Hi Bipul
Where do you do this from? I mean where is the place of business?
Also, what is your turnover?
Answer the above for deciding GST applicability
Compliance of GST for merchant trading - drop shipping
Dear Sir / Madam, This mail is regarding applicability of GST on Merchant Trade Transaction. We do not import or export any goods in India. It means the goods do not touch Indian territory but directly dispatched to third country. For better understanding we can say, if our supplier is based at Nepal and buyer is based at USA, than supplier will directly ship goods to USA. Means shipping directly from Nepal to USA. Nepal supplier will dispatch product through Nepal post and will send us invoice including shipping cost. After that we will transfer that amount to Nepal supplier. Balance amount will be my profit. I will receive payments through PayPal. What will be the compliance of drop shipping in GST ? Regards Bipul
Asked 6 years ago in GST
We are doing this from india and through Ebay platform. We are selling goods on Ebay.com. After receiving orders from Usa we ask our Nepal supplier to directly ship the item to buyer in Usa. He packs items for us and sends through post office to Usa We are selling buddhist ritual handicrafts. Mostly order comes for a single piece. Item price is in between 10 usd to 40 USD. Our turnover is less then 20 lakh. Ebay generates monthly Ebay fee in Indian currency. Which we pay every month. After receiving payments through PayPal. PAYPAL converts usd to INR and sends to our bank Account through NEFT.
Asked 6 years ago
Then, there is no requirement for GST payments or registration.
I assume you are not already registered under GST.
I have already taken GST registration because it’s mandatory on Ebay to enter GSTIN otherwise they don’t allow to sell. So finally we have decided to pay gst without claiming any refund. As there is no concrete answer with GST regarding compliance of drop shipping in GST. So we will do as follows — Purchase cost 100 Pay GST on reverse charge at specified % on 100 say, 18 Sale price 200 Charge GST (say 18%) and pay 36 (18 in cash and 18 from input tax credit of GST paid on reverse charge) What do you think ? Because I don’t want any tension afterwards. And as a profit is good it’s no problem for me to pay GST.
Asked 6 years ago
I have already taken GST registration because it’s mandatory on Ebay to enter GSTIN otherwise they don’t allow to sell. So finally we have decided to pay gst without claiming any refund. As there is no concrete answer with GST regarding compliance of drop shipping in GST. So we will do as follows — Purchase cost 100 Pay GST on reverse charge at specified % on 100 say, 18 Sale price 200 Charge GST (say 18%) and pay 36 (18 in cash and 18 from input tax credit of GST paid on reverse charge) What do you think ? Because I don’t want any tension afterwards. And as a profit is good it’s no problem for me to pay GST.
Asked 6 years ago
Since, you have taken GST registration, you are liable to pay GST on your profit amount.
Your profit amount will be your commission and you need to pay 18% GST on your commission income (to be done reverse calculation).
Suppose your profit (commission) is 100, you pay GST of (100/118*18).
Please feel free to call/ revert in case you need more clarity.
Thanks and regards
Abhishek Dugar
CA CS B.Com
Thanks for your answer. But officials will never know that its a commission case. They might ask lots of question. Can I pay gst in whole amount?
Asked 6 years ago
You can pay but do you receive any invoice from your vendor?
Yes sir. They will send me a invoice in NPR ( Nepali currency) Suppose if the price of item is 1000 NPR and shipping is 500 NPR then they will attach shipping receipt to the invoice. And make invoice like this. Table cover 1 piece 1000 1000 Shipping cost 500 Grand total. 1500 NPR BILL TO my company name and address of India Ship to client name and address of Usa. As the amount will be too less for example 1600 NPR / invoice = 1000 INR. So I will wait for 2-3 month and calculate all the invoices and send them to their bank account. For nepal we can send money in INR through NEFT.
Asked 6 years ago
If you are registered, then charging GST is must.
What you are doing is also correct, but actually your income is chargeable as intermediary service I.e. Commission. GST@18% is chargeable without any refund.
Yes in that case, you can pay GST on whole amount.
You will also need to pay GST in reverse charge on purchase cost. This GST will be claimed as ITC.
Further, your sales can be treated as export of goods and subject to the fulfillment of other conditions, you can get exemption from payment of GST on sale made by you.
Thank you Abhishek ji and lakshita ji We will do reverse charge is this way Sale price 200 Charge GST (say 18%) and pay 36 (18 in cash and 18 from input tax credit of GST paid on reverse charge) Is it ok to do this ? As you are telling about comission 18 percent in profit. How to show this in GST return? Purchase invoices will be issued by Nepal supplier in my firm name and sales bill be issued by my firm in the name of buyer ( Usa )
Asked 6 years ago
Since you are not importing goods into India, there is no reverse charge liability. Moreover, reverse charge is suspended till March 2018.
As commission, it will be a service you would be providing. The profit amount would be your commission. And you need to pay 18% GST on the same. This will be your outward supplies.
Are you charging GST from the customers?
