The Impact of GST on your eCommerce Business: 3 Things to Know

GST for small business
(Last Updated On: May 22, 2023)

Before 2017, Indian citizens had to navigate 17 different types of Indirect taxes. Today, we follow the policy of “One nation, One tax” – the GST. But, do we really know if it has worked?

Read on to know the long and short term impact of GST on eCommerce businesses.

GST on eCommerce businesses: Overview

Under the GST regime, all products and services are uniformly taxed across the nation. There has been a significant decrease in the number of taxes that businesses had to pay.

It has also become easier for the government to keep track of tax evasions and illegal activities.

GST on eCommerce businesses has largely increased employment opportunities in this sector, has increased the ease of doing business, improved cross border trade, and has given a boost to entrepreneurs and innovators.

GSTs registration to help small eCommerce businesses get access to formal credit 

In India, the informal sector accounts for more than 93% of the working population. With the implementation of GST, the Indian government saw an addition of 4 million salaried people from September 2017 to April 2018.

Why? For eCommerce sellers, the biggest advantage of GST had been the input tax credit. This gave incentives to businesses to register themselves.

(💡 Input Tax Credit: If a seller has already paid taxes when buying raw materials, the tax they pay for the final product is adjusted.)

Registering your small business with the government gives you a whole host of benefits. With relevant and updated documents you can take loans from the government, banks or non-banking financial companies.

This access to formal credit not only protects you from scams, frauds, and arbitrary interests imposed by unofficial loan sharks, it also helps grow your business profit margins.

Want to know more about the basics of GST? Here’s a short trailer of our free course by mojoVersity – our very own learning initiative platform.

Enroll in the free course “Basics of GST for small businesses”

eCommerce businesses to see higher profits in the long run

1. Removal of the cascading tax effect

Earlier, each stage of the production had a separate tax. Along with that, there was a tax for the central government and for the state government. each state had different tax quotas.

This created a sort of a cascading effect where an individual had to pay a tax on an already taxed good.

Now, all kinds of indirect taxes are consolidated under one umbrella. This reduces the total tax that an eCommerce business owner needs to pay when selling online.

2. Reduction in logistics costs to benefit eCommerce businesses 

Interstate travel of goods used to be a huge burden to eCommerce business owners. Since different states had different taxation rates, vehicles carrying goods usually had to stop at multiple checkpoints for long hours to clear the paperwork!

The removal of multiple state-level taxes has helped eCommerce businesses by

  • Allowing them to choose profitable vendors from other states

  • Keep inventory in warehouses around the country to reduce delivery times

Related read: Shipping for small businesses in India: the complete guide

3. Expansion to new cities

The states that once used to have different taxes on different products now have a uniform taxation system in place.

GST on eCommerce businesses has allowed online sellers to expand to new cities and increase their customer bases.

If you want to sell online in different states, you don’t have to modify the prices according to each state.

GST on eCommerce businesses to simplify taxation

The implementation of GST has also drastically impacted the tax filing processes. eCommerce business owners today don’t need to worry about long back and forth with tax authorities, delays, discrepancies across state governments, and so on.

All compliances can now be done online. Through GST portals established by the Indian government, eCommerce business owners can now: 

  • Register online through customised apps provided by GSTN and ST Suvidha Providers
  • Upload invoices in real-time instead of tracking all of them at the end of a financial year
  • File refund claims online with self-declaration forms

Every process is digitized and automated, which means that every process has a structured and consistent timeline. You can get your registration done within 3 days and settle refund claims within 60 days.

Confused about the filing process? Here’s another course that will help simplify the legal jargon for you! 

Learn all about GST invoicing with our free course on mojoVersity! 

Register for GST with the help of Instamojo partners

Registering your eCommerce business has multiple benefits in the long term that range from hassle-free tax filings to increasing profit margins.

If you are a small business owner selling on Instamojo, you can take the help of Instamojo partners like LegalWiz to register your eCommerce business online.

You can also get the free services of our partner – Vakilsearch as part of our rewards program – mojoPlus.

Visit our app store for more such tools that help you grow your eCommerce business!

Visit Instamojo App store


Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.