Decoding the impact of GST on our Internet-based fashion purchases

Niveditha, a happy homemaker and mom to a 6-month-old is confused. Since the advent of online shopping that has been a blessing in disguise for many like her who feel the whole exercise of stepping out for shopping, especially for clothes, is futile as everything available at your doorstep easily.

From cute baby rompers to the little black dress you always eyed – everything is now available online and all you’ll have to do is ‘filter’ and ‘sort’. Oh, and the wonderful world of offers, coupon codes, discounts, and mega sales! Many of us like Niveditha, sure lived in our la-la online land!

But with the advent of the Goods and Services Tax (GST) and a slew of tax reforms being announced day in and day out, customers are becoming wary. Will online shopping for clothing and accessories continue to be fruitful or will it burn a bigger hole in my wallet? Will GST make me spend more or save enough in online purchases? We put your doubts and certain myths to rest with regards to how the world of online fashion shopping will change (or not) after GST.

Is there any good news out of this?

“GST comes in with a positive impact such as better pricing for the customers and no additional taxes on inter-state sales – which is a great move as in brings in more transparency,” says Suchi Mukherjee, Founder and CEO of fashion portal Limeroad.com. And with India being a key player in the online retail industry, GST might actually be the way forward. Internet and Mobile Association of India (IAMAI) claims that India is expected to generate $100 billion in online retail revenue by the year 2020.

GST primarily works as a uniform tax rate across the nation, eliminating the various state-level taxes. If you are expecting a product that is being shipped from another city, GST will rule out the paperwork at each stage, and your product will reach you quickly. So, that’s good news!

Will discount sales, offers and free return policies continue?

With the new tax reforms, it is only a matter of time before we notice a change in price of regular household items shopped online. Mukherjee tells us how Limeroad.com encourages discovery than discounts. “All discounts on the platform are the ones that are offered by our seller partners directly,” she says.

What about returning the products for which the GST was collected?

Will the 30-day return policy or no-questions-asked still hold good?

The portal Jabong.com points us to their new rules on GST where they mention, “On return/cancellation of an order, the refund amount, including the GST collected would be refunded, in its entirety. In case of partial returns, the GST amount charged corresponding to that particular item(s) shall be refunded”.

This comes as a relief amidst news that refunds in the event of returns or cancellation will mean the e-commerce operators deduct tax at source and then claim refund from the Government, which might be a tedious process for them.

To be on the safe side, the customer might want to take a second look at the return/cancellation policies every time they make a purchase.

Poornima Srivatsan, a Chartered Accountant based in Chennai, says that “it is too early to draw conclusions, whether this is going to benefit or affect the e-commerce sector. While the existing big players will be prepared with infrastructure and compliance, the small and medium sellers must get a good awareness on the system and prepare themselves to sustain their businesses.”

Are there any immediate changes?

We will have to wait and watch. Earlier, the Government had announced that players in the e-commerce sector would have to collect a tax of 1% TCS (Tax Collection at Source) from the sellers listed on their site. But the Government has deferred this move to a later date (yet to be announced). “Since sellers will now be able to take tax input and the overall cost of manufacturing will go down, the product pricing will be more competitive. The cost benefit of increased sales will eventually be passed on either partially or completely to the customer in the form of lower costs,” says Mukherjee.

Srivatsan explains how the e-commerce sellers need to get their act together. “All the businesses carrying out e-commerce activity are required to get registered under GST irrespective of their turnover. This has caused a bit of anxiety among the small sellers,” she explains.

With many small time sellers yet to register with Goods and Services Tax Identification Numbers (GSTIN), there isn’t any clarity on when the tax will be introduced.

But regular online shoppers like Neha, an IT professional, are undeterred.

“It’s not just about the convenience. There are certain offers and discounts that work well only online.” She says, “If there’s going to be a marginal increase in the prices because of GST, that’s not going to stop or hamper online customers like me.”