Indians have completely absorbed the utility of eCommerce into their modern lifestyle. Quite the leveller. Today anyone can order anything and everything online—potato, Samsung mobile, pressure cooker, medicines, even a door! Indians love to shop. Yes, eCommerce is a big boom in India. With over US$87,515 million worth of revenue as of 2023, the Indian eCommerce market is the seventh largest in the world.
Now, while online shopping is the innuendo of convenience, from the perspective of online sellers, be it the owner of an e-commerce company or a vendor at an online marketplace, they have to face certain challenges to meet the demand. Perhaps the biggest challenge is meeting the COGS with GST compliance.
One of the top 10 GST consultants in Kolkata, MPVD & Associates is relied upon by numerous eCommerce businesses to plan and handle GST-related matters in addition to providing bookkeeping and accounting services to maintain order.
Bookkeeping Challenges for Multi-Channel eCommerce Businesses
This is the domain of online sellers that have their own websites as well as distribute products across Amazon, Flipkart, and other Indian marketplaces. The core process and cash flow are heavily dependent on data integration. Thankfully, new accounting software and tools make computation easier and ensure both the accuracy and consistency of all financial records.
Online sellers are unanimously hurdled by the competitive trends in customer experience. From carrying out returns and refunds and foreign transactions to running multiple promotions, many tasks impact the accounts. While accounting software makes it easy for businesses to monitor and track financial data across multiple sales channels, there is always a potential risk of system errors, erroneous data entry, late or missing entries, etc. It is a common challenge to mitigate the risk of running into an operational crisis due to a system fallout or an error in data entry.
Multi-channel eCommerce businesses constantly need a balanced process that can leverage the best of automation and expert support. With the strategic placement of smart accounting technology and professional expertise, MPVD & Associates helps each business fulfill customer demands while having total control of their accounts and financial and tax liabilities.
Common GST-Related Challenges for eCommerce Businesses in India
It has become very easy for eCommerce businesses to offer nationwide and even global shipping and supply beyond local customers. However, being tied to the GST regulations of the home state, businesses need to adhere to GST rates for supplying to other states as well. This often creates an operations gap. But this is not all, there are many more challenges, including the following:
- Input Tax Credit (ITC): Ensuring accurate and timely claims of ITC on inputs, including goods and services used in the course of business, is crucial. Managing ITC across various states and reconciling it with sales becomes challenging.
- GST Rates and Classification: Determining the correct GST rate and classification for various products sold online can be tricky due to frequent updates in GST rates and classification changes by the government.
- Reverse Charge Mechanism: eCommerce transactions often involve the reverse charge mechanism, where the liability to pay tax shifts from the seller to the buyer. Understanding and complying with these provisions can be complex.
- Place of Supply Rules: Determining the place of supply for goods or services in the context of eCommerce, especially for services or digital products, can be challenging. This is crucial for correctly applying GST rates and compliance.
Businesses have to exercise caution as the GST requires revisions to tax rates. This involves modifying their pricing strategy to account for the varying exchange rates. Businesses must determine these shifting rates to plan their finances and maintain their competitiveness. With the support of MPVD & Associates’ GST services in Kolkata, eCommerce businesses can always align with
Separating Taxable Income from Cost of Goods Sold
Total expenses incurred in selling products are called the cost of goods sold. This crucial metric for eCommerce businesses shows how decisions about inventory, pricing, unpaid taxes, and cash flow management affect the bottom line.
eCommerce sellers may compute pricing and taxable income incorrectly as a result of a COGS calculation error, potentially subjecting them to fines and penalties. Ideally, for greater granularity, the COGS should be performed at the SKU level. The purchase costs include labour, materials, supplies, and any other incidental expenses.
eCommerce websites frequently feature inventory management systems, and businesses can access a wealth of additional resources to separate taxable income and COGS.
Ledger reports, packaging, shipping and logistics, service charges, and operational costs are all subject to cohesive calculation.
With MPVD & Associates’ personalized accounting and bookkeeping services, eCommerce businesses can keep a consistent overview of their finances through all the layers of cash flow.
The Reasons Why Contracting Out Bookkeeping Work to MPVD & Associates Is More Practical Than Inbound Systems
We can assure you that accounting and tax compliance can become a breeze while handling returns and managing inventory and cash flow from a business perspective. In India, there is ferocious competition among Amazon sellers, Flipkart sellers, and eCommerce brands to keep afloat.
While the benefits of multiple sales channels have opened more opportunities for e-commerce businesses, they have also posed strong challenges in terms of tax liabilities and financial record keeping. By leveraging MPVD & Associate’s tax consultancy & bookkeeping services in Kolkata, you can have a team of experts by your side, with minimum obligations and costs compared to hiring in-house accountants and inbound systems.
Whether it is about navigating complex tax regulations and compliance peculiarities within the Indian eCommerce landscape or leveraging the benefits of the latest technologies and software used by MPVD without the burden of system setup and maintenance costs– it is only more practical for growing businesses to have less to worry about and be able to focus on core operations.