Lack of clarity clouds e-tail bonhomie over GST

Most e-commerce firms offer aggressive discounting and freebies, with specific purchases.

E-commerce companies, which are still trying to understand the ramifications of the new tax regime, want clarity from the government on many issues.  

The issues of concern include goods and services tax (GST) being levied on stock transfers from sellers to warehouses and taxes on discounts as well as freebies offered by e-commerce companies.

“Stock transfers from sellers to the warehouses to maintain inventory across the network would attract GST, leading to cash flow impact, as some of these goods would typically wait for long before they get sold online,” said Manish Saigal, managing director, Alvarez & Marsal, a professional services firm.

“Most e-commerce firms offer aggressive discounting and freebies, with specific purchases. Under GST, these are expected to be taxed. Also, in case an e-commerce firm decides to sell an item on discount, it will have to pay the tax on the price it has purchased the goods from the supplier.”

There’s lack of clarity on how GST would be applied in the case of peer-to-peer (P2P) platforms such as Olx and Quikr.

While many top start-up officials said that the GST regime acknowledges the existence of a digital economy and that GST saves them from a maze of indirect taxes, worries are rife regarding implementation costs.