the seller must send the consumer an invoice that includes the GSTIN, address, product information, date, amount of tax due, etc.
You can send auto-generated Invoices to your customer with the WooGST plugin. WooGST plugin is the best GST invoice plugin for Woocommerce stores that deals with GST calculation and auto-generates invoices.
Both offline and online vendors must comply with the GST’s return filing requirements. Filling out GSTR-1 and GSTR-3 on a monthly and quarterly basis, respectively, is required.
The due date for filing GSTR-1 for e-commerce sellers is the 10th of the following month.
The GST is a significant tax structure in India that has brought consistency to the way commodities and services are taxed.
Online sellers must adhere to the various GST rules that apply to their transactions and maintain proper records to avoid penalties and legal action.
In conclusion, as an online store owner, it is important to understand the different types of GST that are applicable to your business. CGST and SGST/UTGST are applicable for intra-state sales, while IGST is applicable for inter-state sales. GST is also applicable to e-commerce transactions, imported goods, digital products and services, and shipping charges. We hope this article has provided you with a better understanding of the different types of GST that apply to online stores.
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