GST compliance problem should be reduced; Industry wants from govt

IndiaTech.org, ADIF, and Nasscom have urged the government to ease the burden of GST compliance on small online sellers. They claim that many micro, small, and medium-sized businesses (MSMEs) are hesitant to move to online marketplaces due to the burdensome tax and GST compliance requirements imposed by the Goods and Services Tax (GST) law.

They argue that this discourages MSMEs from exploring online marketplaces, slowing India’s vision of a digitally powered economy. According to them, the GST compliance rules may suppress sellers whose current incomes are well below the GST thresholds.

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Section 24(ix) of the CGST Act, 2017, states that “any person who supplies goods through an e-commerce operator, is required to compulsorily register under GST, irrespective of the turnover of such persons.”

As a result, even if their turnover does not exceed the prescribed threshold for GST exemption under the GST law, these businesses must register for the tax and comply on a regular basis, they have stated.

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“The MSME ministry, in the interest of MSMEs and small businesses, should recommend that the exemption limit for small businesses should apply irrespective of whether the sale happens in state or outside,” IndiaTech.org said in a letter to state finance ministers, GST Council Secretariat, Ministry of Micro, Small and Medium Enterprises and the finance ministry.

It said this requirement should be removed in case of online selling, which would encompass inter-state selling. It said “an alternative authentication process” should be put in place involving PAN and bank accounts.

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The requirement of GST registration for online sales with a turnover of less than Rs 40 lakh could be due to the fact that the exemption does not apply to inter-state sales and only applies to intra-state trade, according to IndiaTech.

The Alliance of Digital India Federation (ADIF) had previously urged the government to level the playing field between online and offline businesses, particularly in the post-pandemic economy, to allow startups to survive.

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The body also expressed concern about the rising cost of online services and the stifling of digital growth as a result of these provisions, as well as the negative impact it could have on startups and small businesses.

“The current GST norms create barriers for lakhs of traders from using e-commerce platforms to sell their products but even practically render ineligible, large numbers of small businesses of artisans, craftsmen, household and cottage industry who are conducting businesses from their home to supplement the income of the family,” ADIF had said in a letter.

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Nasscom said the hesitation of small businesses to register under the GST law is not to evade taxes but to avoid cumbersome and time-consuming registration and returns filing processes.

“We have requested the government to allow such sellers to avail the benefit of composition scheme, allow sellers to register warehouses of e-commerce operators across states, based on a single physical place of business registration in the home state of the seller, strengthen reporting-led safeguards in the periodical compliances undertaken by e-commerce operators to enhance the compliance rating of the ecosystem…,” Nasscom said in a blog post.