E COMMERCE AND GST

E-Commerce and GST:Major reason behind why E-Commerce/E-tailers are able to offer products such as books and appliances etc at much cheaper rate than traditional retailers were because of 'Warehousing' model- wherein the E-commerce websites avoid CST liability on account of the fact that Central Sales Tax was only applicable on inter-state ""commerce""- and NOT on 'transport'. Hence, they didn't engage in direct sale, but stored the consignments (finished goods) in warehouses and then dispatched. As per the new GST framework, the Integrated GST component that will replace the erstwhile CST shall make no difference b/w ""transport"" and ""commerce"". Wouldn't this lead to a huge disadvantage for the E-Commerce companies that thrive on avoiding (legitimately) inter-state taxes?"

With the arrival of E-era/E-commerce, it is but natural that they also would be brought under the tax loop. if u claim it as disadvantage, then not covering them under tax would be disadvantage to the government. its like service tax where many other services were brought under it over a period.

Thought it may increase the tax burden, e commerce companies will still be able to thrive. They cut down costs by eliminating the need for retail brick and mortar stores, creating distribution networks, etc. Warehousing model is not just an exercise in tax avoidance. Tax avoidance is but its positive externality.. And, with the sort of convenience e commerce has brought into the experience of consumption, it is sure to retain its customer base even if they are not able to give huge discounts. The experience of shopping is a key driver in retaining the consumer. E commerce offers a variety of options to the consumer on a single platform, saves him time and helps him search the appropriate item by various filters. Time is a proxy for money and just by saving the consumer's time, e commerce will have its edge over brick and mortar stores.Now that the e commerce players will also brought under the GST regime as 'transport' would also be covered, I think it would help correct the huge skew in favor of e commerce players vis a vis the brick and mortar stores.