E-Commerce in India had grown and matured considerably over the last 5-6 years. Customer’s expectations in terms of delivery speed had reduced considerably in the due course. The customers are expecting product deliveries on the same day or within 1-3 days after placing orders. For example, Same/Next Day delivery offering by Amazon under Amazon Prime subscription and Fulfilled by Amazon Services (also known as FBA) had changed buying experience considerably. Order Fulfillment Services like Amazon FBA/Prime, Flipkart Smart/Advantage, etc. helped to gain more confidence from the customers as well.
One of the major attractions of selling on e-commerce marketplaces (like Amazon, Flipkart, Myntra, etc.) is that they provide a platform to do business from one location/state and to serve customers from all over India. For example, acquiring a customer in Delhi by selling products from Bangalore was not easy under the traditional offline channels. In contrast, this is a regular scenario in e-Commerce and e-Commerce sellers often see 70-80% of the sales coming from Interstate customers. Are we seeing a change in this trend?
What is Regional Availability / Visibility?
To improve the buying experience & to serve customers better, e-Commerce marketplaces like Amazon had implemented logic around Regional Availability in their Search Algorithm to rank products higher in the search results if the products are available near to the customer’s location. They display the products near to the customers in the initial pages of the search result. Though the location of the seller is one of the parameters to display products in the search results, it is having considerable weightage after they implemented Regional Visibility. This is believed to be one of the reasons why Amazon is growing much faster in India compared to other marketplace channels. Same day / 1-Day / 2-Day delivery offering from Amazon helped Amazon to attract more customers.
As a result of this, your products may not be listed in the initial few pages of search results & may not be visible as a “Prime” offer even if you have opted for those services depending on your distance from the customer. This will have an impact on your Sales, and you might have seen a decline in sales in the last few months. You might have also seen an increase in your Amazon Sponsored Ad expenses to maintain the sale volume.
What are the benefits of Selling from different regions?
- Improves Product Visibility in the regions where you sell from. You will see an increase of minimum 20-30% in your sales volume and we’ve seen people growing to 2-3X over the last 1 year when they sell from 5-9 States/GSTIN.
- Customers often get 1–2 Day delivery options instead of getting 3-7 days delivery. This will work in your favour since they may choose to buy from you instead of a product that reaches them in 3-5 days.
- Shipping Fee expenses will reduce drastically since most of the shipments will be shipped under Local/Regional Shipping Fee slabs. As of now, 60-70% of your orders must be shipped under National Shipping Fees slab which will reduce drastically.
- Amazon Sponsored Ad expenses will go down since you need to spend less to get your products displayed in the initial pages of Search Results.
- Stock enough inventory for all your Top Selling SKUs in all regions all the time increases your sales considerably.
How can we sell from multiple regions/states? What are the requirements?
As you all know, the primary requirement to start selling from a different state other than your primary business location is to have an address in that State and you also need to have GST registration in that state. This might be a distant dream for small/medium scale sellers where they might need to set up offices in those states and employ staff to fulfil orders from there. Fortunately, there’s a way around, when it comes to the e-Commerce business.
As you all know, a Primary Place of Business (PPOB) is mandatory irrespective of whether you’re an online/offline seller. But, since we need not fulfil orders from your PPOB in other states, it can very well be a virtual/shared space and the order fulfilment happens from the warehouses of Marketplaces. Marketplaces like Amazon, Flipkart, etc. have warehouses in multiples states and it becomes easier if we need to expand to those states where marketplaces offer warehouse-based fulfilment services.
Since we can not take GST registration with marketplace warehouses as PPOB, we can opt-in for services like Virtual/Shared Place of Business (VPOB) where most of the service provider charges you a nominal rent of Rs. 750-1,000/- per month (often billed annually). Marketplaces like Amazon have tie-up with dedicated Service Providers for each state to assist you in the whole process of signing up for VPOB with a service provider, taking GST registration, etc. Once you have the GST registration done, it is a matter of adding marketplace warehouse addresses as Additional Place of Business (APOB). Often, the marketplace associated service providers apply for the GST registration by mentioning the list of warehouses as APOB at the time of registration itself. This reduces the overall turnaround time and the whole process to get started with a new GSTIN usually takes around 2-4 week’s time, depending on the accuracy of documentation.
