GST is going to be the Growth Seconding Tantra for B2B E-Commerce Industry
GST is all about growth and it starts with a “G”
GST (Good and Services Tax) has already hit the headline and everybody is talking about it. The heated arguments have left people in a muzzle about its Pros and Cons. It is indeed a very pleasing news for the E-Commerce firms that are currently operating in the Indian Peninsula. The news that is appealing is that Cooperative Federalism of the States and the Centre will have concurrent power to levy taxes. As of now, Centre mainly collects Service Tax, while the States tax the retailing process. With GST their roles will be extended. Anyone can tax anything. However, the states will see their arena extended, the Centre’s will be shrunken.
“Taxes on consumption but not on production. The final consumer will bear all the taxes, and this tax will have Centre’s as well as the States’ share in it. Taxes will also be paid by intermediaries, however this amount will be paid back to them.”
The Existing Taxation Patterns
The Business to Business E-commerce is facing a lot of hurdles in terms of inter-state shipping across the peninsula. Let’s assume that coal has to extracted from Tamil Nadu’s Neyveli to Maharashtra’s Mumbai to attain the end result of coal. If coal has to be shipped from Neyveli, clearance is sort and it is kept ready for shipping. The shipment reaches Mumbai, clearance is sort and there comes the difficult part. The Maharashtra Government imposes an entry tax in the name of “Octroi Duty” which ranges from 3–6% on the product cost. The raw material cost is shot up and now the usual taxation policy of every sovereign state is to impose a VAT (Value Added Tax) which again ranges from 12–14.5% and plus the service tax imposed by Central Government 14.5%. The taxes add on to the base cost of the Raw Material and this varies between State to State. For instance, States such as West Bengal, Odhisha, Bihar, Maharashtra, Assam, Arunachal Pradesh, Gujarat, Himachal Pradesh and Jammu & Kashmir have their own entry taxes and they are aimed at bringing in more revenue to the states in particular. There is ambiguity in every notion of these transactions and it is not a simple task to ship a product within the nation at a single cap of rate slabs.
Hurdles faced by B2B E-Commerce Firms
We got in touch with our Delivery Expert Dinesh Appu of Kobster for further details on the hurdles faced by an e-commerce firm to deal with a Pan India Delivery network. He said that a product reaching the customer on time is the priority but there are a lot of milestones that are to be achieved by the delivery chain to sort clearances on the way. There are 23 forms in total that are required to be filled and authorised by local body authorities to get a product delivered. The Tamil Nadu Government have their own clearance form with their own set of taxations in the name of “Form JJ”. The other states have their own set of paper works that are required to be filled and sort clearance like the Uttar Pradesh Government’s form called “e-Sanchar form” to deliver a product within the state. The other hurdles faced by the delivery chain includes the slow bandwidth of the government websites and their lack of updation, few forms are mandatorily made “online only” and few states deals only with the conventional papers.
These taxations are the main reason for every commodity getting expensive at different location across the nation. Dinesh also gave an insight about a scenario where
“ The customer who is getting a product delivered in a remote town in UP had to approach the Taxation Officer of that District to get his product delivered from New Delhi due to variation in taxes between National Capital Region (Union Territory) and Uttar Pradesh (A neighbouring state). “
How GST is the actual “One Nation One tax” ombudsman
The scenario is simple. Let’s assume a product that is priced at Rs.100/- is shipped from Chennai, Tamil Nadu to Guwahati, Assam by Kobster
The table excludes Fuel surcharge which keeps fluctuating*
In simple words, Kobster will be able to deliver products to the end consumer all across the nation without the interference of ambiguous states’ taxation policies. The delivery time will be very much efficient and the stringent taxations will no longer be a hurdle to serve the nation as a whole. And GDP is capable of
· Reducing the cascading effect of taxes on the final price of the product. Eliminate tax-on-tax effect. No more Tax on Tax on Tax on Tax.
· Moderate prices and increase consumption.
· Uniform and Stable Tax Regime. One-Country-One-Tax.
· Simplify Tax Structure. Reduce the hassles of filing tax forms by merchants.
· Increase GDP, tax-GDP ratio and revenue surplus.