Govt looking at simplified GST processes for e-commerce, travel industries to ease compliance

Under GST it is mandatory to have a definite place of business in brick-and-mortar form as per law.

The central government is working on a simplified Goods and Services Tax (GST) regime for services industries, including e-commerce and travel, which may not have physical offices in the states they operate.

The options before the authorities include a change in the GST law with an additional clause or adding to its definition with a slight change in processes for the industry. If necessary, a reverse charge mechanism may also be looked at for these sectors which work differently, a senior government official said.

The development comes after the Central Board of Indirect Taxes and Customs (CBIC) drive earlier in the year to crack down on fake GST registrations by entities caused problems for the e-commerce and service industries as many of them have only virtual offices in states. The government thus is working on solutions under GST for these companies for simplified tax compliance.

“The process is a work in progress. There will be a change possibly in processes and law. It may be an additional clause on how it (GST for the service industry, e-commerce) will be addressed or an additional definition. That will happen because these sectors work differently,” the official told Moneycontrol.

The current law 

Under GST it is mandatory to have a definite place of business in brick-and-mortar form as per law. Under the law, a physical address is needed where the tax officials can conduct audits and verification if need be.

One cannot ask someone to change their business processes because of taxation, so the GST authorities have to look at their business processes to make sure taxation is a part of it, the official said. Under GST, if there is a value addition of goods and services, if there is a delivery component, it becomes taxable.

“GST authorities may also look at a simplified regime if necessary or put it on reverse charge for these sectors. Already small suppliers in e-commerce are on reverse charge,” he said.

The idea is to ease participation in the tax process and enforcement. Both components have to be met, the official added.

The services sector, including travel booking firms, may have common work areas and not a physical space. The concern is that these companies have virtual offices in many states with minimal staff. With the rise of work from home in services sector firms, the government is working on solutions under GST.

In states where such companies have virtual offices, the distinction between fake and e-commerce operators is very thin which needs some distinguishing feature to establish that they are genuine.

“We have received suggestions under GST for the service industry, including travel booking firms and e-commerce, and will work on those. It's under examination,” another senior government official had said earlier.