GST – Goods and Services Tax Explained for Digital Entrepreneurs
We are in the new India where everything is changing faster than before. The currency, taxation for business and individuals, the standard of vehicles we drive and a lot more to come. This a new era for the youth of the country to have options to choose from many alternative career options. In this blog, know about the GST for Dropshipping businesses in India.
Digital Entrepreneurs or Nomads are people who work from anywhere, anytime they like. That is a possibility now and it is completely legal with minimum paper works with government as well.
Anyone can form a simple one person company with minimum documentation and obtain a GST certificate. You need to understand one basic thing like, once you get a GST you have to inform the government once in a month or at least once in a year how you are doing. They need to know after issuing a GST Certificate right?
There are exemptions to try out or like a trial period before enrolling yourself or your business into GST structure. That limit was 20L and its been increased to 40L from the fin year 2019-2020. If your total business revenue is less than this limit for the financial year, you do not need to file GST.
We suggest you to set a trial period of 1-3 months and create a basic company and get GST certificate for the same. Once you get GST, its mandatory to file GST returns every month unless you enrolled under composition scheme.
Composition scheme allows you to pay 1% of total turn over if your total revenue is under 2 Crores per year and there are also other related schemes as well. But we suggest you to register your business under regular GST and file returns every months. You can use tools like Zoho books (Rs.2500 per year) and file the returns with click of a button yourself.
GST – Goods and Services Tax, for Dropshipping businesses in India
This is a new tax reform levied at all stages from manufacturing to consumption with the credit of taxes paid at previous stages available as input credit. This reduces the tax burden of sellers who will need to pay tax for the profit or the value addition done.
There are different GST slabs mentioned for various product types. You can refer to our products’ GST slabs here.(link to HSN codes FAQ). The broad categories of GST are SGST/CGST and IGST. If you are a registered/unregistered business from Tamil Nadu, you will be billed under SGST/CGS. If you are a registered/unregistered business from other states, you will be billed under IGST.
From here, we will explain the applicable taxation formalities with respect to our print on demand and fulfilment business model and this applies your B2C transactions only.
Under Section 10, Sub-Section 1 (A/B), you(Qikink’s Clients) will be considered as third party. Here, the place of supply will be the principal place of business of the third party. So, Qikink will invoice you with tax slab as per your state.
Section 10(1)(b) states “where the goods are delivered by the supplier to a recipient or any
other person on the direction of a third person, whether acting as an agent or otherwise, before
or during movement of goods, either by way of transfer of documents of title to the goods or
otherwise, it shall be deemed that the said third person has received the goods and the place of
supply of such goods shall be the principal place of business of such person”
When goods are delivered to a party on the direction of a third person the place of supply will be the location of such third person and not where the delivery terminates.
Filing GST Returns
To file GST returns you need Sales Invoices, Purchase Bills, Tax charged on sales invoices and tax paid on purchase invoices. You need to file 2 monthly returns and one annual return.
The manual entry is only on the first process of filing GSTR1 before 11th of every month. The other filing GSTR 3B will get its value from your filing of GSTR1 and your vendors’ and needs to be done before 20th of every month.
Your buyer purchases from you and you are sending sales invoice to him. You need to file all those invoices in GST as GSTR-1 by 11th of next month. By 20th of the month, file GSTR 3B where in all the sales along with all the input tax credit from purchases are declared(You can also reconcile GSTR-8’s TCS input here if you are selling in marketplaces).
If Kiran from Hyderabad purchases T-Shirt from you (a registered business in say Bangalore) for Rs.500, you invoice him for Rs.500. You place the same order with Qikink for Rs.350, Qikink invoices(with IGST) you for Rs.350. You will file GST with both the sales invoice and purchase bill and pay GST of Rs.7.5.
If Kavya from Mumbai purchases T-Shirt from you (a registered business in say Chennai) for Rs.600, you invoice him for Rs.600. You place the same order with Qikink for Rs.300, Qikink invoices (with CGST/SGST) you for Rs.300. You will file GST with both the sales invoice and purchase bill and pay GST of Rs.15.