Before starting a C2C business, one must have an idea about the entities that are liable to pay GST.
The following are the entities that come under the GST ambit:
(a) Businesses or sellers that are registered under tax regimes even before GST. These include: people who are usually under the tax bracket;
(b) E-commerce operator or regulator;
(c) Agents of a supplier; any individual whose annual turnover is above ₹40 lakh (or ₹20 lakh for northern India and hilly regions);
(d) Anyone who deals with the inter-State supply of goods;
(e) Non-resident taxable person;
(f) Payers under reverse charge mechanism.
The C2C business model enables the customer to sell products to other customers. The customer who is selling across these sites can sell products and services without restrictions. C2C is often referred to as the C2C e-commerce model, where business takes place on the digital platform. The classified listing sites are also based on a similar idea.
The company that enables the selling of products across such a portal may allow monetary transactions through the website or be the source of connecting customers. C2C business sites have the dashboard that’s easier to use. The customers selling across these platforms are mostly unregistered and don’t have any inventory.
The marketplaces charge fixed listing fees for selling through the platform, and customers prefer to purchase, as the prices are lower.
In such a case the C2C interface will charge GST on the listing charges/intermediary/agency commission/shipping if any undertaken either as a composite Business Support Service under SAC 9985 or individually as standalone services as the case may be at applicable rates, all of which however attract GST.
Used goods sales C2C and GST
GST deals with supplies in the course or furtherance of business and therefore unless selling is not somebody’s business, GST will not apply to sales. Recently, the Centre clarified that sale of used jewellery by a customer to a jeweller is not classified as business. Similar is the case of sale of used furniture. These transactions do not attract GST.
Unlike large e-commerce companies where the seller on the platform is usually a small or medium sized entrepreneur, on C2C websites, the goods sold are largely used items by individual sellers. These goods range from furniture to electronic items, from toys to household products. This basically means that if consumers (people not engaged in selling and buying as trade) sell their old products on online portals, the latter will pay them the full amount and not deduct the TCS of 1 per cent.
C2C customers have been exempted from this tax because it is not their business to buy and sell as a one-off transaction their own used goods for a residual valuable consideration though.
Is the C2C e-commerce business model profitable?
C2C business models expecting year-on-year growth in the e-commerce market due to the way the business is conducted.
The C2C model allows one set of customers to meet another set with the demand-oriented goal, which is not possible from other marketplace ideas. Another most important reason is the ease of usage of the platforms. The platform’s goal is to connect the people looking for certain types of products and services to their suppliers.
When the demand is met with the supply of an adequate product, and appropriate pricing, more customers will be attracted to the website. Listing products on these sites gets good exposure. The businesses also list classified ads on C2C platforms to enable direct reach to the audience.
The C2C business model’s main advantage is connecting with other buyers and sellers.
They enable easy payment options and help create the best deal for customers to the products delivered at the best price, and make shopping across e-commerce platforms easy.
Since all C2C e-commerce models do not attract taxes and GST in creation of additional liabilities, it is easier for people to start selling online. If you are trying to figure out online selling options, you can register yourself on the C2C platforms, and start listing your products.
However, if you are planning to start your own e-commerce business, C2C will not be enough for you.
The writer was with the Indian Revenue Service