How GST will help e-commerce companies

Implementing GST will actually help eliminate the aforesaid taxation problem at the root and give a further boost to the e-commerce sector that is still at a nascent stage, yet growing exponentially, and has the potential to give a huge boost to the country’s economy in the coming years. It is currently being perceived, by the industry, as panaceato endless tax woes.

Logistics being one of the biggest hurdles so far for e-commerce companies, the roll-out of GST is likely to simplify things to a great extent. The objective of GST is to simplify and streamline the indirect tax regime in the country.

It is a single comprehensive tax regime that will be applicable across all states in India on the sale, manufacture and consumption of goods and services. Since the same tax regulation will apply across different states, e-commerce companies (as well as those from other industries) will not have to struggle with the complex regulatory structure that currently prevails in the country, and with the lack of uniform policies in different states, giving them the levy to devise their strategies in keeping with the GST norms.

Under GST, both Central and State taxes will be levied on the manufacturing cost at the point of sale, which will help eliminate the challenge of tax being levied on the same product/service more than once.

Moreover, sourcing, distribution and warehousing strategies that are currently designed by companies from the perspective of how tax liability can be minimised will change. Companies can now device these strategies based on what is actually in their best interest, since they no longer need to have a warehouse in every state as a means to minimize their tax liability.

Instead, a large warehouse at a strategic location can fulfill the demand of several states and help minimize costs. In fact, based on research it is believed that a company’s profit can increase by over 20 per cent by reducing cost by a mere 2 per cent. Going by this estimate, e-commerce companies stand to gain tremendously from GST.

Easing regulatory norms is a move that will not just benefit e-commerce companies by further accelerating their growth, but will also position the country as industry-friendly and attract more investments from foreign investors. This in turn will create a ripple effect by generating endless employment opportunities. It is, therefore, imperative that the government makes all efforts to make GST a success, since it will be a win-win for both, the industry and the economy.

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