For entrepreneurs planning to start a dropshipping or e-commerce venture in 2025, understanding GST implications and legal requirements is crucial for smooth operations and avoiding penalties.

What is Dropshipping and How It Differs from Traditional E-commerce?

• Dropshipping: A business model where sellers list products on their online store without holding inventory. The product is shipped directly from the supplier/manufacturer to the customer.

• E-commerce: Involves either maintaining stock or selling via marketplaces like Amazon, Flipkart, Meesho, Shopify, or WooCommerce stores.

The key difference lies in inventory ownership and order fulfillment. But under GST law, both dropshipping and traditional e-commerce sellers are treated as suppliers of goods or services, bringing them under GST compliance.

GST Applicability on Dropshipping and E-commerce in 2025

1. Mandatory GST Registration

   • Any person selling online via e-commerce operators (ECOs) must obtain GST registration, irrespective of turnover.

   • Even if annual turnover is below the ₹40 lakh (goods) or ₹20 lakh (services) threshold, registration is compulsory for online sellers.

2. GST on Intra-State and Inter-State Sales

   • GST applies on both intra-state and inter-state sales.

   • Dropshipping often involves inter-state or cross-border supply, making GST compliance unavoidable.

3. E-commerce TCS (Tax Collected at Source)

   • Marketplaces like Amazon, Flipkart, Meesho must deduct TCS at 1% from sellers before remitting payment.

   • This creates compliance needs where sellers must reconcile TCS credit while filing GST returns.

4. Exports under Dropshipping

   • If the supplier ships directly from India to a foreign customer, the supply may qualify as export of goods under GST (zero-rated supply).

   • Proper documentation (export invoices, LUT/Bond filing) is required to claim GST exemption or refund on input tax credit.

5. Imports under Dropshipping

   • If goods are shipped from outside India directly to the customer, it may attract Customs Duty and IGST.

   • The seller must ensure compliance with Import regulations while charging GST correctly.

Legal Requirements for Dropshipping and E-commerce Sellers in 2025

1. GST Registration – Mandatory before selling online.

2. Trade License and Shop Act Registration – Required for operating a retail business.

3. Import-Export Code (IEC) – Essential if sourcing products from outside India.

4. Trademark Registration – Recommended to protect your brand name.

5. Compliance with Consumer Protection (E-commerce) Rules, 2020 – Display seller details, product descriptions, refund policies.

6. GST Return Filing – Monthly/quarterly returns (GSTR-1, GSTR-3B) and annual return (GSTR-9) must be filed.

7. TCS Reconciliation – Match TCS deducted by marketplaces with GST portal credit.

Common Challenges for Sellers in 2025

• Complexities in calculating GST on cross-border dropshipping.

• Claiming refunds for input tax credit on exports.

• Reconciling TCS deducted by e-commerce platforms.

• Understanding whether supply qualifies as goods or services under GST.

• Managing compliance costs for small sellers.

Practical Example

Suppose you run a Shopify dropshipping store in India, sourcing products from China:

• A customer from Delhi orders a product worth ₹2,000.

• Supplier ships directly from China to the customer.

• The order attracts Customs Duty + IGST, payable at import stage.

• As a seller, you must declare this in your GST returns to remain compliant.

Conclusion

In 2025, the Indian government is focusing on tightening e-commerce and dropshipping tax compliance under GST. While this ensures transparency, it also increases compliance responsibilities for sellers.

For entrepreneurs, the key takeaway is to obtain GST registration, maintain proper documentation, and file regular returns. Consulting a professional GST consultant can save you from costly mistakes and penalties.

Created & Posted by Navneet Kumar

CA Article at TAXAJ

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