GST AND DIGITAL ECONOMY: TAXATION CHALLENGES OF E-COMMERCE AND ONLINE SERVICES

Abstract [English]

The pace at which India’s digital economy is growing, from e-commerce platforms to online services to appearing digital sectors, is both an opportunity and a regulatory challenge. The GST, introduced in 2017, was aimed at bringing indirect taxation under one roof and broadening the tax base, but its relationship with digital stays unresolved. This paper provides a critical analysis of the e-commerce and online service taxation under GST, specifically on compliance cost, cross-border service taxation, and policy vacuum. Based on secondary data sources of GST Council reports, RBI estimates, NITI Aayog studies, and international experiences, the analysis brings out immediate concerns, the ease of compliance, the perils of dual liability, and the exclusion of small sellers due to mandatory recommendations. The numbers tell the same story TCS from e-commerce was ₹13,000 crore in FY 2020–21, and close to 40 percent of foreign digital subscriptions stay out of the tax net, resulting in an annual revenue loss of ₹3,000–4,000 crore. The EU, Australia, and OECD experience also suggest that simplified compliance regimes and mandatory registration of foreign providers can help to promote parity. The paper concludes that without specific reforms, GST has the potential of excluding micro-entrepreneurs and hurting competition in the trillion-dollar Indian digital economy.