Do I Need GST Number For Dropshipping? | GST Registration For Dropshipping

Many of people who want to start dropshipping business in India often wonder “Do I need GST number for dropshipping business?” . Understanding the legal requirements under GST for dropshipping is crucial. This article provides a comprehensive guide, addressing all your questions in detail.

What is Dropshipping?

Dropshipping is a retail fulfillment method where a store doesn’t keep the products it sells in stock. Instead, when a store sells a product, it purchases the item from a third party and has it shipped directly to the customer. This means the seller doesn’t handle the product directly. The main advantage of dropshipping is that it requires less capital to start since the seller doesn’t need to invest in inventory upfront. It also allows for a wide range of products to be offered without the need for physical storage space. However, it also means the seller has less control over inventory management, shipping, and quality control.

GST Registration For Dropshipping

Dropshipping business is an extended arm of e-commerce world. To understand the GST registration requirements for a dropshipping business, we first must understand the GST registration requirements for e-commerce.

Mandatory Requirement of GST for E-commerce Sellers

Obtaining GST registration is compulsory if you are involved in inter-state transaction of goods. As per Section 24 of the CGST Act 2017, any person involved in inter-state supply of goods is legally bound to take compulsory registration under GST.

Various E-commerce platforms like Amazon.in, Flipkart etc. require sellers to have GST registration. You cannot list your products as a seller on their platforms without GST registration.

You can also read Key Compliances to Keep in Mind Before Starting an Online Business in India

Requirement of GST for Dropshipping

When starting a dropshipping business, there are three possible scenarios under which your business might operate, each with distinct GST registration requirements. We will explore each scenario in detail.

Case-1

Final Customer- Indian Customer

Material Supplier – India

GST Registration Implication – According to Section 10(1)(b) of the IGST Act, if goods are delivered to a third party on the buyer’s direction, the transaction involves two places of supply. This setup, known as the bill-to-ship-to model, can be better understood with an example.

Imagine Mr. A in Uttar Pradesh orders products from Mr. B in Delhi. Mr. B then orders the product from Mr. C in Haryana and instructs him to ship it directly to Mr. A. In this scenario, Mr. C will issue a GST invoice to Mr. B, and Mr. B must issue an invoice to Mr. A, charging IGST. Mr. B can claim Input Tax Credit (ITC) as the goods are considered to be received by him.

Since most dropshipping transactions involve selling goods to a different state from the principal place of business, GST registration becomes mandatory for dropshippers, regardless of their turnover.

Case-2

Final Customer- Outside India (say US)

Material Supplier – India

GST Registration Implication – When an exporter buys goods from local manufacturers or producers and sells them to international buyers without any further processing or value addition, this process is known as merchant exports. In these transactions, the supplier charges the exporter a GST rate of 0.1%. The exporter then ships the goods abroad without paying any taxes. According to Section 54(3) of the CGST Act, exporters are eligible to request a refund of the accumulated Input Tax Credit (ITC) at the end of the taxable period for zero-rated supplies of goods.

Imagine Mr. A in the United States orders products from Mr. B in Delhi. Mr. B then procures the products from Mr. C in Haryana, instructing him to ship the goods directly from the manufacturer to the port, airport, or national customs for export. Mr. B can claim a refund of the accumulated ITC by filing an application under Section 54 of the CGST Act.

Individuals engaged in such export transactions must register for GST, as these activities involve the export of goods.

Case-3

Final Customer- Outside India (say US)

Material Supplier – Outside India (say China)

GST Registration Implication – According to Schedule III of the GST Act, “supply of goods from a place in the non-taxable territory to another place in the non-taxable territory without such goods entering into India” GST will not be levied on such transaction. Let us understand this with an example.

For instance, if Mr. A in the US orders products from Mr. B in Delhi, and Mr. B sources the products from Mr. C in China and has them shipped directly to Mr. A in the US, then the goods never entered India. Therefore, no GST will be levied on this transaction.

Individuals involved in such transactions are not required to register for GST, as these sales are not included in their aggregate turnover. Thus, they are not required to obtain GST registration.

Documents Required for GST Registration for Dropshipping

How To Do GST Registration For Dropshipping

Here is a step-by-step guide to register for GST:

1. Visit the GST Portal: Go to the official GST portal: GST Portal.
2. Click on ‘Services’: Navigate to the ‘Services’ tab, select ‘Registration,’ and then choose ‘New Registration.’
3. Fill in Part A of the Application: Select ‘New Registration. Fill in the required details & Click on ‘Proceed.’
4. Receive OTP: Enter the OTPs sent to your email and mobile number for verification.
5. Generate Temporary Reference Number (TRN): After verification, you will receive a TRN. Note this TRN for future use.
6. Fill in Part B of the Application: Go back to the GST portal, click on ‘Services’ -> ‘Registration’ -> ‘New Registration. Enter the TRN and complete the CAPTCHA then Click on ‘Proceed.’
7. Verify Details: Enter the OTP received on your email and mobile for verification.
8. Fill Out the Registration Form: Fill in all required details in the GST REG-01 form.
9. Upload Documents: Upload the required documents (PAN, proof of business registration, address proof, etc.).
10. Verification and Digital Signature: Verify the application using Digital Signature Certificate (DSC), e-Sign, or EVC.
11. ARN Generation: After successful verification, an Application Reference Number (ARN) will be generated. You can use this ARN to track the status of your application.
12. Processing: The application will be processed by the GST officer, and if all information and documents are in order, the GSTIN (GST Identification Number) will be issued.
13. Receive GST Certificate: Once approved, you will receive the GST registration certificate with your unique GSTIN.

This process may take a few days, and you can track the status of your application using the ARN on the GST portal.

If you need expert assistance with GST registration, you can reach out to us for top-tier GST registration services in the industry.

Conclusion

It is very crucial to understand GST registration requirements if you are planning to start a dropshipping business. For domestic dropshipping, GST registration is mandatory regardless of turnover due to interstate supply rules. However, for international dropshipping where goods never enter India, GST registration is not required. Necessary documents for registration include PAN, identity proof, business registration, and bank account details. The registration process involves visiting the GST portal, filling out forms, verifying details, and submitting required documents.

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