Last updated: November 18th, 2024 5:40 PM

GST Registration for eCommerce Business​

GST registration is mandatory for all ecommerce businesses in India, regardless of their revenue threshold. Every ecommerce operator, including those without a physical presence in India, must register for GST and obtain a Goods and Services Tax Identification Number (GSTIN). This GSTIN must be displayed on all transactions and invoices, ensuring transparency and compliance with tax laws. In this article, we will delve into the specifics of GST registration for eCommerce business, exploring the requirements, process, and benefits of obtaining GSTIN to help ecommerce businesses understand and fulfil their tax obligations effectively. Streamline your e-commerce operations with expert GST registration assistance from IndiaFilings.

What is GST Registration?

GST registration is when a business obtains a unique 15-digit GST Identification Number (GSTIN). This number is required to collect and remit GST to the government legally. For e-commerce businesses, GST registration is mandatory, ensuring compliance with tax laws and facilitating smooth operations.

Why is GST Mandatory for eCommerce Businesses?

To understand why GST is essential for eCommerce businesses in India, it's important to grasp its underlying principles and impact.

• GST (Goods and Services Tax) is a destination-based tax applied at the consumption point rather than the origin point. This represents a shift from the older tax regime, which involved multiple cascading taxes, leading to inefficiencies.
• For eCommerce businesses, GST registration is particularly crucial due to the sector's rapid expansion and extensive reach. Under the GST framework, registration is mandatory if the annual turnover exceeds the prescribed threshold, which varies based on the type of business and state. This requirement ensures that all entities within the e-commerce ecosystem follow uniform tax regulations, promoting fair competition and greater accountability in tax compliance.

Benefits of GST Registration for eCommerce Businesses

Obtaining GST registration for eCommerce Business offers several key benefits for ecommerce sellers in India, enhancing their ability to operate effectively and expand their business. Here’s an overview of these advantages:

• Legal Recognition as a Supplier of Goods and Services: GST registration confers legal recognition to an ecommerce seller as an authorized supplier of goods or services. This recognition not only boosts credibility with customers but also with potential business partners and regulatory authorities.
• Input Tax Credit (ITC): One of the most significant benefits of GST registration is the ability to claim Input Tax Credit (ITC) on the taxes paid on purchases. This can significantly reduce the cost of goods and services as it allows businesses to reduce their taxes due by the amount of GST paid on purchases used for business purposes.
• Compliance with Mandatory Requirements: For ecommerce sellers, GST registration is mandatory regardless of the turnover threshold applicable to other businesses. Registration ensures compliance with tax laws, avoiding potential penalties and legal issues.
• Access to Online Marketplaces: Most reputed online marketplaces require sellers to be registered under GST to sell on their platforms. GST registration is, therefore, essential for ecommerce sellers who wish to use these platforms to reach a broader market.
• Inter-state Selling: GST facilitates seamless inter-state transactions, removing complex tax compliance requirements associated with various state taxes. Ecommerce sellers registered under GST can sell across state lines without worrying about state-specific tax regulations.
• Increased Customer Base: By complying with GST regulations, ecommerce sellers can attract customers who prefer to buy from tax-compliant businesses. This can significantly increase the seller's customer base and enhance the brand's trustworthiness.
• Ability to Compete with Larger Enterprises: GST registration puts ecommerce sellers on an even playing field with larger enterprises in terms of tax payments and compliance. This level playing field can help smaller sellers compete more effectively.
• Expansion of Business: With the ability to claim ITC and operate legally across states, ecommerce sellers have the opportunity to expand their operations more easily. GST registration also supports obtaining various business loans and aids in the formalization of the business.
• Ease of Doing Business: The GST system has streamlined the tax structure across the country, reducing the complexity of tax compliance. This unified approach can significantly ease the process of managing taxes, making it simpler and more transparent.
• Digital Compliance: GST registration and tax filing processes are conducted online, which aligns well with the operational mode of eCommerce businesses. This digital compliance makes it convenient for sellers to manage their registrations and returns efficiently.