How are you invoicing them?
All the items I have listed as a free shipping. So I m mentioning any extra shipping charges in invoice. Suppose I have sold one table cover at 10 USD including free shipping. We will make invoice in this way. Table cover 1 piece 9.52 usd IGST 5 percent .47 usd Grand total 10 usd. This invoice we will not send to buyer. This is for GST AND our future record
Asked 6 years ago
OK..
So basically you have 2 options:
1. Cancel your GST registration since you don't require it now in light of the new amendments making traders below turnover of 20 lakhs exempt from GST.
2. Don't pay GST on reverse charge on purchases, it has been suspended till March 18. Don't charge it on sales, as it is out of scope of GST since goods have not moved into India. Charge 18% on the profit element and file GST returns showing commission service income.
Hello Bipul,
1. Since you have applied for a GST registration, what you are doing is correct in order to safeguard yourself.
I assume that you are paying GST out of your own pocket rather than charge it to the USA based customer ?
Trust this clarifies your query.
Feel free to call / get back in case of further clarifications.
Thanking You.
Regards,
Rohit R Sharma
BCOM, FCA, LLB, CERT. FAFP
I read with interest the clarifications given by other experts on this issue. While your queries are adequately addressed, I think you must keep in mind the following issues:
1) As your place of business is in India, your business operations constitute as business carried out from India. You import goods and export them but there is no physical movement of goods to India and out of India. Still the ownership on the goods exported by your supplier in Nepal vests with you. The ownership on such gets transferred to the actual end buyer only after you raise the invoice. However, in your case, most likely you will be raising invoice first and then place order on your Nepalese supplier.The transfer of ownership rights will be one of the critical points in determining the time and place of supply of goods.
In your case, you will be liable to pay GST on your turnover (if it exceeds Rs 20 Lakhs). However, as you are exporting, you will be entitled to get refund of GST. However you may continue with the present practice of levy of GST on your turnover but can you claim input credit on your purchases, as the Nepalese supplier is not required to charge GST on his sales but he may be charging taxes as applicable to him in Nepal.
Thank you, Rohit Ji and Vijaya Ji. While making online sales we are not charging any GST to our buyer. We are making invoice in this format ( just for example ) suppose if we have sold 1 piece table cover to USA buyer at 10 USD including free shipping. Then we will make the invoice in this format. This invoice we will not send to our buyer. It's only for our future record and GST purpose. Table cover 1 piece 9.52 usd IGST 5 percent .47 usd Grand total 10 usd. After that at side by side, we will write amount and IGST charges in INR too ( according to same day exchange rate ) The confusion is who will raise invoice first. Me or my Nepal supplier. Because I need to write tracking number on sales invoice. This tracking number I will know after the shipment only. Can we both issue invouce in the same day of shipment ? My Nepal supplier invoice format will be in this format Table cover 1 piece 400 NPR shipping charges 300 NPR grand total 700 NPR We will pay first gst on purchase after that on sales at reverse format. For example Sale price 200 Charge GST (say 18%) and pay 36 (18 in cash and 18 from input tax credit of GST paid on reverse charge) Is it ok to do this ?
Asked 6 years ago
Thank you, Rohit Ji and Vijaya Ji. While making online sales we are not charging any GST to our buyer. We are making invoice in this format ( just for example ) suppose if we have sold 1 piece table cover to USA buyer at 10 USD including free shipping. Then we will make the invoice in this format. This invoice we will not send to our buyer. It's only for our future record and GST purpose. Table cover 1 piece 9.52 usd IGST 5 percent .47 usd Grand total 10 usd. After that at side by side, we will write amount and IGST charges in INR too ( according to same day exchange rate ) The confusion is who will raise invoice first. Me or my Nepal supplier. Because I need to write tracking number on sales invoice. This tracking number I will know after the shipment only. Can we both issue invouce in the same day of shipment ? My Nepal supplier invoice format will be in this format Table cover 1 piece 400 NPR shipping charges 300 NPR grand total 700 NPR We will pay first gst on purchase after that on sales at reverse format. For example Sale price 200 Charge GST (say 18%) and pay 36 (18 in cash and 18 from input tax credit of GST paid on reverse charge) Is it ok to do this ?
Asked 6 years ago
Yes, your Nepal supplier will raise invoice first and then you will raise he invoice.
Please feel free to call/ revert in case you need more clarity.
Thanks and regards
Abhishek Dugar
CA CS B.Com
I think you may opt for composition scheme and pay 1% tax on your turnover, instead of charing GST
Hello,
Since you are exporting all your goods then are you even paying/ charging GST.
I would suggest you, apply for a LUT (Letter of Undertaking) and pay NIL taxes on your Export sales and file NIL returns on a regular basis rather than unnecessarily paying taxes.
Trust this clarifies your query.
Feel free to call / get back in case of further clarifications.
Thanking You.
Regards,
Rohit R Sharma
BCOM, FCA, LLB, CERT. FAFP
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