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All QuestionsCategory: GST ConsultancyGST for Drop-shipping Business
Profile photo of ShubhamShubham asked 6 years ago

GST for Drop-shipping Business

Hi,

I am going to start a drop-shipping business of printed T-Shirts. 

My GSTIN is registered in Bihar. My targeted customers are from All over India and my supplier is based in Tamil Nadu, India.

My business will work as follow:-

The customer will purchase a T-shirt from my site (at MRP decided by me) >> I will forward order details of the product to the supplier>> Supplier will ship that product directly to the customer. 

I will receive an invoice for the base price of the product from my supplier and my customer will receive an invoice for the selling price of the product from me.

Now, my question is

How GST will work in this business type?

Which type of GST should I charge to customer SGST & CGST or IGST?

What will be the GST rate for a t-shirt?

How will I file GST Returns?

Answer the question
5 Answers
Profile photo of CA Shafaly GirdharwalCA Shafaly Girdharwal answered 6 years ago
  1. You will raise invoice at MRP and your seller at agreed price.
  2. Both will file their returns .
  3. Once the TCS provisions will be applicable your supplier will also be required to deduct TCS and file TCS return

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Profile photo of Deepak Bholusaria, CADeepak Bholusaria, CA answered 6 years ago

On point # 3 Shaifaly I have a difference of opinion. Since the model explained by Shubham is not of Marketplace, thus in my opinion provision of TCS shall not be applicable, since in current model amount is not collected by Shubham on behalf of vendor. Vendor is not privy to the contract of Sale between Shubham and customer. Vendor’s contract of supply is with Shubham not customer. 

Profile photo of CA Shafaly GirdharwalCA Shafaly Girdharwal answered 6 years ago

As per my understanding, the portal/seller will be collecting the payment. The actual seller will only ship the goods. In drop shipping CoD is generally not allowed. Shubam will be having a portal and he will sell the goods of other suppliers. On receiving an order supplier(Stockist) will ship the goods but payment will be handled by Shubham portal.In this case, he will be liable to collect TCS.

Profile photo of Deepak Bholusaria, CADeepak Bholusaria, CA answered 6 years ago

The name may be “drop-shipping” but here supply is technically happening first from Vendor to Shubham and then from Shubham to Customer.
Shubham himself has explained that he is raising invoice on customer, which means that customer is buying goods from Shubham (even though delivery is being carried by Vendor in bill to ship to model). 
In typical marketplace model, vendor raises invoice on customer and then portal collects money on behalf vendor from customer… there TCS is applicable. 

Also when vendor shall be filing his GSTR-1, he would be showing this supply to Shubham (and not through e-commerce operator) . The key to differentiate whether TCS is applicable or not is to test word “through” vis-a-vis “to”.

If vendor is selling goods “to” customer, “through” e-commerce operator… TCS is triggered.
But by raising invoice upon shubham, vendor is selling goods “to” shubham, not “to” customer. In order to have “through” in the transaction, Vendor should have raised invoice “to” customer, “through” Shubham, and then shubham would have collected money on behalf of vendor, since in that scenario, Shubham’s role would be merely to act as “facilitator” since supply of goods actually would have happened between vendor and customer. 
Please refer to attach drawings to have better understanding as to what I would like to convey.
 
Various E-Commerce Revenue Models
 
 
 


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