E-Commerce Industry and the GST Connection

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Source: http://www.financialexpress.com/article/economy/logistics-set-for-rapid-growth/54736/

In the otherwise buoyant e-commerce scenario of India, a bump in the road is the problem of issues with the states’ sales tax department. The repercussions include failure of product delivery to the specific states or “stuck in transit” which eventually results in dissatisfied customers.

The solution for this impasse between state governments and retailers, both online and offline, is the introduction of Goods and Service Tax (GST). The retailers have been demanding GST as the hassle-free solution that combines all indirect taxes into one, facilitate faster movement of goods and even reduce prices thus enhancing their convenience; a case supported by the Kerala state government. A positive reflection of GST can be gauged with SBI Capital’s analyst, Viral Shah’s statement in The Economic Times, “GST would drive consolidation in the logistics industry, promote exports, reduce carrying and forwarding agency costs, impact warehouse and depot fixed and variable costs help slowly eliminate entry tax, octroi, etc.”

According to Sanjeev Jain, director of finance at Gati Ltd, profit margins in e-commerce logistics are actually higher than those in traditional distribution, and sustainable, given services such as packing, and warehouse and inventory management that logistics firms offer.

In the current market scenario, retailers end up paying Central Service Tax (CST), Value Added Tax and a separate tax in the state the particular product is sold. These taxes are applicable per product. For the e-commerce companies, paying these taxes at separate windows poses a problem when there are large scale product deliveries involved and that too, on a daily basis.

With the Indian logistics industry poised for an upward swing in the growth graph, the implementation of GST could well be a game changer.

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