With less than a week left for the rollout of Goods and Services Tax (GST), e-commerce retailers are trying their best to finish their pending stock. They are luring in customers by giving discount offers ranging from 25 per cent to 90 per cent.
But that’s going to change after July 1 when the GST comes into force. Most of your online shopping will get expensive after the GST. Here’s how:
Tax collected at source
Currently, e-commerce websites do not collect tax in any form. Under the GST, they will collect tax at a fixed rate of 1 per cent while paying to the sellers listed on their websites. This is likely to impact prices and make your online shopping more expensive. Though, the move has been deferred, it is likely to come in force at a later date.
Under the GST, your goods will reach you faster as the retailers will not have to file a separate paperwork for each state. Currently, for example, if your seller is in Bangalore and you are based in Delhi, your seller will file a separate bill for logistics, another one for the state tax, etc. Under the GST, the extra paperwork imposed by states will end and make deliveries faster.
The end of freebies and discounts
Used to mega discounts and freebies? There may not be many in future because they will attract an additional tax. Also, since an e-commerce company will have to pay the tax on the price it has purchased the goods from the supplier, it will not be worth its while to offer discount in many cases.
Shopping from global players
If you shop from portals like Amazon.com and Ebay.com, they transact in foreign currency. The government has yet to come up with clarification of rules for such operators.
Returns and cancellations will get difficult
Returns and cancellations are going to face challenges. E-commerce companies have a return or cancellation rate of nearly 18%. While collecting tax at source, e-commerce companies will have to bear the tax amount on their own and only later get refund from the government in case of returns and cancellations. The companies will face a major cash-flow disadvantage due to returns and cancellations.