The session deliberated the bottlenecks faced by MSMEs in the e-commerce sector due to the GST regime, and offered recommendations to promote ease of doing business.
Speaking about some of the roadblocks, Natwar Agrawal, Founder & Director at Bacca Bucci Fashions, a footwear and accessory brand, rooted for an alternate mechanism through which returns can be submitted, instead of the OTP-based system. He also highlighted how the 1% tax collected at source (TCS) monitoring mechanism leads to working capital inefficiencies for e-commerce sellers. “It leads to working capital blockage. We are a 100% bootstrapped company and don’t have any funding till date. There should be a mechanism of a low taxation certificate for companies which have a low EBITDA,” he stated.
Delving on other issues, Subodh Sharma, Co-Founder, PinkWoolf, a shaving and skincare company, said there is a huge need for education among the GST team on what online business entails. He also explained how there is a huge variance between states when it comes to additional place of business. (APOB). “For instance, while it took us two weeks in Telangana, it took just two days in Bangalore. Besides this we did not face any distrust issues here but it was not the same situation in Haryana and West Bengal,” he said.
Addressing some of these concerns, Mamatha Anand, Partner-Indirect Taxes, Deloitte, said that some awareness about e-commerce business is necessary. “There has to be some sort of education or training programme with regard to e-commerce itself, because it is here to stay. It has democratised selling and buying and is the need of the hour. A training session focusing on e-commerce awareness for states would be extremely beneficial,” she said.
Doing away with physical invoices should be given more consideration in a digital age. “It just adds to the paperwork. If you go to any of the retail stores, they are happy to give a digital invoice. I think we should push for it,” she stated.Anand emphasised that there is a need to take a relook across sectors to identify areas of improvement for MSMEs such as easing registration hassles, improving working capital blockages and rationalisation of rates to make the process more seamless for them. Anil Bhardwaj, Secretary General, FISME, said even though a lot of push and encouragement is being extended to small entrepreneurs in e-commerce, they encounter huge difficulties in complying with GST provisions. This, he said, needed immediate attention to make it easier for them to do business. “They are required to obtain multiple registrations in states where goods are stored and are asked to create a full set-up and wait a long time for adding new places. Tax processes, harassment and intimidation by state tax authorities are pulling the clock back for ease of doing business,” he said.
Some of the key recommendations tabled during the session included adopting a single home state PPOB model in GST regulations to enhance operational flexibility for sellers; streamline MSMEs’ expansion through e-commerce; safeguard state GST revenue and maintain transparent audit trails. Permitting digital B2C transaction invoices to aid MSMEs in cost reduction and contribute to minimising carbon footprint was also mooted.
Besides this, an API-based APOB registration system by e-commerce operators for each seller’s GSTIN at warehouses was suggested to help reduce time required for inventory placement and eliminate repeated verification of the same premises. Reducing the TCS rate to 0.1% cumulatively, the industry body said, will help to resolve the working capital issue for sellers and maintain continued visibility.
