Direct-to-consumer (D2C) brands have revolutionized the retail landscape in India by eliminating intermediaries and selling directly to consumers via digital platforms. However, this business model has regulatory and tax compliance requirements, particularly under the Goods and Services Tax (GST) regime. For D2C brands, staying GST compliant is legally mandatory and critical for seamless operations, especially when dealing with multiple sales channels, logistics partners, and states:
1. GST Registration
Under the GST law, businesses must register for GST if their aggregate turnover exceeds ₹40 lakh. However, D2C brands often require registration even if their turnover is below this threshold due to specific scenarios:
• They sell via e-commerce platforms like Amazon, Flipkart, or Myntra, where GST registration is compulsory.
• They make interstate sales, which triggers the need for registration regardless of turnover.
• They store goods in warehouses located in multiple states, necessitating multi-state GST registration.
• Obtaining multiple GSTINs can be challenging, but it is essential for compliance and for efficiently claiming input tax credits across different locations.
2. GST Invoicing
• Must issue a tax invoice with proper details: GSTIN, HSN/SAC code, tax breakup, etc.
• The platform typically issues a consolidated invoice if selling on marketplaces, but the brand must maintain reconciled records.
3. GST Returns Filing
Common returns include:
• GSTR-1: Details of outward supplies – monthly/quarterly
• GSTR-3B: Summary return of input tax credit and tax liability – monthly
• GSTR-9: Annual return
To file accurate returns, brands must reconcile sales data from their website, e-commerce portals, and ERP systems.
4. Input Tax Credit (ITC)
One of the key benefits of GST for businesses is the ability to claim input tax credits on purchases related to business activities. D2C brands can claim ITC on:
• Raw materials and inventory
• Packaging materials
• Digital advertising expenses
• Saas tools, website services, logistics, warehousing
However, ITC can only be claimed if the supplier has uploaded the invoice and paid the tax. Brands should regularly reconcile ITC with GSTR-2B and follow up with non-compliant vendors.
5. Dealing with E-commerce Platforms
• If you list on marketplaces like Amazon or Flipkart, they will deduct 1% TCS on your sales. This amount is reflected in your GST portal, and you must claim it back when filing your returns.
• You also need to report sales through each marketplace separately in your GSTR-1 return, which can lead to reconciliation issues.
6. Inventory and Logistics Compliance
If you’re using third-party warehouses or logistics companies generate e-way bills for inter-state movement. Ensure that you maintain clear stock records and job work documentation.
Most common GST compliance mistakes to avoid
1. Delayed or Missed Return Filings: Late GSTR-1 or GSTR-3B filings attract late fees and interest.
2. Incorrect HSN Code or Tax Rate: Misclassifying products can result in overcharging customers or paying less GST than required.
3. Incorrect Invoicing: Invoices not following GST norms are non-compliant, and ITC may be denied to your B2B customers.
Best Practices for Smooth GST Compliance
• Automate invoicing and return filing.
• Maintain robust bookkeeping practices.
• Reconcile GSTR-2B monthly to match ITC.
• Work with a GST-registered CA or tax advisor.
• Train your team on basic GST concepts.
For D2C brands, GST compliance ensures better cash flow, credibility with suppliers and investors, and ease of scaling across geographies. As your brand grows, the complexity of GST will too. Contact Lawgical India Business Developers Pvt. Ltd. if you face any issue in the compliance or the registration process. Our team of 80+ professionals will assist you in the registration process thoroughly. We will help you figure out the key legal requirements and fulfil them on your behalf.
Moreover, we excel in other fields, such as GST registration and FSSAI licensing, Apeda Registration, MSME Registration, PAN Registration in India and other services. Our experts are well aware of the intricacies of legal processes and have ample experience in this field. You can chill while we do all the computation and legal work, ensuring you face no difficulties.
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FAQs
1. What are the services offered by Lawgical India?
Lawgical India specializes in Company registration, obtaining FSSAI license, Apeda Registration, GST Registration, MSME Registration, Pan Registration in India.
GST Compliance for D2C Brands in India
1. GST Registration is mandatory for D2C brands selling online, interstate, or via multiple warehouses.
2. Tax Invoicing must include GSTIN, HSN codes, and proper tax breakdowns.
3. Returns Filing includes GSTR-1, GSTR-3B, and GSTR-9, requiring platform reconciliation.
4. Input Tax Credit is claimable on business-related purchases only if suppliers comply.
5. Marketplace TCS must be claimed and sales reported separately.
6. E-way Bills are needed for interstate goods movement and warehouse tracking.
7. Avoid common errors like missed filings, incorrect HSN codes, and non-compliant invoices must be avoided .
