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Wait and watch is GST buzz on marketplaces.

Date: 17-07-2017
Subject: Wait and watch is GST buzz on marketplaces
BENGALURU: A fortnight into the goods and services tax (GST) regime, sellers and online marketplaces continue to assess the impact of the new tax. While some of them have adopted a wait-and-watch policy, many others whose margins could be hit are holdings talks with brands or vendors.

The initial dip in seller numbers by 20-30% across marketplaces indicates the wait-and-watch strategy being adopted by some, on the margins their businesses are likely to make on the ecommerce platforms.

Though the feedback from different marketplaces highlights GST as a beneficial tax in the long run for the input tax credit given to sellers, there has been no revision in the margins or commissions paid by sellers to ecommerce platforms. This has seen sellers negotiating with brands and vendors they work with to ensure better margins.

"On the Flipkart platform, 95% of our top-sellers are GST compliant. Very few sellers have dropped off the marketplace and it has been business as usual with the number of active sellers in a month remaining constant on the platform," said Nishant Gupta, director of marketplace on Flipkart.

"Sellers in the categories where margins will go down are having parallel conversations with us and the brands or vendors they work with for payment. In the medium to long term, prices will reduce when the tax credit system kicks in," he added.

Flipkart on last count had little over 1lakh sellers, without disclosing the number of active sellers right now.

Paytm Mall, the ecommerce entity of Paytm, recently delisted 85,000 sellers for non-compliance with certain norms laid down by the company, though none were barred from selling for not producing GSTIN registration.

"No sellers were delisted due to noncompliance of GSTIN. We have not revised our margins or service fee post GST, though our service charge now carries a GST component," said Amit Sinha, COO of Paytm Mall.

The sellers who have dropped out of selling on the marketplaces include long-tail retailers and those running small businesses.

"Most of the sellers who have been selling from small setups have opted out of selling on ecommerce platforms due to lack of stocks. As we are the importers and wholesalers for most of our products on online platforms, we are able to absorb the new tax rates from our margins," said Shaival Gandhi, who owns Pace Sports, an entity selling sports goods, kids toys and lifestyle products across major marketplaces. He added that the increase in tax from 5% VAT to 12% under GST for a category like toys will lead to price rise in the long run, especially where retailers are selling at a margin on the marketplace.

"We have been negotiating with the brands we procure and sell from as our margin on sale for the smartphone category has come down to 1% instead of 2% we used to make earlier. GST on tablets is also high at 18%. From a marketplace's view, we will get the input tax credit on GST and hence they will not change the margins," said Sumanth Lingala, owner of Green Mobiles which retails consumer electronics online. He adds that there is also the catch of showing that input tax credit has been used to offer consumer benefits, a requirement under GST. Hence the products cannot be priced higher than before.
A spokesperson for Amazon India said the number of sellers has not changed since GST implementation. "We haven't made any changes to our commission structure. Our system identifies the destination pin code of the customer based on the delivery address and applies the relevant tax," said an Amazon India spokesperson.

Some sellers who are not a part of the marketplaces are also leaving to opt for the composition scheme, which allows businesses with turnover less than Rs 75 lakh to file returns on a quarterly basis, but must only deal with intrastate supplies and cannot avail of input tax credit. Several sellers have also stopped selling in categories which have seen a sharp rise in tax, such as watches and sports goods which now invite 28% tax.

"One of the only concerns among sellers is regarding how returns need to be filed, whether it should have state-wise summaries or just turnover. We are discussing this with the ecommerce committee and we hope it is finalised before September," an AIOVA spokesperson said.

Source: timesofindia.indiatimes.com

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