Setting up GST correctly on an online store

The situation

A Kochi spice exporter is GST registered and has filed returns for years on its export and wholesale business. Its accountant knows the rules well. When its retail store went live, though, nobody connected those rules to the store's settings. Every product had the same tax rate. Every invoice showed Kerala state tax and central tax, including for orders delivered to Delhi and Mumbai. Business buyers, such as cafés buying cardamom in bulk, could not get their GSTIN onto the invoice, so they could not claim input tax credit. Each month the accountant rebuilt the sales register by hand from order exports.

None of this is unusual. GST on an online store is mostly the same GST you already know, applied consistently to hundreds of small transactions. The work is in setting the store up so it applies the rules for you.

GST rates, thresholds and procedures change through notifications and council decisions, so make each of these decisions with your chartered accountant.

Step one: registration

Confirm with your CA whether you need to be registered and in which state. If you sell only through your own website, the usual turnover thresholds may apply. If you also sell through marketplaces, or ship to buyers in other states, the position can be different, and the rules on compulsory registration for online and inter-state sellers have changed more than once. If you hold stock in warehouses in more than one state, you will usually need a registration in each.

Step two: the right code and rate for every product

Each product needs an HSN code and the GST rate that goes with it. Products that look similar can sit under different codes. For the Kochi store, whole spices, ground spices and blended masalas did not all fall under the same code, and gift hampers that mixed products raised their own question about how a mixed supply is taxed.

Make a sheet with every product, its HSN code and rate, and have your CA sign it off. Then load the codes and rates into the store. Review the sheet whenever rates change or you add a new category.

Step three: place of supply

For goods, the place of supply generally follows where the goods are delivered. When you ship within your own state, the sale usually carries central tax and state tax. When you ship to another state, it usually carries integrated tax. Your store has to read the delivery address and apply the right tax type on each order. This was the single biggest error in the Kochi store, and it affected almost every order going outside Kerala.

Step four: prices that include tax

Indian consumers expect the price they see to be the price they pay, and consumer rules expect the total price to be shown before purchase. For retail buyers, set prices inclusive of GST, and have the store work out the taxable value and tax from that price on each invoice.

Decide also how you treat:

• Shipping charges you collect from the buyer, which are usually taxable, and the rate that applies to them.
• Discounts shown on the invoice at the time of sale, which generally reduce the taxable value.
• Cash on delivery fees, if you charge them.

Step five: invoices that work for every buyer

A tax invoice needs your GSTIN, a unique serial number, the date, the buyer's details, HSN codes, taxable value, the tax broken down by type, and the place of supply. Business buyers need a field at checkout to enter their GSTIN and business name, so their invoice is usable for input tax credit.

Depending on your turnover, e-invoicing may apply to sales to registered businesses. When goods above a certain value move, an e-way bill may be needed, which your courier aggregator or logistics partner will often ask for.

Returns and cancellations

When an order is returned after invoicing, issue a credit note against the original invoice. Do not delete or edit the invoice. Agree with your CA how cancelled and returned to origin orders are recorded, so the sales register matches what was actually supplied.

Step six: reconcile every month

Your GST returns must match your sales. Each month, compare store sales and credit notes with what you report, and compare gateway settlements and COD remittances with the orders they cover. If you also sell on marketplaces, they collect tax at source on your sales and report it; match those figures too.

How ShopenUp fits

On ShopenUp, basic sales reports in the admin and order data available through the API give your accountant a starting point. The invoice format, tax rates per product and the GSTIN field for business buyers are set up with you before launch, using the sheet your CA has signed off.

Tax inclusive pricing rules, and syncing orders and invoices with Tally or another accounting system, are built or integrated for you. A B2B dealer portal we built on ShopenUp for a Gujarat FMCG distributor included GST invoices and Tally sync, because the distributor's accounts team worked entirely in Tally.

Limits

A store can apply rules correctly only if the rules it is given are correct. The responsibility for codes, rates and filings stays with you and your CA. Exports, which the Kochi business also handles, follow their own export procedures. Rates and thresholds change, so do not rely on a sheet that nobody has reviewed for a year.

Checklist

• Registration position confirmed with your CA for every state you operate from.
• HSN code and rate for every product, signed off and loaded.
• Tax type set by delivery address.
• Retail prices inclusive of GST.
• Treatment of shipping, discounts and COD fees agreed.
• Invoices complete, with a GSTIN field for business buyers.
• E-invoicing and e-way bill position checked.
• Credit notes for returns, no edited invoices.
• Monthly reconciliation of sales, settlements and returns.
• Rate sheet reviewed whenever rates change.

To see which tax and accounting pieces work on day one and which are built for you, read native or custom.