Who Needs to Register for GST?

GST registration is mandatory for:

• All ecommerce operators.
• Ecommerce sellers/aggregators who supply goods or services through ecommerce platforms.
• There is no threshold limit for mandatory GST registration for suppliers making taxable supplies through ecommerce platforms. This means even if the turnover is below the traditional threshold of Rs. 40 lakhs (Rs. 20 lakhs for special category states), ecommerce sellers must register for GST.
• GST registration requirements extend to foreign e-commerce operators, who must ensure they are registered in every state and union territory where they conduct business. Additionally, these operators often need to appoint agents to manage their GST obligations locally.

Eligibility Criteria  for eCommerce Business

In India, the Goods and Services Tax (GST) registration requirements vary based on the nature of the business and its annual turnover. Below is an overview of who needs to register for GST:

Business Type	Turnover Threshold	Registration Requirement
Suppliers of Goods	₹40 lakhs	Mandatory registration if annual turnover exceeds ₹40 lakhs.
Suppliers of Services	₹20 lakhs	Mandatory registration if annual turnover exceeds ₹20 lakhs.
E-commerce Operators	No threshold	Mandatory registration regardless of turnover.
Suppliers through E-commerce Platforms	No threshold	Mandatory registration regardless of turnover.
OIDAR Service Providers (Foreign Entities)	No threshold	Mandatory registration regardless of turnover.

Key Points:

• Commerce Operators: Entities that own, operate, or manage digital platforms facilitating the supply of goods or services must register for GST, irrespective of their turnover. Platforms like Amazon, Flipkart, and Zomato that manage and facilitate online transactions must register for GST regardless of turnover.
• Suppliers through E-commerce Platforms: Individuals or businesses supplying goods or services through e-commerce platforms must register for GST, regardless of their turnover.
• OIDAR Service Providers: Providers of Online Information and Database Access or Retrieval (OIDAR) services, especially those located outside India but supplying to Indian consumers, are required to register for GST, irrespective of their turnover.

Requirements for eCommerce Business under GST

E-commerce sellers in India must comply with specific GST regulations to ensure seamless operations and adherence to tax laws. Below are the key requirements:

GST Registration

E-commerce sellers must obtain GST registration irrespective of their annual turnover. This rule applies even if their turnover does not exceed ₹40 lakhs (₹20 lakhs for businesses in special category states). Once registered, sellers must:

• Display their GSTIN(Goods and Services Tax Identification Number) on their website.
• Include their GSTIN on all invoices issued to customers.

Collection and Payment of GST

Sellers are required to collect GST on all taxable supplies made through their platform.

• The applicable GST rate depends on the type of product and the nature of the business.
• The collected GST must be deposited with the government within the prescribed timelines.

Filing of GST Returns

Regular filing of GST returns is mandatory for e-commerce sellers to report their sales, purchases, and tax liabilities. Key returns include:

• GSTR-1: Filed to report outward supplies (sales).
• GSTR-3B: A summary return to report sales, purchases, and tax liability.The frequency of filing depends on the seller’s turnover.

Tax Collected at Source (TCS)

E-commerce aggregators are required to collect and deposit a TCS at 1% on each transaction. This requirement ensures that a portion of the tax liability is collected upfront, aiding in tax compliance and reducing tax evasion. For dealers or traders selling goods or services online:

• They receive their payments after the deduction of the 1% TCS.
• All such traders and dealers must register for GST, regardless of whether their annual turnover meets the basic exemption threshold. This registration is necessary for them to claim the tax that aggregators have collected.

Exemptions and Restrictions

• Supplier of Services Exemption: Suppliers of services, except those specifically covered under the TCS provisions (like those not selling through an e-commerce operator liable to collect TCS), and having a turnover of less than Rs. 20 lakh (Rs. 10 lakh for special category states), are exempt from registering under GST.
• Composition Scheme: E-commerce operators liable to collect TCS under Section 52 cannot opt for the GST composition scheme. This scheme allows eligible businesses to pay GST at a nominal rate of turnover and simplifies compliance but is not available to those collecting TCS.

