Have composition GST number, want to sell Online. What to do?

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Have composition GST number, want to sell Online. What to do? 2017-09-19T14:17:40+00:00

GST India Forum – Goods and Services Tax (GST) in India Forums Discussion Have composition GST number, want to sell Online. What to do?

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  • Sheikh NazimuddinSheikh Nazimuddin
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    #2546 |

    I have a shop of electrical goods. I have applied for a composition GST number for this.
    I am eligible for composition GST number.
    Now,
    I want to sell products online via online market places (Like Flipkart, Amazon, Snapdeal etc)
    But with composition GST I cannot sell my products online.
    Composition GST number is necessary as all my competitors have composition GST number (giving 1% tax).
    If I go with regular GST, Product price will go up in my shop and I shall be out of market.
    On the other hand I want to sell my product online.
    How can I handle it abiding law?

    May I create two business entities and keep Composite GST number for one and Regular GST number for other one?
    If yes,
    How can I do this?
    Do I need to have two PAN numbers for that?
    May I have two pan Numbers?
    Do I need to have two different Legal Names?
    How to register Legal Name of my business?

    If No,
    How can I solve the problem?

    Carl SabberwalCarl Sabberwal
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    It is clear that you cannot have a Composition Registration and sell through the online marketplace like Flipkart, Amazon, Snapdeal etc.
    For this, there has to be two separate business entities under separate PAN numbers. All business entities under the same PAN would have to jointly apply for Composition Scheme otherwise neither of the business entities would be eligible for Composition Scheme.
    Therefore, it’s important that both the business entities CANNOT have the same PAN number.
    The next question that comes to mind is, whether two business entities can be a proprietary firm. It can be but then the PAN number to be used would be that of the proprietor, which brings us back to the same problem of a common PAN number.
    It is therefore important that a separate business entity is created for the online market sale which is completely different from the business entity enjoying Composition Scheme.
    There are numerous forms of business entities that can be formed and would depend on the size and exposure you intent to have in the market. Examples are:
    1. Another proprietary unit using the PAN of a close relative, like father, brother, wife. But you have to remember that such a unit would also have to file its IT Returns.
    2. Partnership with close relatives. In this case, a separate PAN would be allotted to the partnership firm.
    3. Of late the One Person Company (OPC) has also become very popular and could be looked at as another option.
    I hope you have got some clarity and I would be willing to provide further details once you tell me the quantum of business to plan to do through the online marketing channels.

    Sheikh NazimuddinSheikh Nazimuddin
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    Thank You Very much for such elaborate advice.

    I was thinking to create a separate business entity with PAN number of my brother.
    He works in an MNC. So he pays his income tax on his salary.
    Now, suppose business entity is created with his PAN and GST is paid as per schedule.
    Does he need to pay income tax again on the profit from business (with the same income tax rate he paid on his salary)?

    Carl SabberwalCarl Sabberwal
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    All profits earned by your brother through the new business entity would be added to his Income as “Profit and Gains from Business” and subject to Income Tax at the slab rate in which he falls. This would be only if he starts the new business entity as a proprietary concern.

    Sheikh NazimuddinSheikh Nazimuddin
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    Thank You for your response.

    As he wants to sell using eCommerce platform, he does not need business premises. He wants to do it from his home which is a residential place. In this case which document he needs to submit during GST registration?

    Which kind of Business entity best suits in this case (to register a LEGAL NAME)?
    What will be the approx. cost?

    Is there any way in which profit from business will not be calculated for his income tax?

    Carl SabberwalCarl Sabberwal
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    The documents required to be submitted for GST registration would depend on the form of the business entity. In any case using the residential accommodation for the purpose of eCommerce is possible, but an NOC would have to be submitted during registration regarding the use of premises.
    The easiest form of a business entity with a legal name would be the One Person Company and the cost would be around Rs. 15000. You can get in touch with https://www.indiafilings.com/ for further details and the Income Tax complications.
    Whatever may be the form of the business entity, the income would be added to your brother’s income and subjected to tax.

    Sanjeev YadavSanjeev Yadav
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    Hi,
    I am small car accessories retailer & sell product on my own website having turnover 25 lac,Most of the orders comes from other states & I purchase items from local manufactures.Since govt implements GST of 28%,we are suffering the most,We had to pay Rs.55000/month GST.Just imagine how difficult for a small business like us will pay such high amount of tax,How can a small business survive in front of big players like Amazon & Flipkart & expand their business in future.Seriously Govt destroying small businesses like us,I request you please raise this issue & suggest weather we opt GST composition scheme or any other solution.

    Carl SabberwalCarl Sabberwal
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    Dear Sanjiv
    It is clear that a Composition Dealer cannot make inter-state sales. For that he must be a regular dealer.
    Moreover, in case you are estimating Rs 55,000 as tax to be paid, your turnover would be around Rs 2,00,000 per month which is well over the threshold limit of Rs. 20,00,000 per annum.
    I think you have not considered Input Tax Credit, which would lower your tax burden as you would enjoy the amount of tax paid on your purchases as a deduction from the tax liable to be paid by you on your sales.
    I suggest you send the details of your purchases and sale along with the amount of GST paid on the purchases and the GST payable on your sales and then I will calculate your exact liability.

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