GST Council: Small businesses using e-commerce platforms exempted from mandatory registration

The GST Council has approved a proposal to relax compulsory registration norms for small businesses that use e-commerce platforms to sell their products. Also, composition dealers would now be allowed to make intra-State supply through e-commerce operators.

These moves will provide a level playing field for both online and offline business, besides helping small businesses in a big way.

The changes would be notified w.e.f. from January 1, 2023, as it would require technical changes to be made on the portal, as also by E Commerce Operators (ECOs). Officials say approximately 1.2 lakh small taxpayers could benefit from the relaxation on registration requirement.

Currently, suppliers using E Commerce Operators (ECOs) have to take compulsory registration even if their aggregate annual turnover is below the threshold limit of Rs 40 lakh/ Rs 20 akh, while sellers who operate offline are allowed exemption from registration for supply of goods and/ or services up to Rs. 40 lakh/ Rs 20 lakh. These thresholds are Rs 20 lakh and Rs 10 lakh in select states, including the North-East.

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Composition dealers are businesses having a turnover up to Rs 1.5 crore, and have to pay GST at a flat rate with input tax credit (ITC)

According to officials, now, small businesses with turnover below the threshold will not be required to go for mandatory registration. However, there are conditions attached to this exemption. First, such businesess would have to declare their Permanent Account Number (PAN) and principal place of business. Also, unregistered persons will be allowed to declare their principal place of business in only One State. Such businesses will not be required to make any inter-State taxable supply.

In order to ensure that there are no inter-State supplies by unregistered dealers, ECOs would have to place a check on pin codes (both bill to and ship to), which have to be in the same state as that of the seller. For example, M/s. ABC, an unregistered dealer based out of Maharashtra, should not be allowed to make supplies if the pin code of the recipient (bill to or ship to) is of another state.

ECOs should ensure that unregistered dealers are only allowed to make intra-state supplies through their platforms. Penal provisions may have to be incorporated for the same; a penalty may be imposed on ECOs if inter-State supply is made by unregistered persons through them.

Officials said the measures are aimed at facilitation, with safeguards. “Such a move will ensure a level field for online and offline suppliers, which will give a boost to ease of doing business, especially for micro and small businesses, artisans and women entrepreneurs working from homes,” one official said. At the same time the move would also safeguard concerns of revenue, the availability of information on supplies made by unregistered persons (based on their PAN) through ECOs, along with other requisite checks as proposed.

Composition dealers

Officials also mentioned that composition dealers will be permitted to supply through ECOs with some conditions. Such dealers should not supply goods or services that are not leviable to GST. They will not make inter-State outward supplies of goods or services. They will not manufacture such goods as may be notified by the Government on the recommendations of the Council. And, they will neither be casual taxable persons nor non-resident taxable persons.

Important decisions taken by Council

-       Transport of goods and passengers by ropeways be reduced to 5 per with ITC from 18 per cent

·      GST on renting of goods carriage with operator to be lowered to 12 per cent from 18 per cent.

·      Goods transport agency to be allowed to pay GST either at 5 per cent or 12 per cent on their consignments under forward charge. Option to continue under RCM at 5 per cent

·      Proportionate value of the foreign component of the tour may be exempted from GST