Two GST registration thresholds for offline and online sales are to be removed. here’s why


All sellers of goods are eligible for a threshold exemption of ₹40 lakh before being required to register for mandatory Goods and Services Tax (GST). This is very helpful for small traders and businessmen as they are spared the hassle and cost of compliance under the GST Act. However, if the same person intends to enjoy the benefits of selling through e-commerce operators, they must register under the GST law.

In short, if a business intends to sell goods online through marketplaces, it loses the benefit of the threshold exemption and has to pay GST from the first rupee. Moreover, once the person is registered for GST, it is not only online sales but even offline sales that will be subject to GST. So, even if a company’s turnover is less than ₹40 lakh, it cannot benefit from the threshold exemption.

The Indian government has announced various programs for MSMEs and encouraged the digitalization of the economy. However, many of them with turnover below ₹40 lakh are unable to avail the benefits out of fear and apprehension of compliances.

With the advent of e-commerce platforms, large companies have expanded a lot in the market and in areas where they did not serve. Covid has dramatically increased online sales. The small-scale sector has been hit hard due to closures and restrictions. Moreover, their inability to operate on e-commerce platforms due to the mandatory GST registration condition has aggravated their situation.

Even if you have to change over time, you have to be careful to adapt. Today, even large companies with a strong workforce are struggling to comply with the GST. Small businesses find this much more difficult.

Registration is made mandatory due to fear of non-compliance and tax evasion by the artisanal sector for online sales. There can be various precautions like getting KYC – PAN, Aadhaar number etc. – and submit the details on a monthly or quarterly basis to the authorities.

The withholding tax system on payments to these companies with a nominal rate will ensure proper reporting and control. Also, in case of sale through e-commerce transactions, the entire proceeds are transferred through normal banking channels. The company has no way of hiding said turnover.

It is high time there were no longer separate thresholds for online and offline sales. Moreover, small businesses should not be disadvantaged not to increase their turnover by online sales via e-commerce operators because of such conditions. It is hoped that this anomaly will soon be removed and a level playing field will be created for small businesses, which will help them grow and speed into the digital age. It will help freelancers, housewives, etc. to start and grow their own business. Tuesday’s budget presents a timely opportunity for policymakers to enable upward mobility in the growth trajectory of nascent Indian SMEs.


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David A. Albanese