GSTIN on Invoices

The GSTIN (Goods and Services Tax Identification Number) of the e-commerce operator must be clearly displayed on the invoice. Displaying GSTIN on invoices is legally required. Failure to comply can result in penalties and complications for both the platform operator and the sellers.

GST Registration for eCommerce Entities Liable to TCS

Under Section 24 of the CGST Act, all e-commerce entities required to collect Tax Collected at Source (TCS) must register for GST. The process involves electronically submitting the GST REG-07 form, which needs to be signed or verified through an Electronic Verification Code (EVC). This form can be submitted either through the GST portal or at a facilitation centre designated by the Commissioner. E-commerce operators without a physical presence in the state or union territory where they operate must specify this in part A of the form, while the principal business location, if different, should be listed in part B. Once the application is reviewed and verified, the proper officer will issue a GST registration certificate form GST REG-06, typically within three working days. This ensures e-commerce operators are compliant with GST regulations and can continue their operations smoothly.

Documents Required for GST Registration for eCommerce Business

Documents Required for GST Registration for eCommerce Business is listed as follows:

• PAN Card of the Proprietor or Company’s Director: The PAN Card serves as the tax identity for the proprietor or company's director, detailing their financial transactions.
• Memorandum of Association (MOA): This is the document of incorporation for the company, outlining the scope of its business and its relationship with the outside world.
• Articles of Association (AOA): These are the by-laws that govern the internal management and conduct of the company's business.
• PAN Card of the Authorised Signatory: The PAN Card is used to track the tax-related transactions of the authorised signatory.
• Aadhar Card of the Authorised Signatory: This document serves as the taxpayer's identification and confirms the identity of the authorised signatory.
• TCS Details: Details related to Tax Collected at Source (TCS) need to be provided by the applicant.
• Certificate of Incorporation: Issued by the Ministry of Corporate Affairs, this certificate confirms the formation of the company as a separate legal entity.
• PAN Card of the Company: This PAN Card documents the company's tax-related transactions.

Procedure for GST Registration for eCommerce Business

Here is a Step-by-Step Guide to GST Registration for eCommerce Business.

Step 1: Access the GST Portal

• Visit the official GST website
• Navigate to Services > Registration > New Registration.

Step 2: Start the New Registration Process

• The new registration form will appear. Select ' Taxpayer ' under the dropdown menu for ‘I am a’.
• Fill in the required details, such as the location of the business, the legal name of the business, PAN, email ID, and mobile number.
• Enter the captcha and click on ‘Proceed’.

Step 3: Verification via OTP

• An OTP will be sent to both the provided mobile number and email address. Enter these OTPs and click on ‘Proceed’.
• This completes Part A of FORM GST REG-01 of the registration process.

Step 4: Temporary Reference Number (TRN)

• Upon completion of Part A, a Temporary Reference Number (TRN) will be generated. Click on ‘Proceed’.
• Enter your TRN and the captcha, then click on ‘Proceed’.
• Verify the OTP again and click on ‘Proceed’.

Step 5: Complete Your Profile

• Your saved application will appear with an expiry date of around 15 days. Click on ‘Action’.
• Complete your profile by filling out the ten sections on the portal:

Business Details

• Promoter/Partners
• Authorized Signatory
• Authorized Representative
• Principal Place of Business
• Additional Places of Business
• Goods and Services
• State Specific Information
• Aadhaar Authentication
• Verification
• Select the name of the authorized signatory from the dropdown list under ‘Name of Authorized Signatory’.
• In the Place field, enter the place where the form was filed (e.g., Delhi, Mumbai).

Step 6: Digital Signature and Submission

• The application must be digitally signed using a Digital Signature Certificate (DSC), e-sign (wherein OTP is sent to the Aadhaar-registered mobile number), or an e-verification code (EVC) wherein OTP is sent to the registered mobile number.
• Upon successful submission, a message indicating application success will be displayed.

