{"id":26004,"date":"2021-02-15T14:45:49","date_gmt":"2021-02-15T09:15:49","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=26004"},"modified":"2023-03-17T18:24:23","modified_gmt":"2023-03-17T12:54:23","slug":"is-dropshipping-business-is-taxable-under-the-gst-regime","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/is-dropshipping-business-is-taxable-under-the-gst-regime\/","title":{"rendered":"Is Dropshipping Business Taxable under the GST Regime?"},"content":{"rendered":"\n<p class=\"has-drop-cap\">Dropshipping is an e-Commerce\nbusiness in which the seller does not hold any inventory. Whenever the customer\nplaced an order on such a portal, the seller diverts the request to the third\nparty for further processing.<\/p>\n\n\n\n<p>Dropshipping has become immensely popular in India due to its productive and cost-effective business structure. The responsibility of the drop shipper is only limited to accepting an order, the rest of the formalities such as order packaging and delivery is fulfilled by the third party. Those who are about to step into this business model must get accustomed to tax implications.<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><img decoding=\"async\" width=\"985\" height=\"293\" src=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/02\/Is-Dropshipping-Business-is-Taxable-under-the-GST-Regime.png\" alt=\"Dropshipping Business is Taxable\" class=\"wp-image-26021\" srcset=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/02\/Is-Dropshipping-Business-is-Taxable-under-the-GST-Regime.png 985w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/02\/Is-Dropshipping-Business-is-Taxable-under-the-GST-Regime-300x89.png 300w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/02\/Is-Dropshipping-Business-is-Taxable-under-the-GST-Regime-768x228.png 768w\" sizes=\"(max-width: 985px) 100vw, 985px\" \/><\/figure><\/div>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/is-dropshipping-business-is-taxable-under-the-gst-regime\/#Applicability_of_GST_on_Dropshipping_in_Case_of_Domestic_Transaction\" >Applicability of GST on Dropshipping in Case of Domestic Transaction<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/is-dropshipping-business-is-taxable-under-the-gst-regime\/#Applicability_of_GST_on_Dropshipping_Business_in_Case_of_Overseas_Transaction\" >Applicability of GST on Dropshipping Business in Case of Overseas Transaction&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/is-dropshipping-business-is-taxable-under-the-gst-regime\/#GST_on_Dropshipping_Business_when_Goods_are_Purchase_from_Foreign_Countries\" >GST on Dropshipping Business when Goods are Purchase from Foreign Countries&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/is-dropshipping-business-is-taxable-under-the-gst-regime\/#GST_on_Dropshipping_Business_when_the_Entire_Transaction_takes_Place_in_Non-Taxable_Territory\" >GST on Dropshipping Business when the Entire Transaction takes Place in Non-Taxable Territory&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/corpbiz.io\/learning\/is-dropshipping-business-is-taxable-under-the-gst-regime\/#Essential_Points_to_Ponder\" >Essential Points to Ponder&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/corpbiz.io\/learning\/is-dropshipping-business-is-taxable-under-the-gst-regime\/#Conclusion\" >Conclusion&nbsp;<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Applicability_of_GST_on_Dropshipping_in_Case_of_Domestic_Transaction\"><\/span>Applicability of GST on Dropshipping in Case of Domestic Transaction<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Let\u2019s understand the concept of <a href=\"https:\/\/corpbiz.io\/gst-registration\"><strong>Goods and services tax<\/strong><\/a> implication on dropshipping business through an example. Suppose there a person name Rohit who solely manages the dropshipping business. For packaging and delivery, he enters into a contract with a third-party entity known as ABC enterprise. <\/p>\n\n\n\n<p>Now a person X places an\norder on Rohit\u2019s website and pays the cost of the goods in a usual manner. As\nsoon as Rohit receives the order, he forwards the request to the ABC enterprise\nfor further processing and issues an invoice to the customers.<\/p>\n\n\n\n<p>While dispatching the\nproduct to the customer, ABC enterprise won\u2019t issue an invoice for the same\nsince they are playing a third-party role and don\u2019t have direct interaction\nwith the customer. Therefore, ABC enterprise will issue an invoice to Rohit\ninstead of the customer. Rohit can further avail of the input tax credit of\nsuch an invoice.<\/p>\n\n\n\n<p>Both ABC enterprise and\nRohit are required to get registered under GST if the turnover of their\nbusiness exceeds the max threshold limit of Rs. 20\/10 lakhs. The registration\nis also applicable in case the sales are made outside the union\nterritory\/states in which the seller has a place of business.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Applicability_of_GST_on_Dropshipping_Business_in_Case_of_Overseas_Transaction\"><\/span><strong>Applicability of GST on Dropshipping Business in Case of Overseas <\/strong>Transaction&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>When commodities are sold\noutside the Indian Territory, the drop shipper has to deduct GST from the\nperson in dropshipping business (merchant). In the case of export sales, the\nmerchant has an option to either pay IGST at the time of sale and seek a refund\nafterward or file a letter of undertaking to get exempt from GST for selling\nthe goods.<\/p>\n\n\n\n<p>For issuing an invoice to\nthe merchant, the drop shipper can avail the benefit of CBIC&#8217;s notification\nissued on 23rd October 2017 and pay SGST &amp; CGST @ 0.05% each or 0.1% IGST,\nas the case may be. This benefit is exposed to certain conditions as mentioned\nin the said notification.