Confused about GST compliance for your online business? You’re not alone. Here’s everything you need to know.
Why GST Compliance Matters for Online Sellers
Whether you sell on Amazon, Instagram, or your own website, GST compliance in India is mandatory for most sellers. Getting it wrong can result in:
- Penalties and fines from tax authorities
- Blocked input tax credits (losing 18-28% of your costs)
- Legal issues affecting your business
- Inability to scale (can’t get proper financing or partnerships)
- Loss of B2B customers who need GST invoices
The good news: It’s not as complicated as it seems once you understand the basics.
Do You Need GST Registration?
You MUST register for GST if:
- Your annual turnover exceeds ₹20 lakhs (₹10 lakhs for special category states)
- You sell on marketplaces like Amazon or Flipkart (required regardless of turnover)
- You engage in inter-state sales
- You’re a B2B supplier to registered businesses
You MAY register voluntarily if:
- You want to claim input tax credits
- You want to appear more professional to B2B customers
- You plan to scale your business
Penalty for not registering: Up to ₹10,000 or 10% of tax due, whichever is higher.
Understanding Input Tax Credit (ITC)
This is the biggest benefit of proper GST compliance:
What is ITC? Input Tax Credit lets you reduce the GST you owe by the GST you’ve already paid on business purchases.
Example:
- You buy a product from supplier for ₹10,000 + ₹1,800 GST (18%) = ₹11,800 total
- You sell it for ₹15,000 + ₹2,700 GST (18%) = ₹17,700 total
- GST you collected: ₹2,700
- GST you paid: ₹1,800
- GST you actually owe: ₹2,700 - ₹1,800 = ₹900
Without ITC: You’d pay the full ₹2,700 in GST With ITC: You only pay ₹900 in GST Your savings: ₹1,800 (18% of your cost)
This directly improves your profit margins.
Requirements for Claiming Input Tax Credit
To claim ITC, you MUST have:
-
Proper B2B Invoice (Tax Invoice)
- Supplier’s GSTIN (GST identification number)
- Your GSTIN
- Invoice number and date
- Description of goods
- HSN/SAC code
- Taxable value
- GST rate and amount
- Place of supply
-
Supplier Must File Returns
- Your supplier must upload the invoice in their GSTR-1
- The invoice must appear in your GSTR-2B
- If supplier doesn’t file, you can’t claim ITC
-
Payment Made to Supplier
- ITC can be claimed only when you’ve paid your supplier
- Payment to government within 180 days
-
Goods/Services Received
- You must have actually received the goods or services
- Records should prove receipt
Common GST Mistakes Online Sellers Make
Mistake 1: Not Getting Proper Tax Invoices Many suppliers provide “bill of supply” instead of tax invoices. You CAN’T claim ITC on bills of supply.
Solution: Always insist on proper tax invoices with all required details.
Mistake 2: Buying from Unregistered Suppliers If your supplier doesn’t have GST registration, they can’t provide tax invoices.
Solution: Work with registered suppliers only if you want to claim ITC.
Mistake 3: Missing GSTR-3B Deadlines Late filing attracts late fees of ₹50/day (₹20/day for nil returns).
Solution: Set reminders. File by 20th of next month (can vary, check current dates).
Mistake 4: Incorrect HSN Codes Wrong HSN codes can lead to wrong tax rates or ITC rejections.
Solution: Verify HSN codes with your CA or use government HSN lookup tools.
Mistake 5: Not Reconciling GSTR-2A/2B If supplier hasn’t filed their GSTR-1, your ITC claim will be rejected.
Solution: Reconcile monthly. Follow up with suppliers who haven’t filed.
GST Compliance Checklist for Online Sellers
Monthly Tasks
- Collect all tax invoices from suppliers
- Verify invoices appear in GSTR-2B
- Generate sales invoices for your customers
- File GSTR-1 (outward supplies) by 11th
- File GSTR-3B (summary return) by 20th
- Pay GST liability by 20th
- Reconcile ITC claims with GSTR-2B
Quarterly Tasks (if opted for quarterly filing)
- File GSTR-1 quarterly
- File GSTR-3B quarterly
- Pay GST quarterly
Annual Tasks
- File GSTR-9 (annual return)
- Get books audited if turnover > ₹5 crores
- File GSTR-9C (reconciliation statement with audit)
GST Rates You Should Know
Common product categories:
- Food items: 5% (grains, vegetables) to 18% (packaged foods)
- Clothing: 5% (up to ₹1,000/piece) or 12% (above ₹1,000)
- Electronics: 18% (most consumer electronics)
- Cosmetics: 18% (most beauty products)
- Home goods: 12-18% depending on category
- Books: 0% (exempt)
Always verify current rates as they can change.
Marketplace Sellers: Special Considerations
If you sell on Amazon, Flipkart, etc.:
TCS (Tax Collected at Source): Marketplaces collect 1% TCS on your sales and deposit it with the government. You can claim this when filing returns.
GST Registration Mandatory: Required regardless of turnover threshold.
Invoicing: Some marketplaces generate invoices on your behalf. Understand their process.
Returns Handling: Credit notes must be issued for returns. Affects your GST liability.
How GridRay Helps with GST Compliance
Proper B2B Invoices: Every GridRay order comes with a complete tax invoice including all details required for ITC claims.
GSTIN Verified: Our GSTIN is verified and we file returns on time, ensuring your ITC claims are never rejected.
Simplified Record-Keeping: Digital invoices for every transaction make reconciliation and filing easier.
Professional Support: Our team helps you understand invoicing and can assist with supplier-related compliance questions.
Working with a CA (Chartered Accountant)
When to Hire a CA:
- When your turnover exceeds ₹40-50 lakhs annually
- If you’re doing inter-state sales extensively
- When you have multiple business entities
- If you’re getting notices from GST authorities
What to Expect:
- ₹2,000-5,000/month for basic GST filing
- ₹10,000-25,000/year for annual returns and audit
- More for complex businesses
DIY vs Professional: Small sellers (< ₹40 lakhs) can often handle GST themselves using software. Larger sellers should definitely hire a professional.
GST Software and Tools
Free Government Portal:
- GST portal (gst.gov.in) - basic filing
Paid Software (₹500-2,000/month):
- ClearTax
- Tally
- Zoho Books
- QuickBooks
- BUSY
Features to Look For:
- Automatic GSTR-2B reconciliation
- E-way bill generation
- Invoice generation
- Payment gateway integration
- Mobile app access
Next Steps
- Get GST registered if you haven’t already
- Organize your invoices - create a system for storing tax invoices
- Set up reminders for filing deadlines
- Consider hiring a CA if you’re doing > ₹50 lakhs annually
- Choose GST software that fits your business size
Common Questions
Q: Can I sell without GST registration? A: Only if turnover is below ₹20 lakhs and you’re not on marketplaces.
Q: What if my supplier isn’t filing GSTR-1? A: Follow up repeatedly. Consider switching suppliers if they’re non-compliant.
Q: Can I claim ITC on old invoices? A: Generally within the same financial year or by September of next year, whichever is earlier.
Q: What happens if I file returns late? A: Late fees of ₹50/day (₹20 for nil returns), plus interest on unpaid tax.
Simplify Your GST Compliance
GridRay provides proper B2B invoices for every order, making GST compliance and ITC claims straightforward.
Learn More About Our B2B Invoicing →
Disclaimer: This article provides general information and should not be considered professional tax advice. GST laws and rules change frequently. Consult with a qualified Chartered Accountant for advice specific to your situation.