This article applies to selling in: India

Tax Methodology

Purpose

This document describes the methodology adopted by the system to calculate Indian Goods and Services tax (GST’), Central Goods and Services Tax ('CGST'), State Goods and Services Tax (‘SGST’), Union Territory Goods and Services Tax (‘UTGST’) and Integrated Goods and Services Tax (‘IGST’), for sellers or merchants using tax calculation services.

Overview

GST is a unified tax levied on both goods and services. In the GST regime, both the Central and the State Governments will impose GST on the same transaction involving supply of goods and/ or services. Each taxable transaction could either attract (i) CGST and SGST/ UTGST or (ii) IGST. CGST and SGST/ UTGST will be levied on supply of goods and services within the State/ Union Territory (‘UT’) ( intra-State supply) and IGST will be levied on supply of goods and services between two States/ UT and on import ( inter-State supply).

Unlike in the indirect tax regime, where VAT/ CST is applicable on buying and selling of goods and service tax is applicable on provision of service, GST would be applicable on ‘supply’ of goods and services. The definition of ‘supply’ is wide and inter alia includes:

  1. All forms of supply including sale, transfer, barter, lease, etc made for a consideration in the course or furtherance of business.
  2. Import of services, whether or not for a consideration and whether or not in the course or furtherance of business.

GST is a consumption based tax. Therefore, GST of the State/ UT where the goods and services are actually consumed, will apply. While SGST needs to be paid State-wise, CGST and IGST have to be paid on a consolidated basis. However, the place of supply , the location where the goods and services are actually consumed, have to be disclosed.

In order to determine whether a supply is an inter-State supply (attracting IGST) or intra-State supply (attracting CGST and SGST/ UTGST), specific place of supply rules are formulated:

Supply of Goods:

Generally, for supply of goods, if the State/ UT from where goods originate and the State/ UT where they are delivered is same, then it qualifies as intra-State supply (subject to CGST plus SGST).

If the State/ UT from where the goods originate and the State/ UT where they are delivered are different, it should qualify as inter-State supply (subject to IGST).

Import of goods into India will be subject to Basic Customs Duty (‘BCD’) plus IGST. At the same time, export of goods outside India will be tax-free.

Supply of service:

There are two types of supply services:

  1. Local Supply of service: Generally, in case of a B2C transaction, the place of supply shall be the address of the recipient on records of the supplier or location of supplier in other cases. The place of supply is subject to certain exceptions such as services in relation to immovable property, event based services.
  2. Import and Export of Service: On import of services into India (B2B transaction, where service provider is located outside India), the service recipient will be liable to pay GST under the reverse charge mechanism. On the other hand, if the services qualify as export, the same will not be subject to GST.

    Additionally, the service recipient may also be liable to pay GST under the reverse charge mechanism on certain specified services even if the provider of service is located in India (typically, referred as domestic reverse charge).

    If the suppliers located outside India are providing Online Information and Database Access and Retrieval (‘OIDAR’) Service through Amazon.in platform, then the overseas OIDAR service providers will be required to obtain GST registration in India and discharge the GST liability.

Rate of GST

Goods

Goods are typically categorized under (5) bands of tax rates: Exempt, 5 percent, 12 percent, 18 percent and 28 percent depending on the Harmonised System of Nomenclature (‘HSN’) classification of the goods. Additionally, certain category of demerit and luxury goods such as pan masala, aerated waters and luxury cars will attract an additional cess.

The seller will have to assign appropriate HSN classification of the goods while listing their product for sale along with the applicable PTC.

Service

There are (5) standard rates prescribed for supply of service: Exempt, 5 percent, 12 percent, 18 percent and 28 percent. Further, in addition to GST, cess may also be levied on certain notified services. However, currently there are no services which have been notified on which cess will apply.

This tax calculation service provides functionality for calculating GST for goods shipped from fulfillment centers ('FC') located in India, goods sold by offshore sellers and services provided on Amazon.in platform, based on the parameters discussed above.

