Small e-commerce sellers in India will benefit from a simplified Goods and Services Tax registration process starting November 1, enabling them to expand their businesses across states more easily by using e-commerce warehouses as their principal place of business.
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Key Points
- Simplified GST registration for small e-commerce sellers will be available from November 1, allowing them to expand operations across states.
- Sellers can register in other states using the e-commerce platform’s warehouse as their principal place of business, eliminating the need for a physical office.
- This facility is for sellers with input tax credit of not more than ₹2.5 lakh a month and existing GST registration in at least one state.
- The government is also examining Section 16(2)(c) of the CGST Act, which links a buyer’s input tax credit to the supplier’s tax payment, with a report expected within three months.
- Any changes to Section 16(2)(c) are targeted for implementation from April 1, 2027, aiming to protect genuine taxpayers from ITC denial due to supplier defaults.
The simplified goods and services tax (GST) registration facility for small e-commerce sellers recommended by the 57th GST Council meeting earlier this month will be enabled from November 1, a senior Finance Ministry official said Thursday.
Speaking on the sidelines of an event organised by the Associated Chambers of Commerce and Industry of India (ASSOCHAM), the official, requesting anonymity, said the system changes required to start the new registration route were ready and the facility would go live on the GST portal from the beginning of next month.
New Registration Mechanism
The Council had proposed a simplified, optional registration mechanism under a new rule 14B of the Central Goods and Services Tax (CGST) Rules, 2017.
Under this route, small sellers of goods who supply exclusively through electronic commerce operators (ECOs) can register in other states by declaring the warehouse of the e-commerce platform as their principal place of business.
They would not need to set up their own office or shop in those states.
The facility is available only to sellers who pass on input tax credit of not more than ₹2.5 lakh a month.
They must already have a physical presence and GST registration in at least one state, which would remain their home state.
The registration obtained under this scheme could be used only for supplies made through the e-commerce platforms. Consent of the e-commerce operator would be taken through the system.
The official added that detailed circulars explaining the registration process, along with related notifications, would be issued in the next few days.
Notifications and circulars covering certain refund-related changes approved by the GST Council are also expected in the coming days.
Impact on Small Businesses
“It is a radical reform which can have a positive impact beyond GST on the economy at large.
“Currently, such e-commerce sellers are generally reluctant to expand beyond their home state considering the compliance requirement, specially the whole registration process.
“By enabling e-commerce platform players to support these sellers in taking such registration through the GSTN platform should go a long way in solving this challenge.
“One expects the whole process to be system-driven and simple to comply with.
“It would be interesting to see the adoption of the new system,” said Prashanth Agarwal, partner with Price Waterhouse & Co LLP.
The government should track the adoption of this new regime, how small sellers expand their presence and should assess and publish its benefits over a period, he added.
Input Tax Credit Examination
Separately, another senior official said the committee of officers formed to examine the restriction under Section 16(2)(c) of the CGST Act, which links a buyer’s input tax credit (ITC) to actual payment of tax by the supplier, would be taken up for a detailed study.
The official said the committee was expected to submit its report within three months.
Once the report is ready, it would be placed before the GST Council for final decision.
The 57th GST Council had referred the matter to the committee after several states sought a wider examination of the issue.
At present, genuine buyers can face denial or reversal of ITC even when they hold a valid invoice, have received the goods or services, and have paid the supplier, if the supplier fails to deposit the tax with the government.
The official indicated that any decision arising from the committee’s recommendations is targeted for implementation from April 1, 2027.
“The words of the Government official are promising and encouraging on the issue of Section 16(2)(c) of the CGST Act.
“It is heartening to see that the matter is being taken up for a detailed examination, with implementation of any decision targeted for April 1, 2027.
“Let us wait for the fine print and the committee’s recommendations, while hoping that the final outcome brings much-needed relief to honest taxpayers who have fulfilled their obligations but face the risk of ITC denial due to the default of their suppliers,” said Shivam Mehta, Executive Partner at Lakshmikumaran & Sridharan Attorneys (LKS).
The ultimate objective is to ensure that genuine taxpayers are not penalised for circumstances beyond their control, Mehta added.