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"GST_on_Dropshipping_Business_when_Goods_are_Purchase_from_Foreign_Countries\"><\/span>GST on Dropshipping Business when Goods are Purchase from Foreign Countries&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>If the drop-shipper is\noperating from a place other than the Indian Territory then the merchant has to\npay IGST based on RCM (reverse charge mechanism) at the time of import of goods.\nThe merchant will issue the GST invoice along with IGST or CGST\/SGST, as the\ncase may be. The merchant can avail input tax credit against the IGST paid for\nthe importation of goods.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"GST_on_Dropshipping_Business_when_the_Entire_Transaction_takes_Place_in_Non-Taxable_Territory\"><\/span>GST on Dropshipping Business when the Entire Transaction takes Place in Non-Taxable Territory&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>In such cases, GST will not be levied. According to para 7 of the Schedule III of the <strong>CGST Act<\/strong><sup><a href=\"https:\/\/cbic-gst.gov.in\/pdf\/CGST-Act-Updated-30092020.pdf\"><strong>[1]<\/strong><\/a><\/sup>, any supply\/transaction that takes place in the non-taxable location with no connection to the home country shall not be treated under the GST regime. If the merchant belongs to India and completes the entire business transaction outside the nation then in such case the GST will not be applied.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Services Used in Such Transaction<\/h3>\n\n\n\n<p>The owner of the\ndropshipping business might leverage services related to the packaging and\ntransportation of goods in such a transaction. The services of the freight\nforwarder or courier are utilized for the transportation of goods.<\/p>\n\n\n\n<p>In many instances, the drop\nshipper has to avail of services of the third party for the inspection of goods\nfor quality.&nbsp;Now, this leads to a query whether such services come under\nthe GST regime or deemed as the import of services?<\/p>\n\n\n\n<p><em>According to Section 2(11) of the IGST act the\nterm \u201cimport of service\u201d is described as the supply of any service,\nwhere-&nbsp;<\/em><\/p>\n\n\n\n<ol><li>The supplier of service is\nlocated outside India.<\/li><li>The recipient of service is\nlocated in India.<\/li><li>The place of supply of\nservice is in India.<\/li><\/ol>\n\n\n\n<p>Henceforth, transactions\nsubjected to these conditions will be treated as the import of services.<\/p>\n\n\n\n<p>According to <em>Section 13(5) of the IGST Act<\/em> when the services supplied are related to\ngoods which are needed to be made available by the merchant to the suppliers of\nservices then place of supply will be the location where services are\nperformed. Henceforth, in the case of quality inspection services, the place of\nsupply will be the location where such inspection is performed. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Essential_Points_to_Ponder\"><\/span>Essential Points to Ponder&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul><li>Taxpayers are not required to mention sales that are not treated as\nsupply under the GST regime in GSTR-1 and GSTR-3B.<\/li><li>GSTR-3B doesn\u2019t seek to report of purchase of supply which is not\nconsidered as the import of service under GST regime&nbsp;<\/li><li>Taxpayers belong to the taxable location are liable to pay GST based on\nRCM if the services are availed from foreign a country that is not directly\nrelated to the goods.&nbsp;<\/li><li>Any business transaction of dropshipping business occurs in the\nnon-taxable region i.e. outside India is not subjected to tax deduction under\nGST.&nbsp;<\/li><li>Dropshipper holding a warehouse for goods outside India need not be pay\nGST&nbsp;<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span><strong>Conclusion&nbsp;<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Dropshipping is a cost-effective business model that allows individuals to build their online store without having an inventory. Currently, the margin of profit under this business model is sustainably higher and it\u2019s likely to grow over time.  The implication of the GST on such business models is subjected to various conditions as mentioned above. If you need further clarification on this then connect with CorpBiz\u2019s expert without any second thought.&nbsp;<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/gst-exemption-on-satellite-launches-for-encouraging-the-domestic-launch\/\">\nGST Exemption on Satellite launches for Encouraging the Domestic Launch\n<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Dropshipping is an e-Commerce business in which the seller does not hold any inventory. Whenever the customer placed an order on such a portal, the seller diverts the request to the third party for further processing. Dropshipping has become immensely popular in India due to its productive and cost-effective business structure. The responsibility of the [&hellip;]<\/p>\n","protected":false},"author":22,"featured_media":26027,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[16],"tags":[1534],"acf":{"service_id":"96"},"authorName":"Pankaj Tyagi","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2022\/01\/MicrosoftTeams-image-42.jpg","authorDescription":"Pankaj has a diverse experience of writing research papers, blog, and articles during his college time. Earlier, he was working as a tax consultant in a financial firm, but his interest in writing drives him to pursue a career in the writing field.","postViews":7769,"readingTime":4,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/26004"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/22"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=26004"}],"version-history":[{"count":13,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/26004\/revisions"}],"predecessor-version":[{"id":53541,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/26004\/revisions\/53541"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/26027"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=26004"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=26004"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=26004"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}