In a welcome move last year, the GST Council during its 47th general meeting, brought both offline and online sellers on the same footing with respect to mandatory registration of GST.

Earlier, online sellers selling through e-commerce had to mandatorily register for GST irrespective of their annual revenue, whereas for offline sellers, there was an exemption up to ₹40 lakh annual revenue (₹20 lakh in some States). This created an imbalance between online and offline selling and acted as a barrier for the sellers to sell online.

With this decision, any seller whether online or offline having an aggregate turnover on all India basis below the range of ₹40 lakh, is exempted from mandatorily registering for GST. The Finance Bill 2023 further extended the applicability of composite schemes (fixed rate of GST on annual turnover) to online sellers. While both these relaxations allow such sellers to sell goods only within their State, it would encourage MSMEs to sell online. However, the existing GST regime needs further simplification to reduce the compliance burden.

Sellers with more than ₹40 lakh of annual revenue must register for GST, if they have to store goods in a particular State. However, in order to register for GST, the seller must register a place of business in the State s/he intends to do business, and designate it as a Principal place of business (PPOB). Currently, the law does not specify any prerequisites in terms of dimension for PPOB or minimal number of staff to be employed but under 2(85) of the CGST Act only prescribes that place of business must be “a place from where the business is ordinarily carried on, and includes a warehouse, a godown or any other place where a taxable person stores his goods, supplies or receives goods or services or both; or place where book of accounts is maintained”.

The additional compliance obligations associated with PPOB include providing seller records, maintaining books of accounts, interacting with their authorised representatives and assisting tax authorities. It needs to be kept in mind that sellers storing goods have to comply with these norms in every State they are trading, which means that they have to obtain PPOB for every State where they operate their business. Further, the sellers would also have to bear the overhead cost for the premises and tax compliances.Such compliance burdens prevent small sellers from building a nationwide consumer base, as they tend to hesitate to place inventory outside their parent States. Simplifying the GST registration process around PPOB will help the small sellers.

While concerns regarding enforcement are understandable from the State’s point of view, the same can be achieved by permitting the sellers to obtain State level GST registration with a single national PPOB for online sales.

Further, States can still exercise control on sellers as they will file State tax, and e-commerce operators will have to fulfil the obligations under 194O of Income tax of depositing 1 per cent TCS on behalf of the seller. It is important to note that the burden often falls on the smaller sellers who have to comply with the norms, while bigger sellers are able to provide PPOB in every State.

This change would give the option to the sellers to place the inventory in the warehouse of the marketplace or any other place that the seller deems fit.

The writer is a Rajya Sabha MP