For 13 million small merchants and kirana stores, Budget opens up doors to go digital

Ecommerce initiatives such as ONDC could see significant adoption by mom-and-pop stores and other small merchants not registered under the GST Act.

For 13 million small merchants and kirana stores, Budget opens up doors to go digital

Friday February 03, 2023,

3 min Read

Among the few initiatives in Budget 2023 for the ecommerce sector is one that could prove to be a potential game-changer for millions of neighbourhood groceries, independent pharmacies, and other micro-enterprises.

The latest budgetary provisions propose allowing merchants not registered under the Goods and Services Tax (GST) Act, 2017 to sell in other states through ecommerce operators without having to register themselves as taxpayers under the Act.

Such merchants, referred to as composite taxpayers, run businesses with annual turnover under Rs 20 lakh. India has more than 13 million neighbourhood groceries, or so-called kiranas, in the unorganised sector. Ecommerce accounts for only about 10% of all retail sales in the country.

"It's a small yet crucial step towards formalising the sector," says Brij Purohit, Founder of SellerApp, an ecommerce management platform for merchants.

The decision will encourage online marketplaces and e-retailers to diversify their product portfolios, thus providing a plethora of options at more competitive prices to the end consumer, he added.

Currently, merchants not registered under the GST Act are allowed to sell only within specified areas of their establishments. They are required to register under the GST Act to sell goods beyond the boundaries of their state.

Digital adoption

Standalone stores earning under Rs 20 lakh in annual revenue can now expand their customer base by listing on ecommerce platforms without the burden of paying high taxes, said Syam Prabhad, a Bengaluru-based chartered accountant. He added that the decision was discussed during the latest GST Council meeting in December.

The decision is also expected to drive increased adoption of the government-backed Open Network for Digital Commerce.

"Onboarding small vendors and MSMEs will help ONDC further its agenda of inclusive ecommerce," T Koshy, CEO of ONDC, told YourStory. "The special support offered to MSMEs and startups will also go a long way in fast-tracking broad-based adoption of the open network."

Ecommerce as a sector will become irrelevant: ONDC chief

Listing on marketplaces such as Amazon and Flipkart, however, will still be tough for unregistered suppliers, according to Syam. At present, marketplaces cannot onboard sellers without a GST registration due to tax and accountability reasons.

"The industry hopes the GST Council will fix loopholes within other provisions of the GST Act to enable small vendors to join the force," Syam said, adding that an amendment is expected to come into effect by October.

Moreover, the authorities must formulate a system to source all transaction data related to unregistered suppliers for marketplaces and online platforms to keep track, Syam suggested.

Edited by Feroze Jamal