This document describes the support for calculating the applicable GST and related functions:

  • Determining the tax jurisdiction and tax type
  • Determining the tax calculation selling price
  • Time of supply and GST calculation
  • Return of goods and services

Determining tax jurisdiction and tax type for goods

This requires information on transaction-related parameters to determine tax jurisdiction and tax type ( CGST and SGST/ UTGST or IGST). These transaction- related information are:
  • Ship-from location
  • Ship-to location

General note applicable to the tax location and tax type

  • GST being a consumption based tax, the GST rates of the State/ UT where the goods are actually consumed should apply.
  • In certain transactions, bill-to location and ship-to location could be different. However, the bill-to location has no relevance; the levy of GST would depend on the ship-from and ship-to location only. Thus, even if the buyer and the FC are in the same State/ UT, a supply could be an inter-state supply if the movement of goods takes place from one State/ UT to another. Similarly, even if buyer and the FC are in different State/ UT, a supply could be an intra-state supply if the delivery location of goods is within the State/ UT.
  1. Ship-from location

    The Ship-from location is the location from where the shipment originates ie, the location from where the goods are actually shipped to the customers.

    If the goods are delivered from a place outside India, it will be regarded as import of goods into India.

    1. Products shipped using Fulfilment by Amazon: The tax calculation services uses the location of FC as actual ship-from location for shipments originating from an Amazon FC.
    2. Seller-fulfilled products: Tax calculation services are provided for seller-fulfilled shipments based on the ship from state as declared by the seller in their Seller Central Account.
  2. Ship-to location: The ship-to location is the location to which shipment is destined, ie the destination State/ UT.

Tax location and tax type for goods

Based on the transaction-related information parameters described above, the tax location and tax type for shipments of products that are taxable are determined as follows:

  1. Products shipped using Fulfilment by Amazon:
    1. Shipments where ship-from location and ship-to locations are in the same State/ UT: Shipments are subject to ‘CGST and SGST/ UTGST’ where ship-from location and ship-to location are in the same State/ UT, i.e. where the movement of goods is within the State/ UT where FC/Place of Business is located.

      The CGST and SGST/ UTGST rate will be of the destination State/ UT (ie, ship-to location).

    2. Shipments where ship-from location and ship-to locations are in the different State/ UT: Shipments are subject to IGST where ship-from location and ship-to location are in the different States/ UT, i.e. where the movement of goods is from the State/ UT where FC/Place of Business is located to `another State/ UT.
  2. Seller-fulfilled products: Same as detailed under (a) and (b) above.
  3. Imported products: Import of goods into India will be subject to BCD plus IGST. The IGST will be paid at the time of clearing the goods from the customs station by the importer on record or the CHA on behalf of the importer.

Determining Tax Jurisdiction and tax type for services

This requires information on transaction-related information parameters to determine tax jurisdiction and tax type (ie, CGST and SGST/ UTGST or IGST). These transaction- related information are:

  • Location of the supplier
  • Location of the recipient
  • Place of supply of service

General note applicable to the tax location and tax type

  • GST being a consumption based tax, in order to determine the State/ UT where the services are consumed, specific place of supply rules are formulated.
  • According to the Indian laws, the services provided to customer located outside India would be regarded as export where the consideration is received in foreign currency. Hence, not subject to GST.
  • In certain transactions, bill-to location and the location where the services are actually consumed may be different. However, the bill-to location has no relevance; the levy of GST would depend on the location where the services are actually consumed (in terms of the place of supply rules).
  1. Location of the supplier: For GST purposes, registered place of business of the supplier will be considered as the location of the supplier. If the services are supplied by a supplier located outside India, the services will be considered as an import of service into India.
  2. Location of service recipient: The location of the service recipient will be the address of the customer as available on the ordering details in your Seller Central account.
  3. Place of supply of service: The place of supply of service is typically the location of the service recipient. This rule may be subject to certain exceptions such as transportation of goods, event based services and training services. The place of supply of service will have to be determined on a case-to-case basis.
  4. Tax location and tax type for services:
    1. Services where location of the supplier and the place of supply are in the same State/ UT: Services are subject to ‘CGST and SGST/ UTGST’ where location of supplier and place of supply are in the same State/ UT.
    2. Services where location of the supplier and place of supply are in the different State/ UT: Services are subject to IGST where location of supplier and place of supply are in the different States/ UT.

Supply of Digital content through Amazon.in platform


  1. Under the GST regime, supply of e-books, music, software and other intangibles over the internet will qualify as OIDAR service.
  2. If the OIDAR services are provided by offshore suppliers through Amazon.in platform, the offshore suppliers will be liable to obtain GST registration and discharge IGST on a forward charge basis.
  3. The location of supplier for services provided by offshore suppliers will be outside India.
  4. The tax location is the address of the customer.

Determining tax on the selling price for goods

The GST is typically payable on value of goods supplied, the selling price of the goods. Price variations and ancillary charges as described hereunder could be adjusted against the selling price.

