Tax advice needed for an ecommerce store in drop-shipping model

Tax advice needed for an ecommerce store in drop-shipping model

Hello Respected CAs,

I am launching an ecommerce store which works on the Dropshipping model. A few points:

- I don't manufacture anything, I just provide a website for people to place orders
- Supplier is based in China
- Customers are from across the globe (except India, not a single item will be sold in India)

Here is how the order process works: 

1. A customer visits my site and places order for a product (let's say an LED light).
2. Payment is processed in USD (US Dollars) on my website.
3. The order is placed in the backend automatically with the Chinese company for a lower amount (I keep the difference as profit).
4. Chinese company sends the item directly to customer.

Now, I need your help to understand the Tax implications of this model. I guess I would need to pay income tax as I am earning something in India. 

But as nothing is manufactured or sold in India, do I need to pay GST or any other taxes?

I would highly appreciate if you could provide an insight into this. 

Thanks and Regards,
Aman Thind

Asked 7 years ago in GST

Hii Aman

You are liable to pay Income Tax as you said and also liable to register under GST, because you are doing export of services in the form of commission by providing you platform to others as a E-commerce Operator, in this you need not pay any GST due to zero rated supply, by submitting LUT ( Letter of Undertaking ) (Export treated as zero rated supply under GST) but you have to do compliance's.

in which countries you want to sale products through your portal you might be liable for local taxes on such countries same as Amazon liable to registered under GST in India, thus please also consider this aspect.

Lalit Bansal

CA, Delhi

776 Answers

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Talk to Lalit Bansal

Hi Aman

Such profit element shall be considered as commission income under GST and IGST has to be paid @ 18% on such income.

This has to be done once your income exceeds Rs. 20 lacs.

Lakshita Bhandari

CA, Mumbai

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942 Consultations

Talk to Lakshita Bhandari

Hi Lalit and Lakshita,

Thank your your responses.

I have a few queries from what you have mentioned.

Lalit: 

- Do I need to register with GST as an Individual (Sole proprietor) or do I need to register a company and then register for GST
- Do I need Export license (as u mentioned I am doing export of services as an E Commerce operator)?
- What is zero rated supply

Lakshita:

- What all documents do I need to provide to register for GST as commision income
- Is this '20 lacs' per month or per year or total income from start of operations?

Thank you for your help so far.

Regards,
Aman

Asked 7 years ago

You can register as a sole proprietor. For registration, PAN, aadhaar, address proof, photograph would be required.

It is per year.

Please note that your service is an intermediary service as per GST law, GST has to be paid; it cannot be classified as zero rated supply.

We can assist you with registration and other requirements.

Lakshita Bhandari

CA, Mumbai

5687 Answers

942 Consultations

Talk to Lakshita Bhandari

1. You can Registered as an individual or Company as you think fit, but if you registered as company then Customers as well as vendors showing faith on your platform more in compare to Proprietorship (Individual).

now choice is with you at what scale you are planning to do this business

2. no in case of service no IEC required at all.

Supply of Services or Goods are classified as ZERO Rated supply in GST

all countries in the world want to export their Goods/Services to other countries but not to export taxes on the same, thus taxes applicable on exported goods/services either first collect from supplier then issue refund or via a BOND/Declaration exempt them to pay taxes.

hope your queries resolved now

Lalit Bansal

CA, Delhi

776 Answers

61 Consultations

Talk to Lalit Bansal

Hello,

I assume that the query has been resolved by now. Feel free to let me know in case any part of it has been left unanswered.

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

Rohit R Sharma

CA, Mumbai

2104 Answers

95 Consultations

Talk to Rohit R Sharma

Hi Aman,

You can register as a sole proprietor, it is not necessary to form a company.

EIC is not required in case of export of services.

Regards,

Keerthiga Padmanabhan

M.Com., CA, LL.B

Keerthiga Padmanabhan

CA, Greater Mumbai

784 Answers

27 Consultations

Talk to Keerthiga Padmanabhan

Thank you for answering the queries so far.

I have spoken to some local CAs and to a few legal advisor over the phone. The opinion about taxation is divided.

Many CAs believe that I DO NOT need to pay GST as I am not selling anything at all in India. Essentially, I am based in India but running a business in western countries. They believe I still need to do all the necessary paperwork though (company registration, GST registration etc) and yes, I need to pay 'Income Tax' (not GST).

What do you think, I would need more specific clarification about this that Do I or Do I not have to pay GST?

Regards,
Aman

P.S. I am sorry for a late update on this thread, I was busy with the business setup tasks etc.

Asked 7 years ago

You need to register under GST and also pay GST@18% on your profit element.

Lakshita Bhandari

CA, Mumbai

5687 Answers

942 Consultations

Talk to Lakshita Bhandari

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