Bracing for the indirect tax regime: E-tail firms get GST ready

For e-commerce entities, the next few weeks would be tiring. They’re race against time to equip themselves for the goods and services tax (GST) regime that is likely to be effective from July.

Last week, the Rajya Sabha passed the four supporting Bills for GST, reinforcing the political consensus on the programme to remove existing barriers for a unified indirect tax regime.

E-commerce companies are scheduling classes for their sellers, both online and offline, hiring more people, revamping their technology and warehousing. Experts say there’ll still be initial teething trouble, as companies in states would have to file as many as 37 compliance forms.

“All the e-commerce players are already getting a detailed GST analysis undertaken, to assess the impact or changes in various facets — financials, cash flows, working capital, IT (information technology) changes and compliances. Presently, warehousing strategies are tax-oriented and this restricts the effective utilisation of resources. With GST in place, there would be uniformity in imposed taxes,” said Krishan Arora, partner, Grant Thornton India LLP.

He said companies might also restructure their warehousing strategy, keeping in mind business imperatives, not tax. A company might have only one big warehouse at a central location to serve multiple states. Or opt for warehouses at specific locations, on a hub-and-spoke model.

Amazon India said they’ve begun GST-specific programmes for their sellers. “We have launched an ‘A-Z GST Guide’ programme; it has already trained and enabled over 12,000 sellers to get ready for GST, through tutorials, blogs, free online training sessions and paid professional support from third-party service providers,” its spokesperson said.

In February, e-commerce biggies Amazon, Flipkart and Snapdeal came together on a single platform against the government mandate to deduct a percentage of the amount payable to sellers  and remit this to the government. The amount has been capped at one per cent. The companies say this would block as much as 20 per cent of the capital of small and medium enterprises transacting on their platform.

Tax Collection at Source, recommended in the GST regime only for e-commerce companies, has been a major pain point for the online marketplaces. “We, with other e-commerce players, have together stated that this would add a level of complication to the nascent sector. And, have requested the government to restrict the clause to only sharing of information, as is being done currently with Rajasthan and Delhi,” the Amazon spokesperson said.

Companies have also formed teams to look into various aspects of GST. And, have started recruiting to handle the compliance burden.

“GST preparations started long back at Flipkart. It was a great move from the government and we had started preparing all our key functions for smooth implementation. Training to our sellers as part of Flipkart’s GST Genie program and training for our internal employees were among the steps,” said a spokesperson. 

Shopclues said it has also put measures in place for transitioning to the new tax regime. “We have set up an internal team from all departments, including IT, finance, legal and business teams, with a consultant who is helping us prepare our system and people for GST rollout. We are already in the process of aligning our systems to claim input tax credit, based on the Model GST (law). Though we are running on a tight time constraint, we are confident our systems will be in place before the launch,” said a spokesperson.

Preparations on Full Swing

• E-commerce companies are scheduling classes for their sellers, both online and offline, hiring more people, revamping their technology and warehousing systems
• Amazon India says they’ve begun GST-specific programmes for their sellers
• Companies have also formed teams to look into various aspects of GST
• Shopclues says it has put measures in place for transitioning to the new tax regime
• Experts say there’ll still be initial teething trouble, as companies in states would have to file as many as 37 compliance forms