GST Council waives mandatory registration for small businesses selling via e-commerce

Ease of Doing Business for MSMEs: The GST Council also allowed businesses — with turnover up to Rs 1.5 crore registered under the composition scheme — for the intra-state supply of goods and services through E-Commerce Operators (ECOs).

gst council
The meeting holds significance as the department is in the process of formulating the policy. (Representative image)

Ease of Doing Business for MSMEs: More small businesses are likely to sell on e-commerce platforms as the Goods and Services Tax (GST) Council on Wednesday waived the mandatory registration for businesses supplying goods with turnover up to Rs 40 lakh. Currently, sellers selling goods or services online have to be GST-registered despite their turnovers below Rs 40 lakh or Rs 20 lakh threshold respectively in contrast to offline sellers who are exempted from the registration. 

“Waiver of requirement of mandatory registration under section 24(ix) of CGST Act for person supplying goods through E-Commerce Operators (ECOs), subject to certain conditions, such as first, the aggregate turnover on all India basis does not exceed the turnover specified under sub-section (1) of section 22 of the CGST Act and notifications issued there under. Second, the person is not making any inter-State taxable supply, according to the recommendations of 47th GST Council Meeting. 

“This is a welcome step for micro enterprises who were struggling with the necessary understanding and infrastructure for GST compliance. They will get some time to understand the benefits of being GST compliant and hence to be competitive,” Rajan Raje, Chair, MSME Forum, Bombay Chamber of Commerce & Industry and Group CEO, Nichem Solutions told Financial Express Online.

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The GST Council also allowed businesses — with turnover up to Rs 1.5 crore registered under the composition scheme — for the intra-state supply of goods and services through ECOs. E-commerce sellers aren’t allowed to opt for the scheme currently. The scheme aims at reducing the compliance cost for the small taxpayers with lower tax rates of 2 per cent of turnover for manufacturers, 1 per cent for traders, and 5 per cent for restaurant businesses.

Importantly, a Parliamentary committee report earlier this month on the promotion and regulation of e-commerce in India had also suggested extending the GST Composition scheme to online sellers in order to incentivise MSMEs toward e-commerce adoption.

“It’s a welcome move. This will accelerate the e-commerce adoption by MSMEs for scaling up with a global reach. It should have been done long ago,” Rajendra Prasad Sharma, Professor of Marketing, Indian Institute of Foreign Trade (IIFT) Kolkata told Financial Express Online.

The Council noted that the changes would be tentatively implemented with effect from January 1, 2023. Finance Minister Nirmala Sitharaman chaired the second day of the GST Council meeting in Chandigarh.

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