The model Goods and Services Tax (GST) law, made public by the Centre, has clarified that all e-commerce transactions will attract GST and that the tax will be collected by the service operator as soon as the supplier receives payment.
“…Every electronic commerce operator shall, at the time of credit of any amount to the account of the supplier of goods and/or services or at the time of payment of any amount in cash or by any other mode, whichever is earlier, collect an amount… representing consideration towards the supply of goods and /or services made through it,” according to the model law, approved by most state finance ministers.
While this has cleared the confusion surrounding the levy of the tax on e-commerce transactions spanning different states, it will also make operations more complicated for the e-commerce platform, according to experts.
“This will mean significant compliance burden on e-commerce companies as many of them deal with thousands of vendors,” Pratik Jain, Leader – Indirect Tax, PwC India said. “Further, this may lead to refund situations for many suppliers who operate on thin margins. In addition, the e-commerce companies will need to file a statement providing details of all supplies made through e-commerce platforms.”
The model GST law — with 162 clauses and four schedules — will be applicable for all those with an annual turnover of Rs.10 lakh or more. This limit is Rs. five lakh in the north-eastern states.
“The provisions of the model GST law that prescribes a GST threshold limit which is so low as Rs.10 lakh (Rs.5 lakh for north east), may be a zero sum game as the administrative cost of compliance on both ends would equal the tax collected,” Sachin Menon, Partner and Head, Indirect Tax at KPMG in India said, adding that the Empowered Committee should consider a higher threshold.
Revenue Secretary Hasmukh Adhia tweeted: “We request all stakeholders to give their suggestions/comments to secretariat of Empowered Committee of FMs and or to finance ministry.”.
The model law also provides for an Authority for Advance Ruling to be located in every state, comprising one Central GST member and one State GST member to be appointed respectively by the Central Government and the State government.
In addition, the law provides for the creation of an Appellate Authority in each state.The GST model law also includes a ‘composition levy’, wherein a person with an annual turnover of less than Rs.50 lakh on the sale of goods and services in a single state will have to pay a tax of “not less than one per cent.