The world is no longer going digital. It is already there. Ask yourselves. What is the first thing you would do when you want to know more about a business? You Google it. Today, if a business isn’t present online, it is as good as non-existent.
Covid-19 might have disrupted business operations for a while, but a deep penetration of access to high-speed internet and expanding supply chain networks in Tier II and III cities are acting as catalysts for the country’s e-commerce boom.
According to a report by eMarketer, a market research firm, India, the country is likely to have an estimated 27 percent year-on-year sales growth in 2021. That's $66.76 billion!
India is expected to top the chart of the world’s fastest-growing retail e-commerce markets this year. With the online retail or ‘e-tail’ competition becoming increasingly steep and Diwali just around the corner, it is time to understand why online retailers need to start prepping for the holiday season. A fancy website and lucrative offers are not the only concerns while preparing for the online holiday shopping season. It is equally important to prep on the tax front. Here are five reasons why.
Not Everyone Practices the Same Tax Operations as Your Business - As e-retailers are opening up their online stores to international customers, one of the most important tax concerns this holiday season will be cross-border tax compliance management. The thing about overseas business is that it is not easy. You will be ending up jumping through hoops maneuvering through the various complexities of each country’s taxation system. It will be essential to know the differing tax rates applicable for different products across various jurisdictions etc, and that's only scratching the surface. Some of the fundamental tax operations that are likely to come your way are –
- Issuing correct tax invoices with the right product codes and relevant tax rates.
- Generating the waybills and all other shipping and handling-related documentation to ensure smooth movement of goods from one place to another.
- Adapting to e-invoicing and other digitized systems that are mandated by various countries.
- Fulfilling all compliance requirements while carrying out cross border transactions
Discounting Comes with its Fair Share of Compliance Complications - Only a few weeks ago, e-commerce giants like Amazon and Flipkart were ordered by the Supreme Court of India to allow the inquiry on deep discounting practices by the Indian regulatory body, Competition Commission of India (CCI). While this legal battle unfolds, small and medium-sized e-commerce businesses will need to prepare to face all kinds of pricing wars. Sure, low prices and high discounts are likely to lead to increased sales, but they will also lead to more complicated tax compliance requirements, documentation, and audits. If your business doesn't have a strategy or the bandwidth to handle the compliance requirements, it is crucial that you start prepping for holiday sales well in advance.
Multiple Points of Sales Mean Multiple Opportunities for Errors - As an e-commerce business, it is not enough to only operate through your own website - you need an omnichannel presence. This means you need to be present wherever your competition is. Multiple points of sales can increase the chances of errors if your team is continuing to work manually and combing through mountains of paperwork. Adapting and implementing machine learning-based AI software can help you automate the invoice reconciliation process - you won't just save time, you will also save on resources.
Tax Operations are Now Happening in Real-Time - India runs on a novice Goods and Services taxation system. While our country might still be in the process of properly implementing and settling into real-time tax functions, other countries are well ahead of the game. That means your business needs to be able to handle tax operations in real-time. This includes generating e-invoices, authenticating e-invoices, and ensuring the same tax information is replicated on waybills that will accompany goods to other cities, towns, states, or even countries.
Tax Operations are Not Just About Filing Returns - Yes, the tax returns form a very large part of the tax function but unless your business isn't optimizing its work, there are chances that it won't be able to learn from its current performance and prepare for the next sale. Digitizing tax functions and making use of analytical and AI software will help your business understand where, when, and how it can make better profits, manage compliance better, and more increase tax efficiency - not just on home ground but also overseas.
The e-commerce business is a tough nut to crack but it definitely is not an impossible feat. Being tax-ready in time for the holiday season will allow your business to focus on what actually matters - sales, profits, expansion, and overall growth.