Now with the innovation of Dropshipping, an individual can easily open an online store and engage in trading without necessarily having an inventory holding. By the introduction of the new tax regime, the question was how the system would affect the business. Thus, on this account, the blog shall try and throw light upon the GST rates applicable to a dropshipping business and also involve all processes involved in GST registrations.
What is dropshipping?
Dropshipping is a retail fulfillment process where a store does not keep the products it sells in stock. It sells a product to the customer and when it makes a sale, purchases the item from a third party who ships it directly to the customer end.
GST Rates on Dropshipping Business
The rate for GST under the business head of drop shipping varies for each category of products. As felt suitable by the Indian Governing authority, there are five groups under which the GST rate of India is announced: 0% on items that are in general need, like food, medicine, etc.; 5% on items, for example, clothes, shoes, etc.; 12% on items, for example, electrical appliances, etc.
18% on soaps, oils etc.
28% on flamboyant goods like cars etc.
In the case of a dropshipper, the GST has to be calculated on the selling price of the product, as provided by the drop shipper, and not the cost price. For example, if anyone is selling any product for ₹1,000 and the GST rate is 18%, then the amount of tax that should be earned after sale is ₹180.
It is a very special way of designing the composition scheme, crafted for such drop-shippers for whom the turnover of his business does not exceed ₹40 lacs. However, if in spite of such a turnover below ₹40 lakhs, registration of GST is made mandatory in view of any of the following reasons
You make supplies through any of the electronic commerce operators;
You make interstate supplies of goods.
The way to get registered under GST is as follows:
- Provisional ID and Password: Log in to the GST website and get a provisional ID with a password.
- Fill informal GST REG-01: Fill the informal GST REG-01 with your business details and submit it further.
- Email and Phone Update: Email and phone are being updated; the same will be verified at the time of updating because OTP will be sent on these emails.
- Submit form GST REG-04 : File form GST REG-04 with further business details and submit that.
- GSTIN : Your application, after it is duly checked, you would be allotted with the Goods and Services Tax Identification Number.
Benefits of GST Registration
- Legality : You become the lawful person above many other people and can jump to the value chain.
- Credit of Input Tax: The GST paid on the goods and services you purchased can be used to reduce the GST that you pay on your sales.
- Competitive Benefit: Competitive benefit over those businesses that are not registered.
Conclusion
Most importantly for the avoidance of penalties only pertaining to non-complaint registration, the GST registration is among the most important things pertaining to the adherence by a drop shipper. Pay the GST rates for the drop-shipping business, which according to those, you will do a registration of the same in the GST for smoothing the process of taxation and aiding in the success.
Moreover, If you want any other guidance relating to GST Registration online, please feel free to talk to our business advisors at 8881-069-069.
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