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VAT and CST Tax on E-commerce Business in India

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VAT and CST Tax on E-commerce Business in India

Central Sales Tax (CST) or Value Added Tax (VAT) is levied on purchasing and selling of goods. Both CST and VAT are indirect taxes but the former is a union subject while the latter is a state subject. VAT and CST Tax on E-commerce Business in India, for this registration of private limited company or other form of entity is mandatory if the business involves purchasing and selling of goods.

CST is levied when sales on goods take place inter-state, that is, between two or more states whereas VAT is levied when sale is intra-state, that is, within a state. Taxability on sale of goods by e-commerce companies like Flipkart, Snapdeal, Myntra etc. differs as per conditions.

E-commerce companies provide two variety of services, viz. provide a platform for buyers and sellers to interact and transact and the other wherein it purchases goods and sells it to customers.

In the first scenario since e-commerce firm only provides services, it is not liable to pay VAT or CST while in the other case it has to, as it purchases and sells goods. Hence, sales tax is applicable.

Service Tax Registration image

Applicable CST/ VAT provisions

There is still a lot of confusion when it comes to taxation. Therefore its applicability is divided as per geography. For instance, if the sale is made within the state, that is from Bangalore to say Mangalore then it will attract VAT. But if the sale is made to a location in another state, say, Mathura, then CST will be levied.

Many states are planning to introduce some kind of local tax or entry tax as they lose revenue. For instance, CST is to be paid if goods are purchased from another state.

Therefore when an e-commerce company situated in Bangalore purchases goods from Maharashtra then only one state, that is, Maharashtra is benefitted while Karnataka does not get anything.

However, many pundits say that through applicability of Goods and Service Tax the taxation on e-commerce companies will get sorted.

 

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