Do I Need GST for Dropshipping? [2024]
Shopify - 3 Day Free Trial - No cc Needed   Free Trial
Detect Shopify Theme

Or go to our Shopify Theme Detector directly

Do I Need GST for Dropshipping?

Last modified: January 5, 2024

Do I Need GST for Dropshipping?
Free Shopify Trial

Are you planning on selling or purchasing dropshipping goods from India? Then you might be asking: do I need GST for dropshipping? Here is a quick guide whether that is necessary and what steps you should take.

Key Takeaways
1
GST registration is vital for dropshippers in India, with specific rules for domestic and international transactions.
2
Understanding the reverse-charge mechanism and GST filing requirements is crucial for compliance.
3
For international sales, options like LUT filing or IGST refunds offer tax benefits under certain conditions.
Recommended: 24 Best Shopify Dropshipping Apps [Feb, 2024]
# Name Image
Shopify
Get a Free Custom Shopify Store
1
AutoDS
AutoDS
2
Spocket-World Wide Suppliers
Spocket-World Wide Suppliers
3
Syncee - Global Dropshipping
Syncee - Global Dropshipping
4
Printful-Sell Printed and Embroidered Items
Printful-Sell Printed and Embroidered Items
5
Sup Dropshipping
Sup Dropshipping
6
DSers-AliExpress Dropshipping
DSers-AliExpress Dropshipping
7
Zendrop - Dropshipping & POD
Zendrop - Dropshipping & POD
8
Dropshipman: Dropshipping & POD
Dropshipman: Dropshipping & POD
9
AO - AliExpress Dropshipping by FireApps
AO - AliExpress Dropshipping by FireApps
10
Trendsi - Fashion Dropshipping
Trendsi - Fashion Dropshipping
11
CJdropshipping
CJdropshipping
12
DropCommerce
DropCommerce
13
Modalyst-Sell Brand Name Products
Modalyst-Sell Brand Name Products
14
Ali Orders-Fulfill Orders Easily
Ali Orders-Fulfill Orders Easily
15
Blanka - Private Label Beauty
Blanka - Private Label Beauty
16
Dropified-Automate Your Dropshipping Business
Dropified-Automate Your Dropshipping Business
17
ProductPro
ProductPro
18
Spreadr App
Spreadr App
19
Importify
Importify
20
Inventory Source
Inventory Source
21
Roxie
Roxie
22
Fulfillbot: Dropshipping Agent
Fulfillbot: Dropshipping Agent
23
KakaClo
KakaClo
24
Oberlo-Get the Best Produtcts for Your Site
Oberlo-Get the Best Produtcts for Your Site
Show More

When Goods are Purchased and Sold within India

If the dropshipper is based in India and the merchant who provides the goods to the seller is also within India, then both parties should register GST if the revenue of the businesses is over the specified limits that are imposed by law.

Remember that the invoice for the products from the merchant is sent to the seller and not the customer. The seller can provide the customer with a receipt or an invoice. It is also important to think that even if the customer is not within the same state/union, then registration is still required, because the location of the customer is not important, only where the location of the supplier and seller.

When Dropshipping Businesses Sell Goods Outside of India but Purchased in India

If you’re selling goods to customers who are in other countries (like the UK, USA, EU, etc.) then you might think that you don’t have to charge GST. However, this is not as simple. The merchant still has to charge you IGST. Therefore, as a seller, you will have to pay GST and you will have to consider this within the costs of your business.

However, what you charge your customer can be very different. You have two options because this is counted as an export sale. You can either file for a Letter of Undertaking (LUT) and then you can sell without GST. Or you can charge IGST at the time of the sale but then apply for a refund.

When Dropshipping Products Purchased from Outside India but Sold Inside of India

If you’re selling products from merchants that are outside of India, then you need to consider GST. On the purchase of imported goods, you will have to pay IGST on a reverse-charge basis. This can make this more complicated, but there are accounting apps that can help you with this.

Or you can speak to an accountant who can help you set things up properly.

Dropshipping Products Purchased from Outside India and Sold Outside India

This is when you might sell products that are made by merchants who are not based in India and then sell to international customers. This could be more complicated for some people because you have international taxes to consider. However, the GST rules on this are fairly simple because no business technically takes place within India.

Therefore, you don’t need to register or pay GST when you are buying goods from and selling outside of India.

Keep Reading

Understanding GST in Dropshipping

Dropshipping GST Registration

The process of GST registration for dropshipping businesses involves submitting various documents, including PAN, Aadhaar Card, and business address proof.

This registration is crucial for legal compliance and smooth operation of the dropshipping business in India.

Understanding GST Rates for Different Products

GST rates in dropshipping vary based on the product category. It’s important to understand which GST slab your product falls under to ensure accurate tax collection and compliance.

Impact of GST on Dropshipping Profit Margins

GST impacts the profit margins of dropshippers. Understanding how to calculate GST and its effect on pricing strategies is crucial for maintaining profitability.

Key Compliance for GST Dropshipping and Taxation Aspects

Reverse Charge Mechanism in Dropshipping

In certain cases, the reverse charge mechanism applies, where the service receiver pays GST instead of the service provider.

This is particularly relevant for services procured from outside India, like courier or freight forwarding services.

Reporting and Filing GST

Dropshipping businesses must accurately report their sales and purchases in their GST filings.

Transactions that are not considered a supply under GST, like international dropshipping where goods don’t enter India, are not reported in GSTR-1 and GSTR-3B but are required in GSTR-9.

Export Sales and GST Refunds

For goods sold outside India but purchased within, merchants can file a Letter of Undertaking (LUT) to sell without GST or pay IGST and claim a refund later.

Compliance with specific conditions is necessary for availing of these benefits.

Conclusion: Do I Need GST for Dropshipping?

When you’re an Indian dropshipper there are certain tax laws that you must follow. You might want to ask: ‘do I need GST for Dropshipping?’ and the answer is complicated. However, generally speaking, yes you do, but do speak to a tax advisor/accountant when you’re setting up your Shopify business.

Keep on reading about Dropshipping on Shopify. For example Can You Dropship Apple Products? [2024] and Is it Possible to Make Money Dropshipping On Shopify?. Both part of our Shopify Dropshipping Apps and Shopify Dropshipping Themes lists. You can read more about Dropshipping on Shopify with our ultimate Dropshipping on Shopify guide.

FAQs
  • Can I claim Input Tax Credit (ITC) in dropshipping under GST?

    Yes, dropshippers registered under GST can claim Input Tax Credit on their purchases. This helps in reducing the tax liability on sales, provided they meet all compliance requirements.

  • What are the GST registration thresholds for dropshipping businesses in India?

    GST registration is mandatory for dropshippers if their annual turnover exceeds Rs. 40 lakhs for goods or Rs. 20 lakhs for services. However, for northeastern states, the limit is Rs. 10 lakhs.

  • How often do I need to file GST returns as a dropshipper?

    Dropshippers are required to file GST returns monthly or quarterly, depending on their turnover and the scheme they are registered under. Timely filing is essential for compliance.

Got Something To Say?

Your email address will not be published. Required fields are marked *