• GST for e-commerce

Does dropshipping business need GST for E -commerce?
Asked 1 month ago in GST from HALDWANI, Uttarakhand

Dear Sir,

 

Hope you are doing well !!

 

 

Please provide the further details for apt reply:

 

1.How the invoicing is done? From the dealer and to the ultimate customer.

2. How are you receiving and making the payments? Is it in foreign exchange?

 

 

However, GST registration is mandatory for intermediary services without any threshold limit.

 

-Intermediary generally charge commission against the services provided by them.

 

-The commission income so earned is subjected to GST@18% and all the provisions of GST law is applicable accordingly.

 

Payal Chhajed
CA, Mumbai
2853 Answers
39 Consultations

5.0 on 5.0

Since it is dropshipping model whereby you will never received the goods which shall be directly shipped by the supplier.

 

Definition of intermediary is contained under section 2 (13) of Integrated Goods and Service Tax Act, 2017 and the same is reproduced here under for ready reference ;

 

“intermediary means a broker, an agent or any other person, by whatever name called, who arranges or facilitates the supply of goods or services or both, or securities, between two or more persons, but does not include a person who supplies such goods or services or both or securities on his own account”

 

 

-As per above definition- You are acting as an intermediary i.e. agent.

 

-Generally in drop shipping, GST is chargeable on profit element I.e. commission income.

 

The commission income so earned is subjected to GST@18% and all the provisions of GST law is applicable accordingly.

 

- You need to issue an invoice to the company. If they are paying you a fixed amount and not paying GST in addition, you simply need to do reverse calculation of GST according to the amount so received.

 

- Basically GST is a collection from customer and not from own pocket.It is upto you how to collect it from customer either by increasing the commission amount or charging GST separately on the current commission.

 

 

Payal Chhajed
CA, Mumbai
2853 Answers
39 Consultations

5.0 on 5.0

From  what i have learnt about drop shipping is that it is a trading activity rather than commission service so you take it as trading activity or commission you will have to take GST registration and I would say you need to take it as trading activity since you are taking the order and passing it on to manufacture and you keep the profit so there is no fix commission you earn its your decision at what price you want to sell the product.

 

Hope you find the information helpful if you do please rate it 5 and provide your valuable feedback for my improvement.

Thank you.

Naman Maloo
CA, Jaipur
1981 Answers
17 Consultations

5.0 on 5.0

Hello Sir,

 

1.Under GST, such services are intermediary services which are chargeable to GST@18%.

Agents are intermediaries and for intermediaries, there is a specific provision in law in respect to place of supply of services. In your case, place of supply would be the location of the service provider i.e. your location so every time you will have to pay CGST and SGST.

 

2.You need to charge the GST amount on the invoice as it will be a tax invoice and not an export invoice otherwise you need to do the reverse calculation. Rate would be 18%.

 

 

3. There's no threshold limit applicable for GST registration i.e. GST registration is compulsory.

 

 

4. It is advisable to register as sole proprietor only so that individual slab rate would be applicable.

 

Karishma Chhajer
CA, Jodhpur
1286 Answers
7 Consultations

5.0 on 5.0

Yes, GST registration would be required mandatorily.

 

Hunny Badlani
CA, Neemuch
794 Answers
1 Consultation

5.0 on 5.0

Dropshipping business is more specifically covered under trading rather than commission-based.

Since you will be involved in interstate trade, you will be required to charge IGST on your sales at the specified rate for the product.

This won't be covered under E-commerce business as per GST, because here you will sell your own purchased products and allow other vendors to sell their products over your website.

Hunny Badlani
CA, Neemuch
794 Answers
1 Consultation

5.0 on 5.0

Welcome Sir.

Karishma Chhajer
CA, Jodhpur
1286 Answers
7 Consultations

5.0 on 5.0

- In your case, GST is compulsory irrespective of any turnover threshold. 

Vivek Kumar Arora
CA, Delhi
2942 Answers
144 Consultations

5.0 on 5.0

Hi

 

You don't need the GST registration till your turnover crosses the threshold limit.

If you're just starting up, you need not take a GST Registration.

 

However, many payment gateways require a GSTN mandatorily. So you have to check on that part. As far as law is concerned, you don't need GST Registration.

 

We may discuss the issues further if you have any questions.

Lakshita Bhandari
CA, Mumbai
3545 Answers
174 Consultations

5.0 on 5.0

Ask a Chartered Accountant

Get tax answers from top-rated CAs in 1 hour. It's quick, easy, and anonymous!
  Ask a CA