in Tax and Accounting Law Corporate Law
Asked September 29, 2017

Application of GST on a sole proprietorship for online services

  • 1 Answer

Hi ! recently i have started a online shopping store which sell clothes, accessories, footwear of both men and women. So, basically what i am doing here is I am sourcing my product from outside of india. My supplier/wholesaler are located in different part of globe i.e. australia, new zealand, us, uk, spain, china what i am doing here is. 1. I display there product on my site using there website data feed. ok? 2. now what customer do customer order on my site.ok? 3. then i forward order of customer product to one of the supplier site. ok? 4. supplier ships the product to customer directly. 5. I keep my commission. to be more clear My working is a supply chain management method in which I will not keep goods in stock but instead transfers customer orders and shipment details to either the manufacturer, another retailer, or a wholesaler, located in different part of globe ,who then ships the goods directly to the customer. So, my concern here is do i need to charge GST to customer at the checkout? as i need to pay GST on my commission right? how will my taxation work? how GST thing will work around?. I did some research and i found that I don't need to have any import export licence. I have registered under sole proprietorship hope this will do for this kind of business!.. if not then please guide me in the forming entity. Custom duties are responsibility of customer and i have mentioned it clearly on my site.

Answer 1

From the information provided by you, the exact business model appears to be unclear. Do you have supply agreements with the suppliers or place orders on an ad-hoc basis? What is the current model of charging the customers? How do you determine the commission you charge from your customers or is it paid to you by your suppliers?

Hence, I am required to assume that you are running an electronic commerce website, and fall within the definition of electronic commerce operator under the Central Goods and Services Tax Act, 2017. Therefore, you are required to obtain registration under the GST Act, if you already haven’t.

Regarding the tax, for services notified under section 9(1) of the Act, you are required to pay tax as if you are the one providing the service and you will be required to follow all the applicable provisions of the Act. For other services, if you collect payments made by the customers, you are required to collect 1% of the net value of supplies as tax collected at source.[1] The tax collected is to be paid to the Government within ten days after the end of the month in which you make the collection.

You will also be required to provide an electronic statement on a monthly and yearly basis. This shall contain details of the tax collected and outward supplies of goods and/or services through your website, including the supplies returned.


[1]                      Section 52(1), Central Goods and Services Tax Act, 2017

Agree Comment 1 Agree almost 4 years ago
  • Default avatar

    Thanks a lot Aman sir for answering it!..

    Agree 0 Agrees almost 4 years ago

  • Default avatar

    Thanks a lot Aman sir for answering it!.. 1. My business model is base on dropshiping business model. "Dropshipping is a retail fulfillment method where a store doesn't keep the products it sells in stock. Instead, when a store sells a product, it purchases the item from a third party and has it shipped directly to the customer. As a result, the merchant never sees or handles the product". 2.Well I do have agreement with few supplier(not every) and orders are place on ad-hoc basis. 3.I didn't get you exactly what you mean by "What is the current model of charging the customers?" 4. suppliers doesn't have any role in paying commission to me! I directly cut it when customer order it on my store. and I forward that order to supplier with wholesale rate.

    Agree 0 Agrees almost 4 years ago

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