They have said that many micro, small and medium enterprises (MSMEs) hesitate to transition to online marketplaces due to cumbersome tax compliances under the Goods and Services Tax (GST) law.
This, they have argued, discourages MSMEs from exploring online marketplaces and slows India’s vision of a digitally powered economy.
The compliance rules could inhibit sellers whose current incomes are well below the GST limits, they have said.
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.”
Hence, even where the turnover does not cross the prescribed threshold for GST exemption laid down under the GST law, these businesses are required to register for the tax and comply periodically, they have said.
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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 on Monday.
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.
The mandatory GST registration for online sales even when the turnover is under Rs 40 lakh could be because the exemption does not apply for inter-state sale and is only for trade within the state, IndiaTech said.
Earlier, the Alliance of Digital India Federation (ADIF) had urged the government to level the playing field between online and offline businesses to allow startups to survive especially in the post-pandemic economy.
The body also expressed concern over the increased cost of services offered online and dampening of digital growth owing to these provisions in addition to the adverse 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 dated March 23.
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 on March 14.