Step 7: Acknowledgement and Tracking

• You will receive an acknowledgement on your registered mobile number and email ID along with the Application Reference Number (ARN).
• Track the status of your application under ‘Track Application Status' on the GST portal.

Step 8: Receive Your GSTIN

• The registration process generally takes about six days, after which you will be assigned a 15-digit Goods and Services Taxpayer Identification Number (GSTIN) and receive your registration certificate in Form GST REG-06.

Post-Registration Requirements

After successful registration, businesses must:

• Display their GSTIN prominently on their website and invoices.
• File regular GST returns, including:
  • GSTR-1:For reporting outward supplies.
  • GSTR-3B: For a summary of sales, purchases, and tax liabilities.
  • GSTR-8: For Tax Collected at Source (TCS) by e-commerce operators.
• Collect and remit GST on all taxable supplies.

When Can an eCommerce Business Cancel GST Registration?

E-commerce businesses in India may cancel their GST registration under specific circumstances. While GST registration is mandatory for e-commerce operators and sellers, there are instances where cancellation is permitted, either voluntarily or under certain conditions.

Business Closure

An e-commerce business can apply for GST cancellation if it has been permanently closed or discontinued. In such cases:

• There is no further requirement to collect or remit GST.
• The business must ensure that all pending tax liabilities are cleared and returns are filed before applying for cancellation.

Transfer of Business

GST registration can be cancelled when an e-commerce business undergoes a merger, demerger, acquisition, or transfer to another entity.

• The successor entity must apply for fresh GST registration.
• The original business entity can then apply to cancel its GST registration.

Change in Business Constitution

When there is a change in the legal structure of a business—such as transitioning from a partnership firm to a private limited company—resulting in a change in the Permanent Account Number (PAN), the existing GST registration becomes invalid.

• The business must apply for GST cancellation under the old PAN.
• A new GST registration must be obtained under the new PAN.

Turnover Falls Below the Threshold

For traditional businesses, GST registration is mandatory only if their turnover exceeds ₹40 lakhs (₹20 lakhs in special category states for goods) or ₹20 lakhs for services.

• If the annual turnover of an e-commerce seller falls below the threshold for mandatory registration, they can apply for cancellation.
• However, this rule does not apply to sellers on e-commerce platforms, as they must register irrespective of turnover.

Involuntary Cancellation by Tax Authorities

The GST authorities may cancel a business’s registration in cases of:

• Non-compliance with GST regulations.
• Failure to file GST returns for a prolonged period.
• Fraudulent activities or misuse of GSTIN.

In such cases, the authorities issue a show-cause notice to the business, providing an opportunity to respond before canceling the registration.

Procedure for Cancelling GST Registration for eCommerce Businesses

To cancel GST registration, an e-commerce operator must complete the following steps:

• File Form GST REG-16: Log in to the GST portal and submit Form GST REG-16, the application for cancellation of registration. This form requires details such as the reason for cancellation, the date from which the cancellation is requested, and information about any pending tax liabilities or input tax credits.
• Provide Reasons for Cancellation: Clearly state the reason for cancellation in the application. 
• Clear Dues and File Returns: Ensure that all pending GST returns have been filed and any outstanding tax liabilities are settled before submitting the cancellation application. 
• Verification by Tax Officer: The application and supporting documents will be reviewed by a tax officer. If everything is in order, the officer will issue an order of cancellation in Form GST REG-19. The cancellation is effective from the date specified in the order.

Conclusion

In conclusion, GST registration is a critical step for all e-commerce businesses in India. It not only ensures compliance with the law but also provides significant benefits such as access to online marketplaces, the ability to claim input tax credits, and the establishment of a credible business identity. By understanding and adhering to the GST registration process, e-commerce operators can navigate the complexities of tax obligations more effectively and position themselves for sustained growth and success in India’s thriving digital marketplace. Get expert GST registration assistance for your eCommerce business with IndiaFilings. Ensure compliance and drive growth.