You may refer to the step by step guide that we prepared to get started with Amazon’s Go Local Program and to start selling from multiple GSTIN.
How can we start selling from other states via Amazon? Any recommended states for the new GSTIN?
Like we mentioned before, you would need to apply for a new GSTIN in that state. You may apply through your contacts or avail of the service from Amazon recommended Service Providers. Going with Amazon will definitely help you to get this done in a much cheaper and efficient manner. You may read more on Amazon’s Go Local Program and follow the Guide we prepared to help you get started with it (links in the section above).
As a general trend that we have noticed, the sales from the southern part of India along with Maharashtra contributes to almost 60-65% of your overall sales. In most of the cases, we’ve seen Maharashtra & Karnataka alone contributes to over 40-50% of your sales. Hence, Karnataka & Maharashtra should be the first choice states for you if you wish to expand your presence in other states. Our recommendation is listed below in its order, though the order may vary depending on your product category, targetted audience, etc. We would highly recommend you do proper research based on the last 6-12 months sales data to find out the regions from where you get maximum sales and proceed with the registrations accordingly.
- Maharashtra
- Karnataka
- Haryana
- Telangana
- Tamil Nadu
- West Bengal
- Uttar Pradesh/Delhi
- Gujarat
Will this increase GST & other compliance burdens on us? How can we manage it?
Of course, it will increase GST and compliance burden on you, if you are not equipped with all the necessary tools to handle it. But, it’s nothing beyond a specialist like us can handle. E-Commerce GST Compliance is becoming more and more complex these days. Having multiple GSTINs, accounting offline stock transfers to your interstate warehouses, automated stock transfers/removals (in some cases, more than 5000+ B2B invoices for internal transfers alone) initiated by Amazon, accounting & filing them in GSTR-1 as individual B2B sales invoices in the respective states and taking the appropriate input tax credits in the respective states, etc. may be confusing for the traditional accountants/consultants since this is not a common scenario in offline trade. The volume of invoices plays a big role when it comes to traditional accounting practices, for example keying in all these invoices in Tally for preparing data for GSTR-1 filing.
Of course, managing all these by hiring third party professionals like us would definitely increase your compliance cost. But, the savings from a couple of months shipping fee alone will help you to cover the additional expenses you may incur for Shipping to warehouses, GST and other compliance in those states, additional overhead on accounting cost, the annual rent for PPOB/VPOB, etc.
We’re specialists in eCommerce GST Compliance & we can handle it all for you
We are specialized in e-Commerce GST and TDS compliances since the inception of GST (almost 4 years now). Currently, we are limiting our services to pure e-Commerce Seller or sellers who sell on e-Commerce along with offline. We’ve built enough automation and we’ve tailor-made processes in place to handle GST and other compliances. In a nutshell, we’re well equipped to handle all of these compliance headaches on your behalf.
- We provide services for over 100+ e-Commerce entities from 16 states.
- 100% of our clients are selling on e-Commerce.
- We’ve filed more than 7,500+ e-Commerce GST returns (as of Jul 2021).
- Over 80% of our processes are automated through our in-house system for e-Commerce GST, including the direct integration with GST Poral for uploading data and filing returns, directly from our internal system.
- We take care of everything related to e-Commerce GST compliance, right from sales reconciliation using raw marketplace reports. This helps to limit your involvement to providing raw marketplace reports and offline data, which wont be more than 10-15 minutes a month.
- We do all possible validations & reconciliations (like TCS vs marketplace Turnover Reconciliation, GSTR-2B & 2A reconciliation for ITC, etc.) before we finalize the returns every month, and we do it every month without fail.
- Since our processes are automated, we can do a 100% ITC reconciliation every month to make sure we claim ITC from every eligible invoices without fail.
- Since we spend very less effort on data entry tasks and focus more on validation/reconciliation, we can assure you highest level of accuracy for the compliance filings.
- We also provide TDS Calculation & e-TDS filing as an add-on service to our GST services.
Please reach out to us at compliance@fidesloop.com or on 959 144 3993 (WhatsApp) if you wish to sign up for our Managed Service offering for e-Commerce GST compliance and other add-on services like TDS, e-Commerce Accounting, etc. Alternatively, you click on the Get Quote button in the top-right corner of the website and fill in the details and we will revert you for further discussions.
