Foreign E-commerce Firms to Register for GST in Every Indian State

Posted by Written by Dezan Shira & Associates Reading Time: 2 minutes

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India requires foreign e-commerce companies to apply for the goods and services tax (GST) registration in every state.

The federal government has notified new provisions for tax collected at source (TCS) and tax deducted at source (TDS) under the GST law with effect from October 1, 2018.

The GST, which subsumed over a dozen indirect taxes, was rolled out from July 1, last year. To make it simpler for businesses to transit into the new tax system, the Indian government had suspended the TDS and TCS provisions until now.

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Once the new provisions come into effect, both domestic and foreign e-commerce firms will be required to deduct up to one percent state GST and one percent central GST on intrastate supplies of over Rs 250,000 (US$3,431).

In the case of interstate supplies of over Rs 250,000 (US$3,431), the TDS would be two percent of integrated GST. For e-commerce sellers based out of India, there will be no TCS liability.

Accordingly, any individual dealers and traders selling goods or services online will get their payment after deduction of one percent tax.

These sellers can claim their input tax credit (ITC) later via the e-cash ledger.The ITC would be as collected and reflected by the operator of the online platform.

It will be credited by the government upon matching the suppliers claimed amount with the details furnished by the e-commerce operator in form GSTR-8.

Impact on e-commerce firms

To collect these taxes, the e-commerce firms will have to register for GST in every state by October 1, 2018.

They will also have to deposit the TDS collected by every 10th of the next month in which the tax is collected, and furnish a monthly statement and an annual statement containing details of the outward supplies.

Given the short time period to comply with the new TDS and TCS rules, the e-commerce companies will have to quickly gear up their enterprise resource planning (ERP) systems. This will significantly affect their accounting operations and will also increase their overall compliance and administration cost.

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India Briefing is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia and maintains offices in China, Hong Kong, Indonesia, Singapore, Vietnam, and Russia. 

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