  1. Promotions: The GST on the price of a goods should be reduced by the amount of price-based promotions applied to them. For instance, promotional discounts and trade discounts are reduced from the price of goods for the purpose of calculation of GST. The discount will be adjusted in the invoice itself. Post sale discounts will not be deductible for GST purpose unless such discount is agreed at or before the time of supply.
  2. Shipping & Handling Charges: Shipping and handling charges will be considered as a part of selling price. In determining the GST the selling price, separately stated shipping and handling charges should be assigned to, or associated with, the individual items in a shipment. If a consolidated shipping and handling charge is made, it should be allocated by value or any other justifiable parameter and attributed to each item being invoiced/ shipped.
  3. Shipping & Handling Taxability Options: Taxes on shipping and handling charges associated with individual items in a shipment should be calculated separately from the related individual items. By default, each shipping and handling charges should be assigned the same product taxability as its related item. This will generally result in shipping and handling charges associated with taxable items being taxed at the same rate as the taxable items, and shipping and handling charges associated with nontaxable items not being taxed.
  4. Gift-Wrap Charges: Gift wrap charges are generally treated as taxable because they are considered as a part of the selling price of an item. In determining the selling price, separately stated gift-wrap charges should be assigned to, or associated with, the individual items in a shipment as per the same principles adopted for shipping and handling charges.
  5. Gift-Wrap Taxability Options: Taxes on gift-wrap charges associated with the individual items in a shipment are calculated separately from the related individual items. By default, each gift-wrap charges should be assigned the same product taxability as its related item. This will generally ensure that gift-wrap charges associated with taxable items being taxed at the same rate as the taxable items, and gift-wrap charges associated with non-taxable items are not taxed.

Determining tax on the value of service

The GST is typically payable on value of services supplied, the price actually paid or payable for the said service. Price variations and ancillary charges as described hereunder could be adjusted against the selling price. Promotions: The GST on the value of service should be reduced by the amount of price-based promotions applied to them. For instance, promotional discounts and trade discounts are reduced from the value of service for the purpose of calculation of GST. The discount will be adjusted in the invoice itself. Post sale discounts will not be deductible for GST purpose unless such discount is agreed at or before the time of supply.

Customer based exemption

Currently, customer based exemptions are not available in the GST regime. The tax calculation services will not enable real-time customer-based exemptions in India.

Time of supply of goods/ services for GST calculation

All prices of the product and services listed on the marketplace are the prices are tax inclusive and Taxes are estimated at ship generation. Depending on how a shipment is fulfilled, a tax invoice will be generated in the system shortly after an order is submitted or immediately prior to product shipment.

Many factors can change between the order checkout date and the tax invoice date, and as a result the estimated tax amount may differ from the amounts actually charged. For example, rates may change and this could lead to an increase or decrease in taxes charged

Returns

The customer return (sales returns) process for GST charged is a statutory or legal responsibility of the seller selling the relevant items in India. The filing of tax returns and reporting compliance is respective seller’s responsibility.

  1. Products shipped using Fulfilment by Amazon: The tax calculation engine will calculate GST charged on invoices raised for sales by each Seller and pay such amounts to the Sellers on a monthly (or agreed periodical basis).The GST paid would be identical to the amount of GST charged on item price, ship and handling fees, and/or gift wrap fees etc. The corresponding tax calculation details will be transmitted to the Seller in the regular reporting process under the tax library section of your Seller Central account. The tax calculation details needs to be reviewed and confirmed under your Seller Central account.
    Note: The tax calculation services should treat returns of physical goods as returned merchandise or 'sales returns'. The GST paid on original sales can be claimed as an adjustment by the supplier provided that a credit note is issued. In respect of supplies made during the year, credit note can be issued not later than September following the end of the financial year or the date when the supplier furnishes annual return, whichever is earlier. For example, for the sales made during FY 2017-18, credit note can be issued upto September 2018 or the date when supplier files the annual return (whichever is earlier).
  2. Seller- fulfilled products: Not applicable for India operations.
  3. Services: If the services are found to be deficient, a credit note will have to be issued in order to claim the adjustment of the GST paid. The credit note can be issued not later than September following the end of the financial year or the date when the supplier furnishes annual return, whichever is earlier. For example, for the services provided during FY 2017-18, credit note can be issued up to September 2018 or the date when supplier files the annual return (whichever is earlier)

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