IMPORTANT UPDATE: As GST (Goods and Services Tax) is likely to be implemented by 1st July, 2017, online sellers are required to get GSTIN before that. Consult your tax consultant for details and registration.
Please note, there is no threshold limit for selling inter-state, so every seller who trades taxable items needs GSTIN. A complete list of tax exempted items is yet to be released by the government. Visit GSTIndia site for more details.
One of the most frequently asked questions by the Indian online sellers is whether VAT CST no. is required to sell online or not.
The simple answer is YES. You have to get your TIN (Taxpayers Identification Number) for paying VAT CST.
Every e-tailer who is supplying and distributing goods is a dealer and is subject to VAT. Every transaction you do online is transparent and has to be legal.
WHAT IS VAT?
It is an indirect tax levied on sales of goods. VAT(Value Added Tax) is required to sell products within your state which means buyer and seller are in the same state.
There is exemption in VAT. Every state has its own annual sales turnover threshold for VAT registration. That gives some relief but you are liable to pay tax when you sell outside your state.
CST(Central Sales Tax) is levied on sale of goods outside the state where buyer and seller are in different states. There is no exemption in CST. You need to pay CST right from your first inter – state transaction. Only CST and no state tax (VAT) shall be levied on inter state sale.
There are some categories like textiles, books, agricultural products and hand made goods which are exempted from tax.
Why you should not sell without VAT CST
- Needless to say, the government needs revenue to run the state.
- It is always a good practice to do business in a legal and ethical way. This will give you peace of mind.
- Even if you manage to make few transactions without TIN, always remember when you are selling online, you are living in a glass house. Every transaction can be traced anytime right from the day you started selling online, even months after the sale. You end up paying heavy penalties even for sales you made in the past.
- Moreover, after noticing tax evasions by e-tailers all over India, tax authorities are likely to be more vigilant. So never think of making sales without VAT CST registration.
So what to do if you do not have TIN:
- You can sell products which are exempted from tax. Exports are also exempt from VAT.
- If you sell on a marketplace like Ebay, you have the option to sell within your city. You don’t need registration for VAT CST before your turnover exceeds the threshold limit as prescribed by your state tax authorities.
- If you are planning to build long term business, which you should, then apply for VAT CST, get your TIN and sell all over India without hassles. Sit with your CA before starting and seek his expert advice.
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