GST would be applicable. But how it has to be done depends on:
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?
Dropshipping and GST
Hello, I live in India and I am looking to start a dropshipping business business from my own website. My target customers are from outside India. And once the customer places an order from my website I forward that order to my suppliers based in China who then ship the order to my customer in an international location. (Product does not enter India at all) How would my taxes work? Obviously I have to pay income tax in India. What about GST? Do I pay GST on my turnover only if it crosses 20 lakh? Or how does it work? Since I am marketing and listing my products on my own website i think it's not an ecommerce marketplace defined by GST law? I am confused, please help.
Asked 6 years ago in GST
Hi, 1. Invoicing will be done with my store brand and my retail price in such a way that the customer does not know I am drop shipping, as far as I know. (I have some points to be clear with, myself, on how exactly it's done) I will be making and receiving payments by a gateway like PayPal. And yes I would receive payments in Dollars or so.
Asked 6 years ago
If the invoicing is to be done as above, GST shall be as under:
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)
Later, claim refund of such taxes paid as export of goods are zero rated sales.
Alternatively, you can export under bond/letter of undertaking without payment of GST.
Thank you, which process is simpler one and which one do you feel would be better for me? Also, I saw a similar query in one of the older questions and I saw someone write GST would be charged on the profits?
Asked 6 years ago
The bond process is a little complex.
Overall there would be no liabilities, all taxes paid shall be refunded. This would be the best option. Returns have to be filed monthly/ quarterly as applicable.
That would be some case of commission. In that case, no refund can be claimed.
Feel free to contact for any assistance in GST registration or return filing.
Hi,
You have to pay GST on purchase cost in RCM. You will have to charge GST on sale. You can claim the refund of GST charger on sales as export is exempt.
Alternatively, you can export under bond/letter of undertaking without payment of GST.
Please feel free to call/ revert in case you need more clarity.
Thanks and regards
Abhishek Dugar
CA CS B.Com
Thank you for the answers. Update 1. I just got my doubts clarified on the invoicing as to how it's done. I was wrong earlier. The supplier does the invoice to the final customer, in a mutually accepted way, that it does not harm my brand name. But it will NOT have my store name or anything of that sort. And the only way I can keep accounts is by checking my orders to the supplier and my bank statements. How would my taxes work now? Are my profits considered as commission that is subject to GST? 2. Do I need an IE Code? Thank you :)
Asked 6 years ago
In that case, it would be a commission income that will be subject to tax @18%. The commission would be essentially the profit element. This would be the GST tax liability and no refund can be claimed back.
No.
Hello,
In order to help you with a fool proof advice we need to understand your entire modus operandi. Since GST is an evolving act, it makes no sense giving you blind advices.
I suggest you contact an expert using a phone consultation explain him your entire business model and then go ahead only when you are fully satisfied with the explanation.
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
Thank you Ma'am and I absolutely agree with sir here. I'll explain the modus operandi. 1. Customer visits my webstore and places an order, say for $10. The customer then receives an electronic invoice by email with my store name saying that the order has been confirmed. 2. I take the order and customer details and forward the order to my supplier based in China and I pay them wholesale price and shipping cost, say $5. 3. The supplier then ships the order to the final customer. 4. Customer receives the package with no invoices. 5. I keep the $5 profit. I hope this is clear now. So would I still pay a GST on my "commission", in this example $5 at 18%? Also should'nt I cross the threshold turnover of 20LPA to be liable for GST here? And who needs an IE code? I am confused, I see there are applications open for I.E. code on DGFT website. I also happen to an article saying I.E. code isn't needed. Thanks for the advice :)
Asked 6 years ago
Ya, that is what dropshipping means.
Yes, it would be 18% on commission. No threshold. GST registration is mandatory.
After GST, import export procedures have been simplified. You'll only need GSTN. Also, in you case there is no physical import and export of good.
Hello,
Do you receive the entire amount or just your share of profit ?
GST is mandatory since it is export of services/ goods.
IE code is not required since you are not exporting but just acting as a middle man.
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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