Summary: B2C Sales Invoice and Return Credit Notes TCS Compliance TDS Compliance by Marketplace TDS Compliance by Seller
Accounting for e-commerce business specially for sales done via Amazon, Flipkart, Myntra, Meesho or any other marketplace, is different from accounting for traditional retail or business. In this blog we will cover all things you should know for accounting and compliance regards to filing your GST Returns.
B2C Sales Invoice and Return Credit Notes
Recording the sheer volume of transactions in terms of sales invoices and credit notes of an e-commerce business can be an overwhelming task and very complex reporting structure of marketplace makes the things more complicated.
Fortunately most of the e-commerce transactions are B2C (business to consumer). below are guidelines set forth under GST –
- In B2C Invoices, consumer is unregistered entity, and will not be eligible for Input Tax Credit (ITC)
- For Invoice Values up to 2,50,000, it is not mandatory report all invoices to file GST return.
How to prepare state wise and tax rate wise net sales report for each marketplace
Thanks to this policy, an e-commerce seller can report state wise and GST rate wise consolidated report to file GST returns, as well as to maintain accounting records.
Tax collected at source (TCS) under GST regime is tax collected by an e-commerce operator (in this case Amazon, Flipkart or other marketplace) on net taxable sales of an e-commerce seller.
The Current TCS rate is 1%, meaning Amazon, Flipkart or other marketplace will deduct 1% of net taxable sales of a seller during a specific month. Marketplace then will deposit the same when they file GSTR-8 return by 10th of every month.
Please note TCS amount is deducted from sellers account while making the payment and deposited against sellers GST. The seller can claim these TCS Credits from GST panel, and can either offset the same with any GST liability, or can get money back in his bank account. An accounting partner will help you to get the TCS refund bank in your bank account.
Impact for seller
Purpose of introduction of TCS in e-commerce business was to avoid tax evasion and underreporting of sales by sellers.
Therefore, if any seller under reports their e-commerce sale, same can be quickly identified by taxman.
To remain TCS compliant, it is important for an e-commerce seller to report their sales numbers that match with TCS return filed by marketplace.
Often sellers complain about their actual sales not matching with sales reported by marketplace for their account, let us highlight reason why there is difference
Marketplace generate sales report for taxation purpose by 7th of every month for the previous month –
- In an ongoing business, the report will contain return (sales return) details of earlier months, that were not captured under previous reports, therefore your net sales number based on just the events of current month will not match.
- Marketplace capture the sale events based on order date and not on shipped date or date which shipping, and invoice was generated by seller.
- At times there is an error from marketplace end in reporting, the same can be highlighted with the marketplace.
We strongly recommend sellers to adhere to sales as per marketplace report, this will ensure that they are always compliant with the regulation.
TDS Compliance by Marketplace
As per new section 194O under Income Tax, All Marketplaces (e-commerce operator) will deduct 1% TDS of net taxable sales from the seller’s payouts and deposit against sellers PAN number. The same can be either refunded or offset against income tax liability at the time of filing Income Tax Return.
Effectively 2% of every sale made by seller is deposited by marketplace in the form of TCS and TDS. This new regulation puts pressure on liquidity of the seller as credits are first parked with Government for a period of time.
TDS Compliance by Seller
If your business is under Audit in case of proprietorship firm, or you are a private limited entity, TDS compliance is required by seller. In simple terms, a seller is required to deposit TDS on commission, shipping fee invoices received from the marketplaces. Failure to do so attract penalties from Government.
Often seller wonder if this is an additional expense for their e-commerce business, the answer is no. Once a seller deposit TDS on commission and other fees invoice by marketplace, a seller can get refund from marketplace of the same amount after submitting digitally signed Form 16.
More than 50% sellers miss to claim their TDS from marketplaces, this amounts to huge losses for sellers.
Please also note some marketplaces have defined timelines to claim TDS, you are required to claim deposited TDS amount from Marketplace within this timeline, failure to do so may lead total loss of TDS deposits.
We hope you find this information helpful, and hope your questions are answered, we at Ecom Books are an e-commerce accounting and reconciliation platform and help sellers with accurate Taxation reports to be GST and Tax Compliant. Please reach out to us for a detailed product demo.