India’s ecommerce and logistics sector is facing growing uncertainty over the implementation of recent Goods and Services Tax (GST) amendments, prompting industry leaders to seek urgent clarification from the Ministry of Finance. First India, representing more than 300 e-commerce platforms, logistics startups, and digital marketplaces, has formally requested guidance on the tax treatment of Goods Transport Agency (GTA) services and local delivery operations.
The confusion stems from Notification No. 17/2025–Central Tax, dated September 17, 2025, which amended Section 9(5) of the CGST Act. Under the new rules, e-commerce operators are required to pay 18 per cent GST on “local delivery” services unless the service provider is registered under Section 22(1). However, the legislation does not provide a clear definition of “local delivery,” leaving businesses, particularly micro, small and medium enterprises (MSMEs), uncertain about whether short-distance or intra-city transportation falls under GTA or local delivery services.
The amendments follow the 56th GST Council Meeting and were intended to streamline tax compliance for transport services. Yet, the resulting notifications have generated widespread ambiguity, affecting e-commerce operators, logistics service providers, and thousands of MSME sellers that form the backbone of India’s digital retail ecosystem.
Operational and compliance challenges have emerged across the logistics value chain. Firms are unsure who is liable for GST payment – the ecommerce platform, the logistics partner, or the seller – and face inconsistent documentation and invoicing practices. There is also a heightened risk of double taxation where shipments involve both interstate and local movement handled by separate service providers.
Smaller logistics operators struggle to align with the models used by larger e-commerce players, leading to differing interpretations and practices. For instance, Flipkart claims exemption under GTA provisions, while Meesho refrains from doing so, believing it does not qualify under the exemption.
Sushma Morthania, Director General of First India, said: “The GST Council’s move to streamline compliance and plug loopholes is well-intentioned, but the lack of operational clarity on what qualifies as a ‘local delivery service’ has led to widespread confusion. E-commerce logistics is the backbone of MSME participation in India’s digital economy. A timely clarification will help ensure uniform compliance, protect small sellers from unintended tax burdens, and safeguard business continuity for thousands of logistics partners and digital retailers.”
First India has requested the Ministry of Finance to provide detailed guidance on several points. These include the geographical and operational definition of local delivery services, its distinction from GTA and courier services, the applicability of the existing B2C GTA exemption under Notification No. 12/2017 when goods are delivered directly to consumers, and the treatment of intra-state GTA services facilitated through ecommerce platforms. The organisation also seeks clarity on whether ancillary services such as cash-on-delivery handling or product verification at delivery points should be treated as part of GTA services or as separately taxable activities.
The industry body emphasised that a definitive clarification is crucial to ensure compliance across the sector and maintain fair competition. Guidance on the differing approaches of platforms such as Flipkart and Meesho would enable members to follow the law correctly, prevent misinterpretation of the amended GST provisions, and ensure a level playing field. |
