Indirect tax queries related to e-commerce business

Indirect tax queries related to e-commerce business

Dear Experts,

I’m intending to start an e-commerce store and have finalized the products. I’m an individual / Proprietor based out in Bangalore, India and have created a website to sell some specific products, which will be sourced from China.

My business model is as below:
- Buyer places the order in my website and I receive the amount via a payment gateway.
- Once I receive the order, in turn, I will place a separate order with the Chinese supplier asking him to deliver the product to “MY Customer’s” address.
- I will pay the Chinese supplier through my credit card. (The Chinese Supplier will raise the invoice to me and NOT to my customer).
- The supplier (Chinese) will pack and ship the product to my customer directly to their address.
- The Buyer receives the products (which he ordered in my website) directly to his address.

Now I have these following questions:
1. Do I need to register for GST and charge GST to my customers from the Beginning, or can I wait till my turnover crosses the basic threshold limit (20 Lakhs)?

2. What is the applicability of FEMA? As I would be paying the Chinese supplier in USD through my credit card?

3. Who is liable for Import Duties? Me or my customer?
If me, how do I pay the import duties?
a) As my customers would be spread across India, how to track each shipment and pay the duties?
b) Is it possible to pay the duty by consolidating the shipments at regular intervals? (Say, Every month for the shipments happened for previous month)

4. Finally, how the above questions apply if I sell the same to the buyers outside India?

Sincere thanks in advance for all the help :)
Ranga

Asked 6 years ago in GST

Hi Ranga

You need to register under GST once your turnover crosses 20 lakhs.

The income from your drop shipping business shall be taxed as an intermediary service under GST whereby 18% GST on the profit element shall be applicable.

The import duty on the product shall be paid by the customer in India through the courier/post agency. However, it can be labelled as gift package to avoid import duty up to a value of Rs. 10000.

If the customer is outside india, there is no question of import duty.

Lakshita Bhandari

CA, Mumbai

5687 Answers

910 Consultations

5.0 on 5.0

Talk to Lakshita Bhandari

Dear Sir,

1) As you are procuring goods from china and selling them in India through your website then you need to register as an importer of goods. There is no threshold limit in case of imports, you need to register from the beginning.

2) As you are purchasing goods directly from chinese supplier and making him payment directly therefore you are required ton pay the import duties. Hire an Clearing & Forwarding Agent who will manage the import shipment and pay the custom duties on your behalf.Custom duty needs to be paid at the port to release the goods without which you can not release the goods for further delivery.

3) if you sell the same outside India then you need not to charge GST as both the supplier and receiver are outside India and delivery of goods is also in India.

Further there are two legs in the import transaction. 1st leg is purchase from you from outside on which you need to pay IGST and in 2nd leg you raise the invoices to the buyer then you need to charge GST and take credit of IGST paid on import of goods. All other taxes paid are Cost.

Thanks

Vivek Kumar Arora

CA, Delhi

Available Now

4840 Answers

1037 Consultations

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Talk to Vivek Kumar Arora NOW!

Hello,

1. You will need to register under GST irrespective of your turnover.

2. There should not be any FEMA restriction as the credit card payments will still be made by you within India and in Indian rupees.the respective bank will charge you the conversion rate for $

3a. Since you are directly dealing with the vendor and the invoices are in your name, you will be liable to pay the customs/import duties. You can use the services of a C&F agent who can help you to manage your shipments and payment of customs duties.

3b. I dont think that is possible and you will have to pay for each shipment as and when it arrives and get it cleared. However, you can ask your vendor to release your orders in one assignment so all the goods can be cleared in one batch.

4.if you sell outside India, there is no question of import duties in India.

Hope I have been able to solve your queries.

Regards,

Nikhil.

Nikhil Khanna

CA, Mumbai

1429 Answers

19 Consultations

4.8 on 5.0

Talk to Nikhil Khanna

Hi,

As per the business model explained by you, you are doing sale purchase of goods through online platform. As such you will be considered as normal trader as per the GST Laws.

Answers are as below:

1) You can take registration after your turnover crosses the basic exemption limit of Rs. 20 Lakhs. No Compulsions for this. However, no benefit of input tax credit be allowed till you get yourself registered. However, since you are importing goods from China, GST Registration is compulsory for you.

2) You will have to follow guidelines related to Foreign Trade Policy and Customs Rules and Regulations for import of goods into India. Bill of Entry, AWB/ BL etc. to be submitted to Customs for clearance of goods after payment of applicable customs duty on the same.

3) You will be liable for payment for customs duty since the invoices by the Chinese seller are in your name. Bill of Entry shall be generated for each consignment separately, hence you have to pay customs on each consignment separately. No concept of separate monthly payments. However, you can make advance payments, provided the customs port are same for each consignment.

4) If you sell the goods outside India, you will be a deemed exporter. But I believe in that case, goods will not land in Indian territory since the seller is also outside India. Hence no custom clearance in that case. There is a concept of "MERCHANT TRADER" as per FEMA in this case. You will have to raise invoice in foreign currency.

Regards,