The beginning of the 21st century has marked the age of globalization in India. Globalization is a concept which stresses on breaking away all the trade barriers by change of all industries through the e-commerce stage.
No wonder the techno savvies have been continuously at the forefront in this contest.
Globalization has made them resolute to defy complexities as well as hindrances to smooth trade & commerce. Among the preferred e-commerce media, very often used these days is the domain of High Sea Sales or Drop Shipping business in India.
Among many forms of e-commerce trades, DropShipping business in India is becoming very popular these days.
We all know that shopping and digital marketing is a growing trend that is becoming popular more and more in India. It is on this ground, that the individuals do believe that it’s quite simpler to purchase any product they desire while sitting at their homes.
These days all the shoppers visit internet shopping sites and order their goods without going out for shopping.
These sites offer a wide range of articles with every top niche brand. Other than that, there are attractive financial schemes for various transactions such as online payment through internet banking, via debit or credit cards or the best one- Cash on delivery option.
These highlights are offered by the web based shopping locales in India have made them well known among the individuals. And amid all this advancement, there is ample scope of the High Sea Sales.
This can actually give overnight success to a budding entrepreneur who wishes to make his fortune via e-commerce medium. Here we are giving you the complete information about High Sea Sales or DropShipping business in India.
Drop shipping is a model of trade that has much significance in the today’s system. However this has not been elaborately defined in the new indirect tax law.
In this way, it merits thinking about the much noteworthy area of Drop shipping that is good to go to witness significant changes since the beginning of GST registration procedure in India.
#1. What is all about Drop shipping business in India?
Drop shipment is basically a complex medium of trade network management system wherein, the trader, who had initiated and carried out their sales, never takes possession of the goods or the inventory.
Instead, he transfers his consumer’s order and details of his consignment to either the manufacturer of goods or some other dealer of the said goods, who then dispatches the goods directly to the original buyer.
#2. What are the GST provisions in case of Drop Shipping business in India?
The whole scenario of Drop shipment and its contact with regard to GST tax can be well understood with the help of a case study:
- Let us state the deal is between India (X), UK(Y) and Russia (Z). The X received an order from UK(Y) to send the finished goods/crude data sources. For the said shipments, Company (X) orders the said goods from Russia (Z) and direct them to dispatch the said goods directly to (Y) and issue invoice to them.
- The aforementioned case study draws out a dilemma that whether GST is applicable with reference to the sale exchange i.e. between X (India) and Y (UK) on the direct consignment of the goods from Z (Russia). Here, India (X) really taking no physical possession of the ordered goods into its territory however is providing Chinese goods to the UK.
#3. How shall the GST apply in case of Drop Shipping business in India?
It is imperative to get a handle on that for GST to be applicable on any exchange, the same must be either Interstate or Intrastate Supplies.
#4. What is the principle for GST as per the provision of GST law?
Depending upon the type of supplies, certain conditions have been pointed out u/s 7 of the IGST Act:
- In the event that the supplier is located in India and destination is outside India supply of goods will be considered interstate supply. In such case levy of IGST is applicable.
- In case of imports, the supply will be treated as ‘supply in the course of Interstate trade or commerce’, until the goods have not entered the traditions barrier of India, hence the levy of IGST won’t be applicable in this case.
- Almost certainly that, in the two kinds of trades, the dealer requires the unique Import Export Code.
- Based on the above 2 assumptions, we would now be able to determine the GST pertinence in the present case.
#5. How will the Drop Shipping business in India and UK be treated as per IGST Act?
In the initial segment, we observe that the supply of goods is from Russia to the US. And here, the supplier was located in India and destination of supply is outside India, i.e. UK. In this way, IGST would be applicable in this form of DropShipping business in India.
#6. How will the trade between India and Russia be treated as stated by IGST Act 2017?
With respect to the exchange between India and Russia, we see that goods have been directly shipped from to Russia to the US on the behalf of India. The goods have not entered into the custom barrier of India, which was exactly the condition for GST to be applicable. Hence, IGST wouldn’t matter here.
However, you can easily export your goods to any country without the GST liability by opting for the LUT Registration.
Note: Additionally, it is to be noted that presently the exemption has been extended for the levy of the GST under reverse charge in respect of the purchases by a registered vendor from an unregistered vendor.
Hence, there will be no GST which will be applicable till 30th June 2018 in respect of the purchase from an unregistered person.
#7. Why should we go for the LUT registration process?
Previously, all the importers & exporters had to pay IGST on the purchases of input over and above the export of goods. However, they could later on claim the refund of GST paid in input, but that was in reality a very lengthy process.
As the small traders encounter the difficulty of an extreme cash crunch, the government has now initiated the option of filing an LUT bond, in which you can now conduct exports without the GST liability, by plainly specifying that your intention is to export the goods.
Hence, Drop Shipping business in India can become very easy with LUT registration.