GST impact on e-commerce: Marketplaces put an embargo on non-compliant merchants

BENGALURU: Thousands of online merchants not yet compliant with the new sales tax have been barred temporarily by marketplaces from selling on their platforms. But several are also opting out because of a seeming lack of commercial viability under the new rules.

Online marketplaces such as Flipkart and Amazon India have made it mandatory for their merchants to register on their platforms with their new Goods and Services Tax Identification Numbers ( GSTIN) by July 1, as the new tax became effective. But several vendors haven’t been able to obtain GSTINs yet for various reasons. While this could reduce availability of products in certain categories, online marketplaces insist overall sales would not be affected.

“We don’t foresee any impact on sales. Some of the selection may get lost… (but) due to tax being lowered in many categories like fashion, we expect the sellers to pass the benefits to our customers,” Flipkart said in an email to ET.

“Close to 95 per cent of our sellers who contribute to our sales have become GST-compliant. The rest are in the process of obtaining GSTINs from the government as in certain states there is a delay in getting the same,” the company said.

Flipkart had about 100,000 sellers on its platform. Paytm Mall chief operating officer Amit Sinha said more than 80 per cent of the sellers on the platform had submitted their GSTINs, and Snapdeal said 92 per cent of its top sellers had registered their new tax identification numbers with it. Amazon India did not disclose how many of the vendors on its platform had registered their GSTINs with it, only saying: “We believe GST is good for the ecommerce industry as it would eliminate hurdles in inter-state delivery and subsume the entry tax introduced on ecommerce shipments by some states.”

That said, according to the All India Online Vendors Association, several merchants do not want to continue selling online in the next tax regime. “Some of the categories will have to be marked up on price due to GST. Those sellers have chosen not to go ahead (and register). However, the GST rollout has been smooth,” said a spokesperson for the association, which represents about 2,000 online sellers.