26.01.2022-Mandatory GST registration for sale through E-commerce operators – Time for course correction in Union Budget

Mandatory GST registration for sale through E-commerce operators – Time for course correction in Union Budget

All sellers of goods are entitled to a threshold exemption of Rs 40 lakhs before they are liable to get themselves mandatorily registered under GST Act. This is very helpful to small traders and businessmen as they are saved from all the hassles and costs of compliances under the GST Act.

However, if the same trader/businessman intends to avail the benefit of sale through e-commerce operators, they must get themselves registered under the GST Act.

In short, if a business intends to sell goods online via marketplaces, they lose the benefit of threshold exemption and must pay GST from the first rupee onwards. Further, once the person is registered under GST, it is not only online sales but even the offline sales will be liable to GST. So even if the turnover of a business is less than 40 lakhs, it cannot avail the benefit of threshold exemption.

One must appreciate the fact that as per a recent survey India has 6.3 crores MSMEs. The said number has been derived based on Registrations with Udyam Portal. However, one has still not considered the various businesses of small scale operating from small stores, housewives selling homemade articles, artists, etc.

The government of India has been announcing various schemes for MSMEs and encouraging digitization of the economy. However many of them have a turnover of fewer than 40 lakhs are not able to avail benefits out of fear and apprehension of compliances.

With the advent of e-commerce platforms, large businesses have expanded a lot in the market and areas where they were not serving. The recent Covid scenario has increased online sales to a great extent. The small-scale sector has been badly impacted due to lockdowns etc. Further, their inability to operate on e-commerce platforms due to the condition of mandatory GST registration has worsened their situation.

Though one has to change with time, due consideration has also to be given to class which will take time to advance with time. Today even big businesses with a strong workforce are finding it difficult to comply with GST law, how will a small business which operates with few people comply with the stringent conditions and the cost of such compliances.

The only concern for which registration is made mandatory is the fear of non-compliance and tax evasion by the small-scale sector for online sales. There can be various precautions like obtaining KYC i.e. Permanent Account Number (PAN), Aadhaar Card Number, etc., and submitting the said details on a monthly/quarterly basis to the authorities.

The system of TCS (under Income Tax) while making payments to such businesses with a nominal rate will ensure proper reporting and control. Further one must also appreciate the fact that in case of sales through e-commerce transactions the entire proceeds are transferred through normal banking channels. There is no way for the business to conceal the said turnover.

Its high time one must consider the fact that there cannot be two separate threshold limits for Online and Offline sales. Further small businesses should not be at a disadvantage of not increasing their turnover by online sales through e-commerce operators due to such conditions.

One hopes that this anomaly is removed soon and a level playing field is created for small-scale businesses which helps them to grow and enter the digital era with full speed. This will help self–employed individuals, housewives, etc. have a dream to start and expand their own business. The union budget presents a timely opportunity for the policymakers to recognize this and enable the upward mobility of the growth trajectory of India’s fledgling SME businesses.



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