The Government e-Marketplace (GeM) has simplified procurement for government departments while offering a vast opportunity for vendors. However, taxation and Goods and Services Tax (GST) compliance remain critical aspects for sellers on the platform. Understanding the tax structure and ensuring compliance with GST regulations can help vendors avoid penalties and streamline transactions. Here’s a comprehensive guide on what vendors must know about GeM taxation and GST compliance.
1. GST Registration Requirement
To sell on GeM, vendors must have a valid GST registration, except for those exempt under GST laws. A registered GSTIN (Goods and Services Tax Identification Number) is necessary to upload products and services on the platform.
2. Correct GST Rates for Products & Services
Vendors must correctly classify their products and services under the applicable GST rate slab (0%, 5%, 12%, 18%, or 28%). Incorrect classification can lead to tax disputes, order cancellations, and penalties.
3. Issuing GST-Compliant Invoices
All invoices generated on GeM must adhere to GST invoice rules, including details such as:
- Seller and buyer GSTIN
- Invoice number and date
- HSN (Harmonized System of Nomenclature) or SAC (Services Accounting Code)
- Applicable GST rate and amount
- Total invoice value including tax
4. Input Tax Credit (ITC) Benefits
Registered vendors can avail Input Tax Credit (ITC) on their purchases, reducing the overall tax burden. To claim ITC, ensure proper GST filing and that your suppliers have also correctly filed their returns.
5. Timely GST Filing & Returns
Vendors must file their GST returns (GSTR-1, GSTR-3B, and other applicable forms) on time to maintain compliance and avoid penalties. The data from GSTR-1 is used by buyers to claim ITC, making accuracy essential.
6. TDS Deduction Under GST
Government buyers on GeM deduct Tax Deducted at Source (TDS) under GST at a rate of 2% (1% CGST + 1% SGST or 2% IGST) for contracts above ₹2.5 lakh. Vendors should account for this deduction while reconciling payments.
7. Handling Reverse Charge Mechanism (RCM)
Certain transactions on GeM may fall under the Reverse Charge Mechanism (RCM), where the buyer pays the tax instead of the seller. Vendors must be aware of their RCM obligations and report them correctly in GST filings.
8. Compliance with E-Invoicing Regulations
For businesses exceeding the prescribed turnover limit (₹10 crore as of 2023), e-invoicing is mandatory. Vendors must generate invoices through the Invoice Registration Portal (IRP) and include the Invoice Reference Number (IRN) for validation.
9. Addressing Tax Disputes & Audits
Regular reconciliation of GST data, prompt response to tax notices, and proper record-keeping of invoices can help vendors avoid tax disputes. GeM vendors should maintain transaction records for at least five years.
10. Updating GST Details on GeM
Vendors should ensure that their GST details, including GSTIN and tax rates, are correctly updated on their GeM profiles. Any changes in GST compliance rules should be promptly incorporated into business practices.
Conclusion
Compliance with GeM taxation and GST regulations is crucial for vendors to ensure seamless business operations and avoid legal issues. By staying updated on GST rules, filing timely returns, and maintaining accurate records, sellers can maximize their earnings and establish a strong presence on the platform.