What are the Basics of GST in E-Commerce in Dubai?

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A compilation of majority of indirect tax with the idea of one indirect tax for the whole nation, which will make India one unified common market, GST was introduced in India on 1st July 2017. This tax subsumed most indirect taxes under the single taxation regime.The credit of input taxes will be paid at each stage of the supply chain. Therefore, it will be available in the subsequent stages of value addition. Therefore, the final consumer will bear only the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages. This helps in broadening the tax base, increase tax compliance, and reduce economic distortions caused by inter-state variations in taxes.

Being the one indirect tax in India, Goods & Services Tax is a comprehensive, multi-stage, destination-based tax that is levied on every value addition.

Stages in supply-chain

The following are the various stages a commodity goes through along its supply chainfrom manufacture to final sale to the consumer.

  1. Raw material purchase
  2. Manufactureor Production
  3. Storing of finished goods in a warehouse
  4. Wholesaler
  5. Retailer
  6. End consumer

Goods and Services Tax is a multi-stage tax since it is levied on each of these stages.

Advantages Of GST:

  • GST most importantly removes the cascading effect of taxes
  • This indirect tax has a higher threshold for registration purpose and has a simple online procedure to do so
  • It facilitates composition scheme for small businesses
  • It enables lesser compliances and a defined treatment for e-commerce
  • It helps in increased efficiency in logistics and regulation of unorganized sector.

Applicability

    1. Alcoholic liquor for human consumption is exempted from GST.
    2. Tobacco and tobacco products will be subjected to GST. The centreis yet to decide to apply excise duty on tobacco.
    3. GST is applicable on all supply of goods and services except
      • Petroleum crude
      • High speed diesel
      • Motor spirit(petrol)
      • Natural gas
      • Aviation Turbine fuel

Components of GST

There are 3 components or type of taxes applicable under this system. These are

      • CGST, which is the central GST is collected at the center level by the Central Government on any intra-state sale
      • SGST, which is the state GST is collected by the State Government on any intra-state sale
      • IGST, which is the integrated GST is collected by the Central Government for any inter-state sale

Let us see a few examples of a regular taxpayer in the GST framework:

      1. Mr. Sin Nagpur buys Fountain pens from Mr. R of in Mumbai, 25 pens costing Rs. 20 each. He sells these to consumers at Rs. 40 each. The GST rate for fountain pens is 18%. Find out the tax liability of Mr. S and the revenue to the central and state Government as well.Since this is an intra-state sale, the parties involved are:
        • Mr. S
        • Central Government and
        • State Government

        Sale = 25 pens*Rs.40 each = Rs.1000
        CGST = 9% on Rs. 1000 = Rs. 90
        SGST = 9% on Rs. 1000 = Rs. 90
        Total Sale Value = Rs. 1180/-

        Purchase = 25 pens*Rs.20 each = Rs.500
        CGST = 9% on Rs. 500 = Rs. 45
        SGST = 9% on Rs. 500 = Rs. 45
        Total Purchase Value = Rs. 590/-
        Tax Liability = Tax on Sale less tax on purchases
        = Rs. 180-90
        Tax Liability of Mr. S = Rs. 90/-
        Revenue to central & state Government = Rs. 90+90 = Rs. 180/-

      2. In the above example, let us assume that Mr. R is from Surat and calculate the requirements.
        Sale = 25 pens*Rs.40 each = Rs.1000
        CGST = 9% on Rs. 1000 = Rs. 90
        SGST = 9% on Rs. 1000 = Rs. 90
        Total Sale Value = Rs. 1180/-
        Purchase = 25 pens*Rs.20 each = Rs.500
        IGST = 18% on Rs. 500 = Rs. 90
        Total Purchase Value = Rs. 590/-
        Tax Liability = Tax on Sale less tax on purchases
        = Rs. 180-90
        Tax Liability of Mr. S = Rs. 90/-
        Revenue to State Government = Rs. 90/-
        Therefore, the tax liability of Mr. S does not change in both the cases. However, the revenue to the central government is impacted.

        We saw in the above examples how a person having establishment at a place is impacted by GST. However, in the recent yeas in India, Electronic commerce has been the subject of intense growthbehind many of the other countries in terms of the market size for E-commerce.This is further set to grow fast and is predicted to become one of the largest in the world over the next decade. Before going into how GST impacts e-commerce, let us firsts fully understand the meaning of the term.

What is Electronic Commerce?

Electronic commerce, or E-Commerce, as it is knownsimply refers tocommercial transactions conducted electronically on the Internet. It refers to the buying and selling of goods or services using the internet, and the sale of physical products online. It also extends to transfer of money and data to execute these transactions. This eliminates the need of intermediary and hence enables reduced prices of goods/services.
GST for Electronic Commerce Operator
Every person who, owns, operates or manages digital or electronic facility or platform for electronic commerce is called an Electronic commerce operator. The basic functions forthe person who is an E-commerce operator would be:
• To display in the website the available products and services for sale.
• To arrange through any of the vendors for dispatch of the saleable products.
• Posting the successful supply by the vendors and settle the payment of the vendor on a periodical basis.

GST Registration for Ecommerce Operators
GST registration is mandatory for all E-commerce operators and they need to obtain the sameonce the turnover crosses the threshold limit. GST registration for ecommerce operators is mandatory once the threshold limit for every business is 20 lakhs, and 10 lakhs for special category states, except Jammu and Kashmir which is fully exempt.
GST Return Filing for E-commerce operator
One registered under GST, the E-commerce operator is supposed to furnish the following details in his return:
• Supplies of goods/services effected through him during any period.
• Stock of goods being held by the actual supplier through whom supplies are made in the premises of the e-commerce operator. This comes with a condition that the supplier has registered such premises as his additional place of business.

Return format
E-commerce operators are required at the time of sale to collect tax at source. Since they are required to collect tax at source GSTR 8 return must be filed. Therefore, an e-commerce venture or any persons operating such business must register for TCS, collect tax at source and file GSTR 8 return before the 10th of every month.

What is Tax Collection at Source (TCS)?
E-commerce operator is not an agent. Hence, they are required to collect TCS at the rate of 1% on the net value of taxable supplies made through the ecommerce platform. The amount deducted and collected this way is known as Tax collection at source which should be collected along with other taxes applicable. This must be collected on payment to vendors and subject to reconciliation at a later stage. Also, thishas to be deposited to the Government by the operator within a period of 10 days of the subsequent month in which the amount was collected. In addition, they must also file an electronic statement containing details of all amounts collected by them for the outward supplies made through the electronic portal. However, there are a few exceptions to this rule, where TCS need not be collected:
• Where the operator acts as an agent.
• Where the consideration is paid directly from the recipient to the supplier.
• The operator is liable to pay service tax on Services provided and notified under Section 8(4).

Concept of Matching
As with other cases in GST, E-commerce operations are required to match their invoices with the return as well. The returns filed by an ecommerce operator in his statement should perfectly match the returns filed by the respective supplier. Where there are any lapses on this part, it must be communicated to both the parties. Even after communication of the same, if the party who supplies does not rectify the flaw, then it would be added to the supplier’s liability for the next month and he would have to pay tax along with the interest for the specified period.
Input Tax Credit
It is worth mentioning that only those goods which are capitalized on the books of accounts are eligible for Input Tax Credit. Based on the returns filed by the operator, the TCS collected and paid by the e-commerce operator will later be reflected in the cash ledger of the supplier.
Composition Scheme
An option extended to the businesses for whom the turnover is below a certain limit is called as Composition scheme. This option, however, is not eligible for Ecommerce operators.

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