The Indian government has introduced several significant changes to the Goods and Services Tax (GST) regime, particularly focusing on simplifying processes for the e-commerce and travel industries. These changes, set to take effect from October 1, 2023, are aimed at easing compliance and leveling the playing field for businesses in these sectors.
E-commerce Industry
- Composition Levy for E-commerce Goods Suppliers: The composition scheme, previously not available to those supplying goods through e-commerce platforms, has been extended to include them. This is particularly beneficial for small suppliers in the e-commerce sector. However, those engaged in supplying services through e-commerce are still ineligible for this benefit.
- Changes for Composition Dealers: The option for composition scheme for GST payment, which allows suppliers to pay a fixed percentage of their turnover as tax without claiming input tax credits, has been expanded to include suppliers selling through online platforms. This addresses the previous disparity where offline sales by small and medium enterprises could attract lower GST rates compared to online sales.
- Penalties and Compliance for E-commerce Platforms: E-commerce platforms are expected to monitor sales by unregistered and composition sellers more closely. Penalties are proposed for cases where sellers exceed prescribed limits or make inter-state supplies despite being under composition. This necessitates upgrades in systems and processes for real-time monitoring.
- Expanded Coverage of ‘Online’ Services: The scope of Online Information and Database Access or Retrieval (OIDAR) services has been broadened. This includes changes in the liability of overseas OIDAR service providers and removing certain conditions like services being “essentially automated and involving minimal human intervention” from the definition, thereby making it more inclusive.
Travel Industry
The amendments made to the place of supply rules for the transportation of goods have significant implications for the travel industry, especially in terms of tax accrual:
- Place of Supply for Transportation of Goods: The place of supply, regardless of the destination of the goods, will now be based on the location of the recipient of the service. This change affects how taxes are accrued and has substantial implications for international trade, as services to recipients outside India will qualify as exports, and services from suppliers outside India as imports of service.
- Amendments to Input Tax Credit (ITC) Claims: The amendments made to Section 16 of the CGST Act govern how Input Tax Credit claims are handled. Notably, a new penalty has been imposed on e-commerce operators who allow unregistered persons to supply goods/services through them, except in cases where such a person has been exempted from GST registration. This ensures better compliance with GST regulations.
- Changes in ITC Restrictions Related to CSR Activities: There have been changes in the admissibility of ITC on inputs/input services related to Corporate Social Responsibility (CSR) expenditure. The new amendments restrict ITC availability in respect of goods or services used for CSR activities.
These changes represent a comprehensive overhaul of the GST framework, affecting various aspects of the e-commerce and travel industries. Businesses operating in these sectors must adapt to these changes to ensure compliance and minimize financial impacts. The modifications indicate a move towards greater digitization, streamlined tax processes, and a more inclusive tax regime, potentially benefiting a broader range of businesses and service providers.