NEW DELHI : Exemption from mandatory goods and services tax (GST) registration that is currently available for small enterprises with annual revenue of up to ？40 lakh may soon extend to their sales on online platforms as well, two people aware of the matter said.
Currently, the turnover threshold for GST registration is ？40 lakh for goods and ？20 lakh for services. However, registration is mandatory for all merchants selling on online platforms, regardless of revenue.
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According to the people cited above, who requested anonymity, the budget may provide a direction in this regard, even though the GST Council decides on indirect tax matters.
The move is expected to help micro, small and medium enterprises (MSMEs), self-employed individuals, self-help groups, and artisans sell their products online without bearing compliance costs of GST registration. Under GST rules, even if there are no transactions, GST returns must be filed from the month of registration, failing which a penalty is payable.
The proposal would still need to be ratified by the GST Council that decides on tax rates, exemptions, deadlines for GST form submissions and tax-related laws.
Questions mailed to the finance ministry remained unanswered till press time.
“There is a solid case for allowing small businesses to sell without GST registration below a turnover of ？40 lakh," said Animesh Saxena, president of the Federation of Indian Micro and Small and Medium Enterprises (FISME). “This facility is not available once the business sells goods online through e-commerce. Inability to handle GST compliance costs has disabled millions of self-employed women/SHGs and artisans from selling their products online, especially during the covid pandemic. It is crippling," Saxena said.
Rajat Mohan, senior partner at AMRG & Associates, said compliance costs and cumbersome processes make it difficult for small players to sell products and offer services through e-commerce platforms.
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“GST rules stipulate that every e-commerce operator who is required to collect tax at source and vendors who make supplies through such e-commerce operators are compulsorily required to take a GST registration and comply with tax rules. This registration requirement is irrespective of the scale of operations in the said entity. Not only registration but also payment of tax, together with compliance of all rules, are mandatory. Thereby, all MSMEs registered on e-commerce platforms like Flipkart, Amazon and Snapdeal are required to adhere to GST compliance principles," he said.
Though the easier ‘composition scheme’ is available for all small participants where a fixed lower tax rate and quarterly filing windows is available, it is still considered cumbersome and expensive for small businesses that are only looking at online channels to get some revenue in the absence of expanding market in the offline space. Moreover, those registered under the composition scheme are not allowed to sell online.
The government introduced mandatory and separate GST registration of all sellers (irrespective of turnover) to prevent evasion of taxes by e-marketplace from selling goods and services of related entities, which have been prohibited. E-commerce players are considered marketplaces providing a medium for buyers and sellers to undertake transactions.
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