GST And Taxes For Drop Shipping Businesses In India

gst for dropshipping
4 min read

Today’s eCommerce is moving towards a different dimension and the Goods and Services Tax (GST) is a part of it.

Indian eCommerce is expected to hit $100 billion online retail revenue by the year 2020. And drop shipping is a concept which has much relevance in the GST regime.

Sellers must abide by the registration requirements and declare their turnover to tax departments of multiple states. It is expected that under GST law, India will become a unified common market with reduced compliance costs, and eCommerce business will notice major changes.

We’ve tried to answer all your questions about GST and its impact on drop shipping.

What is GST?

GST – Goods and Services Tax is an indirect tax which took over many indirect taxes in India. It was passed in the parliament in the year 2017. GST in India is a comprehensive, multi-stage, destination-based tax that is imposed on every valuable addition.

In eCommerce, the role of GST has specifically taken up marketplaces and has come out with rules and regulations specific to this segment.

There exists 3 tax components under GST namely CGST, SGST, and IGST.

CGST:

CGST is Central Goods and Services Tax. It is collected by the Central Government on an intra-state sale (Tamil Nadu – Tamil Nadu).

SGST:

SGST is State Goods and Services Tax. It is collected by the State Government on an intra-state sale (Tamil Nadu – Tamil Nadu).

IGST:

IGST is Integrated Goods and Services Tax. It is collected by the Central Government on an inter-state sale (Tamil Nadu – Other States).

CGST and SGST are applied to sales within the state and IGST is applied to sales to other states.

The tax is paid to the central and state government as CGST and SGST at the rate depending on the HSN codes of the items. The tax rate of CGST and SGST are always half of that of IGST.

gst

Why GST?

This is a common question asked by so many consumers in India. GST is implemented to cut off all the indirect taxes that has been applied on goods.

GST is advantageous in the following ways:

Removes cascading tax effect
Higher threshold for registration
Composition scheme for small businesses
Online simple procedure
Lesser compliance
Defined treatment for eCommerce
Increased efficiency in logistics
Regulating the unauthorized sector
Completely technologically driven

GST Number

According to GST India 2017, GSTIN is basically a 15-digit number which has replaced the Tax Identification Number (TIN) that business entities were allotted while registering under a state’s Value Added Tax law.

Your business can be a One Person Company (OPC) or sole proprietorship or can be both. In any case, you will require the GSTIN to carry on your business in India lawfully.

Paying GST vs Filling GST

There is a common misconception between paying GST and filling GST. Actually, they both are different.

You don’t have to pay GST if you’re not selling your products to Indians. But it is mandatory to file GST if you’re an Indian resident doing business.

In order to file the GST, you can approach a chartered accountant. They will automatically file your GST when the time comes for a nominal fee.

GST implementation in Printrove

Printrove’s business model

Printrove operates under a business model wherein the merchants catered to are businesses, which, on receipt of orders for the respective products from end customers, place an order in turn with Printrove. These orders are produced by Printrove, and on completion, are shipped directly to the location of the customers (ship-to address) on behalf of the merchant.

A single order, from beginning to end, involves three parties:

  1. Printrove, being the principal manufacturer and distributor of the products;
  2. Merchant, being the business that places an order with Printrove, and;
  3. End customer, being the source of the order.

There are two separate transactions to be considered. The first transaction is between Printrove and the merchant, who places orders with Printrove. This transaction is consequent to the order placed by the end customer, which is the other transaction.

The tax applicable to each of these transactions depends on the place of supply and location of the parties.

There are a few scenarios to understand GST better. Since Printrove operates from the state of Tamil Nadu, all the scenarios are explained with respect to Tamil Nadu. Here it follows:

gst printrove dropshipping india taxes

printrove gst

Conditions of IGST

Export, as defined by the IGST Act, occurs when:

  • A supplier is within India
  • A recipient is outside India
  • Place of supply is outside India
  • Payment is received in convertible foreign exchange.

Conclusion

The above-mentioned cases make it clear how the GST is applied to various circumstances in the case of drop shipping in India. GST opens a lot of opportunities by increasing the number of sales channels and enabling us to do business with other registered businesses. For more info on registering for GSTIN please get in touch with a chartered accountant who can help you getting a GSTIN and monthly filing.

Well, this is all about GST — Goods and Services Tax.

Don’t-Miss: How to Get the GST Invoice from Printrove to Claim Input Tax Credit

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