I am planning on opening an online marketplace where I would have foreign sellers from china list their products for Indian customers on my platform to purchase.
As a platform I would be charging a comission on each sale through my online marketplace.
Do I have to charge 18% tax on my comission or on the selling price as well?
also, as my business grows i plan to open a shop where in I will provide an option to chinese sellers to keep their product on the shevles of my shop for people to come look at and purchase. In this case, will I charge GST on comission of sale or on selling price? As I would only pay them out once its sold.
07 July 2024
In your scenario of operating an online marketplace with foreign sellers from China and a physical store in India, here’s how GST would apply to your commission and the overall sales:
### Online Marketplace: 1. **Commission on Sales**: - As an operator of an online marketplace, you will charge a commission for each sale made through your platform. - You are required to charge GST on the commission you earn. The applicable GST rate on commission services is 18%.
**Example**: - Sale Price of Product: Rs. 1000 - Your Commission: Rs. 100 - GST on Commission (18%): Rs. 18 - Total Commission Invoice to Seller: Rs. 118
The seller will remit the GST on the sale of the product to the Indian customer, while you remit the GST on your commission income.
2. **GST on Product Sales**: - The seller (foreign seller in this case) is responsible for charging and remitting GST on the sale of goods to Indian customers. - If the foreign seller is not registered in India, you may need to consider the provisions of Section 14 of the IGST Act for import of goods and the corresponding customs duty and IGST.
### Physical Store: 1. **Commission on Sales**: - If you are only charging a commission for allowing foreign sellers to display their products in your physical store, then you charge GST on your commission income. - The applicable GST rate on your commission is 18%.
**Example**: - Sale Price of Product: Rs. 1000 - Your Commission: Rs. 100 - GST on Commission (18%): Rs. 18 - Total Commission Invoice to Seller: Rs. 118
2. **GST on Product Sales**: - If you act as an agent and sell the product on behalf of the foreign sellers in your physical store, the GST needs to be charged on the sale of the product to the customer. - As an agent, you will have to issue an invoice in the name of the foreign seller, collect GST on the sale price, and remit it to the government. - You will still charge GST on the commission you earn from facilitating the sale.
**Example**: - Sale Price of Product: Rs. 1000 - GST on Product (18%): Rs. 180 - Total Invoice to Customer: Rs. 1180 - Your Commission: Rs. 100 - GST on Commission (18%): Rs. 18 - Total Commission Invoice to Seller: Rs. 118
### Key Points: - **GST Registration**: Ensure you are registered under GST in India to collect and remit GST on your commission income. - **Invoice Issuance**: Issue proper GST-compliant invoices for your commission income and ensure sellers issue GST-compliant invoices for product sales. - **Input Tax Credit**: You can claim Input Tax Credit (ITC) on GST paid on expenses related to your business operations.
### Conclusion: - For your online marketplace, you charge GST on your commission income at 18%. - For your physical store, you charge GST on your commission income at 18%. - Ensure proper compliance with GST regulations by maintaining accurate records and issuing proper invoices.
If you need detailed and specific guidance tailored to your business model, consulting with a GST professional or tax advisor would be beneficial.
CAclubindia
